MR
JUSTICE LINDSAY (PRESIDENT):
We have before us the appeal of Mrs Christine MacFarlane and Mrs Tamara Skivington in the proceedings MacFarlane and Skivington v. Glasgow City
Council. The two Appellants appear
by Ms R.Edgar and the City Council by Mr I. Truscott, Q.C. The appeal raises the issue of whether
the two Appellants, qualified gymnastic instructors, were employees properly -
so-called of the City Council.
1.
In July 1998 each
Appellant lodged an IT1 claiming unfair dismissal and constructive
dismissal. Each had been presented
with a new form of contractual agreement which, in her view, significantly
changed her terms of employment.
Each declined to accept the new form. Each said that if she had signed the new
form it would have made her self-employed. The Council’s case was that that had
been the position all along. The
case was put out for a preliminary determination as to whether the Applicants
had no right to bring the proceedings.
There was a hearing at Glasgow on 20th and 21st April 1999 under the
Chairmanship of Mr H J Murphy. The
decision was sent to the parties on 5 October 1999. Whilst it is expressed as
unanimous it is clear that one member dissented on part of the approach and it
was, if we may so put it, a close run thing. The decision was that the Applicants
were not employees and hence were unable to claim for unfair dismissal. On 15
November both Applicants appealed.
Before turning to the appeal in any detail it would be as well to set the
scene by reference to the Tribunal’s findings. The Tribunal
held:-
“The respondents are Glasgow City Council who
operate a number of recreational and sports centres. For many years they have made use of the
services of gymnastic instructors whom they have traditionally paid on a
sessional basis. Both applicants
are gymnastic instructors and hold appropriate qualifications from the governing
national body of which they are members.
For a number of years prior to 1991 the first named applicant carried out
work on a casual basis for the respondents and was paid an appropriate hourly
rate. Until 1991 she would work
only a few hours per week for the respondents, and did not see herself as an
employee of the respondents.”
A little later, in relation to the second named
Applicant the Tribunal continued:-
“During the period between 1991 and 1994 she too
worked for the respondents as a gymnastic instructor for 3 or 4 hours per week,
but in or around September 1994 a third coach, who worked for the respondents,
went abroad and the second named applicant commenced to undertake the work
formerly done by that coach.”
The Tribunal then turned to the manner in which
the two Applicants were paid:-
“Until roughly 1991 or 1992 the first applicant
was paid gross without deduction of tax or national insurance. In or around 1991 or 1992, as a result
of pressure exerted on them by the Inland Revenue, the respondents deducted tax
and class 1 national insurance contributions from their payments to the
applicants as if the applicants were their employees. In addition, the respondents paid the
appropriate employer’s contributions to the national insurance fund.
From 1991 onwards there was a considerable
increase in the demand for training in gymnastics within the city of Glasgow
with an increase in the number of gymnastic programmes run by the respondents
and an increase in the demand for the services of appropriately qualified
gymnastic coaches, such as the applicants.”
2.
The Tribunal then described how coaches would be appointed by letter with
attached terms and conditions added to the letter. The Tribunal, on this subject
held:-
“Occasionally it happened that the appropriate
letter of appointment would not be issued at the beginning of each term, but a
pattern developed whereby the applicants came to understand that their services
would be required in connection with the coaching of certain gymnastic classes
and they would turn up for these classes, even if no letter of appointment had
been received by them. They would
then take the class.
Finally, the respondents attempted to regularise
the relationship between themselves and the coaches and sent to both applicants
a document in the form of A11 the terms of which were not acceptable to them and
which they declined to sign.”
Continuing with findings of the Tribunal, the
Tribunal held:-
“There is no doubt that the respondents, in
conjunction with the sports governing body, specified the courses which were to
be taught by the applicants, and provided the venue, equipment and support staff
who were required to put the equipment in place at the beginning of each
session. The applicants, moreover,
were required to wear uniforms provided by the respondents. The respondents also monitored the work
of the applicants.
