O'Kelly and
others v Trusthouse Forte pic
COURT OF APPEAL,
CIVIL DIVISION SIR JOHN DONALDSON MR, ACKNER AND FOX LJJ 20, 21 JUNE,
Master and
servant - Contract of service - Distinction between contract of service and
contract for services - nether issue of law or mixed fact and law - Jurisdiction
of Employment Appeal Tribunal - Employment Protection (Consolidation) Act 1978,
ss 136(l), 153(l).
The employers
carried on a banqueting business at their hotel. Only a few of the banqueting
staff were employed permanently under contracts of employment, the rest of the
banqueting staff being casual workers engaged for each function, that being the
usual practice in the catering industry. However a large number of the casual