In order to be paid, the applicants would
complete a timesheet, which they would submit to the respondents. They would then be paid for the number
of hours worked by them. Subsequent
to 1992, they were - in effect – on the respondent’s payroll. Each of the applicants, however, were
required to have their own public liability insurance.”
3.
Next came a provision to which great importance was attached as will
later appear; the Tribunal held:-
“If for any reason, one of the applicants was
unable to take a class, she would contact a replacement from the register of
coaches maintained by the respondents, and arrange for her class to be covered
by a member on the register.”
It is to be noted that it was the applicant who
was enabled to select the replacement coach rather than the Council, but that
the substitute had to come from the Council’s list. The arrangement for the
replacement was made by the applicant not the Council. It is to be noted, too, that this
provision for substitution would only be available where an applicant was
“unable” to take a class, albeit that the inability could be “for any
reason”.
4.
The Tribunal then turned to examining whether the applicants viewed
themselves as employees. Lord
Hoffmann’s important speech in Carmichael & Anor v National Power plc
[2000] IRLR 43, shows how a party’s subjective understanding of what had
been agreed cannot in all cases be laid aside as irrelevant in the objective
search for what agreement, if any, has been reached. However, it is important to note that in
Carmichael both sides agreed
the essential fact that the employer was under no obligation to provide work and
the individuals under no obligation to perform it. By contrast, in our case the Tribunal
accepted that Glasgow City Council never saw the Appellants as employees. It may therefore be that the Tribunal
attached too much importance to whether the Appellants viewed themselves as
employees. For all that, the
question was examined. The Tribunal
said:-
“The Tribunal was divided on this issue. One of our members took the view that
the applicants did indeed see themselves as employees of the respondent’s: she took the view that the fact that the
applicants worked at times and places fixed by the respondents, carried out work
the content of which was determined by the respondents to standards again fixed
by them (though agreed with outside supporting bodies), where monitored by the
respondents, wore uniforms, which identified them as the respondents’ personnel,
that they were fully integrated into the respondents’ organisation, that they
paid PAYE and national insurance contributions appropriate to employees,
rendered probable the applicant’s statements that they saw themselves as
employees of the respondents.
The majority did not feel able to acquiesce in
this view. Though recognising the
full force of the considerations outlined by the minority, they took the view
that the fact that the applicants well knew that they were not entitled to sick
pay, holiday pay, pensions, and the fact that the respondents’ failure to pay
holiday pay was a source of grievance for some time, left them unconvinced that
the applicant’s truly saw themselves as employees of the
respondents.”
The issue was one of fact involving credibility
of individuals who had given oral evidence. The majority plainly felt unable to hold
that the appellants had viewed themselves as employees.
5.
Then we come to the
area most attracting criticism on the part of the Appellants; the Tribunal in their last full
paragraph held as follows:-
“We must say that the picture, formed by the
accumulation of detail in this case was largely and (particularly in the case of
one of our members) an image of the applicants being employees of the
respondents, but for one factor. It
was indisputably the case that, if either of the applicants were unable to
attend work, in the first instance, she would arrange for a substitute from the
register of coaches maintained by the respondents. Occasionally the respondents would,
themselves, organise a replacement, but the normal practice was undoubtedly for
the coach to organise a replacement for him or herself, and the Tribunal asked
themselves whether, in the light of the dicta and decisions in Ready Mix
Concrete (South East) Ltd v The Minister of Pensions and National Insurance
[1968] 2 Q.B. 497 and in Express and Echo Publications Ltd v Tanton
[1999] IRLR 367, it could truly be suggested that the applicants were
employees. Neither of these cases
is exactly like the present case, because, in both those cases, the worker, who
claimed the status of an employee, could employ a substitute at his own
expense. In this case we were not
implicitly advised of the payment arrangements, if one of the applicants
organised a substitute, but it was implicit in what we heard that, in such
circumstances, she would not claim payment for the services of the substitute
leaving it to that substitute to claim payment from the respondents, and we
asked ourselves, whether the said cases could be distinguished on that
ground. We have concluded, however,
that such a distinction would not be valid. The last mentioned case makes it clear
that a contract of employment must necessarily contain an obligation on the part
of the employee to provide his services personally. On the evidence, the applicants could
arrange for substitutes to attend on their behalf and this right is inconsistent
with the existence of the contract of employment, and we feel, therefore, bound
to refuse the applicant’s claims.”
6.
It is against that
background that the Appellant’s pleasingly concise Notice of Appeal
says:-
“The Tribunal erred in law in applying the wrong
legal test in determining whether contracts of employment existed. The Tribunal focused on the issue of the
arrangements that were made when one of the instructors was absent to the
exclusion of all other factors. The
Tribunal followed the decision in Express
and Echo Publications Ltd v. Tanton [1999] IRLR 367 CA. However in Tanton, there was an express agreement
that the contractor provided a substitute, at his own expense, in the event of
his being unable or unwilling to perform the services. In the case at hand,
there was no such express agreement.
Furthermore, when the appellants did assist in finding a substitute, they
took no part in the arrangements to pay that substitute.
The conclusions drawn by the Tribunal from the
evidence about the arrangements made to engage a substitute in the event of
absence from work were perverse. It
was not reasonable for the Tribunal to conclude that informal, irregular
arrangements for providing cover in the event of sickness indicated the absence
of an obligation to perform services personally.”
7.
A primary question
before us is what should our approach be; do we have before us an issue of law,
as to which we may override the Tribunal, or solely a question of fact, as to
which the Tribunal is master?
Reverting to Lord Hoffmann’s speech in Carmichael supra at page 46 we find the
following:-
“Thus the rule that the construction of documents
is a question of law was well established when industrial tribunals were created
and has been carried over into employment law.
It was this rule upon which the majority in the
Court of Appeal relied as entitling them to say that the construction of the
exchange of letters between the CEGB and the respondents, together with any
terms which could be implied by law into the contract which they created, was a
question of law.”
A little later Lord Hoffmann
continues:-
“But I think that the Court of Appeal pushed the
rule about the construction of documents too far. It applies in cases in which the parties
intend all the terms of their contract (apart from any implied by law) to be
contained in a document or documents.
On the other hand, it does not apply when the intention of the parties,
objectively ascertained, has to be gathered partly from documents but also from
oral exchanges and conduct. In the
latter case, the terms of the contract are a question of fact. And, of course, the question of whether
the parties intended a document or documents to be the exclusive record of the
terms of their agreement is also a question of fact.”
8.
There does not seem
in our case to have been a reliance by either side on oral exchanges between the
parties; at all events none is mentioned by the Tribunal. However, conduct was relied upon. The fact that the City Council paid
National Insurance contributions and PAYE, the fact that letters of appointment
were sometimes not issued before the opening of a term, the fact that a pattern
developed, nonetheless, whereby coaches understood that they would be required
for work, the fact that uniforms would be provided by the City Council and that
the Appellants would be required to wear them were all matters that seem to have
derived from evidence as to conduct.
Equally the fact that the Appellants were required to provide public
liability insurance seems not to have been covered by anything express which we
have seen, nor anything that would have been implied by law. All those features appear to have been
important considerations held by the Tribunal to be features of the relationship
between the parties but deriving, as it would seem, from conduct. On that basis the question of what were
the terms of the contract was a question of fact. Thus the Employment Appeal Tribunal’s
rôle is circumscribed; see for example, Lee
Ting Sang v Chung Chi-Keung & Anor [1990] ICR 409 PC, where Lord
Griffiths, at page 414, was dealing with a case where the relationship between
the putative employer and employee had to be determined solely by investigation
and evaluation of the factual circumstances in which the work had been
performed.
Had the Tribunal stayed wholly within areas of
fact its decision would be beyond challenge. However, the decisive feature, one
that appears to have overturned the view that otherwise would have been taken,
was in our view, contrary to Mr Truscott’s argument, an issue of law. The Tribunal held, firstly, that the
Applicants had a right to arrange for substitutes to attend on their behalf;
secondly, that such right was inconsistent with a contract of employment and,
thirdly, that therefore – that is to say, on that particular account -
the Tribunal was bound to regard the Applicants as not employees. The Tribunal’s reasoning had manifestly
turned to points of law.
Accordingly we are entitled to scrutinise it for error.
9.
The Tribunal
especially relied upon the recent Court of Appeal case already referred to, Express and Echo Publications Ltd v Tanton,
supra. In that case there was a document called
“An agreement for services” which Mr Tanton had refused to sign. It had within it a clause 3.3 which the
Peter Gibson LJ (with whom Hurst and Auld LJJ agreed) described as
follows:-
“Clause 3.3 of the agreement for services
provided:
‘In the event that the contractor is unable or
unwilling to perform the services personally he shall arrange at his own expense
entirely for another suitable person to perform the
services.’
To this I should add what was contained in
paragraph 13 of the schedule, where it is stated:
‘In the event that the contractor provides a
relief driver, the contractor must satisfy the company that such a relief driver
is trained and is suitable to undertake the services.’
That right for Mr Tanton to provide a substitute
driver was utilised by him from time to time and, exceptionally, throughout a
period of six months whilst Mr Tanton was ill, Mr Tanton paying the substitute
driver, though receiving remuneration from the appellant. Clause 3.3, as the chairman expressly
found, is not a sham.”
10.
It is to be noted
that that Clause 3.3 dealt inter alia
with occasions when the individual was merely unwilling to perform though not
unable to perform. The individual,
in other words, could freely choose whether or not to turn up personally and
there was no limit on how often that right might be exercised. Mr Tanton need never have turned up
himself for work. The substitute,
it is to be noted, was to be provided at the individual’s expense and yet
payment would continue to be made to that individual, Mr Tanton. Mr Tanton could freely choose anybody as
a replacement so long as that substitute was “trained” and “suitable”. The employer had no veto so long as
those requirements were met. Mr
Tanton had, in fact, exercised the right not only occasionally but also for a
continuous stint of six months.
Presumably it was, in practical terms, that exercise of the right that
made it impossible for Mr Tanton to assert, on the ground that he had never
signed the “agreement for services”, that Clause 3.3 was not an effective term
between him and the company. Peter
Gibson LJ continued, after a review of the authorities:-
“In these circumstances, it is, in my judgment,
established on the authorities that where, as here, a person who works for
another is not required to perform his services personally, then as a matter of
law the relationship between the worker and the person for whom he works is not
that of employee and employer.”
A little later Peter Gibson LJ
continues:-
“But, for the reasons which I have given, clause
3.3, entitling Mr Tanton not to perform any services personally, is a provision
wholly inconsistent with the contract of service which the chairman found the
contract to be.”
It is important to note that Mr Tanton was
entitled not to perform any services personally.
11.
The Tanton case is in our judgment
distinguishable from that at hand for at least the following cumulative
reasons. Firstly, the Appellants in
our case could not simply choose not to attend or not to work in person. Only if an Appellant was unable to
attend could she arrange for another to take her class. Secondly, she could not provide
anyone who was suitable as a replacement for her but only someone from
the Council’s own register. To that extent the Council could veto a replacement
and also could ensure that such persons as were named on the register were
persons in whom the Council could repose trust and confidence. Thirdly, the Council itself sometimes
organised the replacement (without, it seems, protest from the Appellant
concerned that it had no right to do so).
Fourthly, the Council did not pay the Appellants for time served by a
substitute but instead paid the substitute direct. There is no finding as to what the
substitutes were paid nor that they were paid the same as the Appellants nor
that the Appellants had any say in what the substitutes were paid. These four grounds in our view provide
ample reasons for the Tanton case to be distinguished but
unfortunately only the last of the four was considered by the Tribunal in our
case.
12. Without in
any way meaning hereby to doubt the correctness of Tanton, which in any event we are
not free to do, but having in mind the distinctions we have mentioned, we do not
see that Tanton obliged the Tribunal
in our case to hold the contract to have been one for services. We cannot regard a provision of the kind
found by the Tribunal in our case to have such force that it had to be seen to
overwhelm the factors pointing the other way; it was not such that it had
inescapably to lead to a conclusion that the Appellants were not employees. We note that in the Ready Mixed Concrete (South East)
Ltd case supra, MacKenna J,
in a passage very frequently relied upon since, said with our
emphasis:-
“Freedom to do a job either by one’s own hands,
or by another’s is inconsistent with a contract of service, though a limited
or occasional power of delegation may not be: see Mr Atiyah’s Vicarious
Liability in the Law of Torts (1967), pp.59-61, and the cases cited by
him.”
It would, for example, be easy enough to imagine
a case where a person clearly to be taken to be an employee – say a
schoolteacher employed by a local authority - might have in his or her contract
a provision that if he or she was unable to take a class then he or she might
arrange for another colleague from the local authority’s common room in the
school to take it for him or her.
No one, surely, could say that the presence of such a clause would deny
the teacher the label, otherwise appropriate, of being an employee. As Ms Edgar points out, it is, at the
lowest, improbable that Parliament would have intended that the
employer-employee relationship could be so easily avoided.
13. The
relevant clause in Tanton was extreme. The individual there, at his own choice,
need never turn up for work. He
could, moreover, profit from his absence if he could find a cheaper
substitute. He could choose the
substitute and then in effect he would be the master. Properly regarded, Tanton does not oblige the Tribunal
to conclude that under a contract of service the individual has, always and in
every event, however exceptional, personally to provide his services. The
Tribunal, in a passage we have already cited, said:-
“The last mentioned case [Tanton] makes it clear that a
contract of employment must necessarily contain an obligation on the part of the
employee to provide his services personally.”
That citation is justified by Tanton as that very sentence appears
in Tanton’s paragraph 30 but we have no
reason to think that the Court of Appeal was there meaning to depart from the
observation of MacKenna J in Ready Mixed Concrete as to limited
delegation. Indeed, that very
passage had been quoted by Peter Gibson LJ only three paragraphs earlier in Tanton. Tanton indicates that if a
contract contains a provision that the individual need not perform any services
personally then it cannot be a contract of service – see paragraph 32 – and, so
regarded, it does not deal with a limited ability to delegate such as that in
the case before us. Tanton was a case where the
individual could at his own will perform his contract by sending along someone
else. Our case, by contrast, is a
case in which, in limited circumstances, it would not be a breach of the
individual’s contract if, the individual being unable to attend, she arranged
for another person approved by the employer to attend in her place. The Tribunal erred in law in regarding
Tanton as driving them to the
conclusion which they reached. We
are therefore entitled to, and do, set aside their
decision.
14.
However, we are far
from saying that the only possible proper conclusion of the matter is that the
Appellants were employees. The
Tribunal found it a difficult case and we are not surprised that they did. We are not prepared to say what a due
interpretation of all the relevant facts would be, if for no other reason than
that we do not have all the relevant facts before us and still less are we able
to evaluate the witnesses in the way that the Tribunal, that had the advantage
of seeing and hearing them, could do.
There may, moreover, be some features which might need to be taken into
account but which are unmentioned in the present Extended Reasons such as that,
as it would seem, however long an Appellant worked she was still only to be
entitled to one week’s notice. It
may need to be considered whether a responsible employer would nowadays put such
a provision into its dealings with employees as opposed to its dealings with
self employed persons for whose services it contracted. Such considerations are for the Tribunal
to examine as matters of fact. In
the circumstances, the proper course, in our view, is for us to remit the matter
to the Tribunal.
15.
We see no reason
why the remission should not be to the same Tribunal as before, at all events
unless re-constituting the same panel of three is either now impossible or would
significantly delay the further hearing.
At the rehearing either side is to be at liberty to call further
evidence.
16.
Accordingly we
allow the appeal. We set aside the
Tribunal’s decision as recorded in its paragraph 1. We remit the preliminary determination
to the same Tribunal as before (subject to the exceptions we have mentioned) and
we direct that at the further hearing fresh evidence may be
called.
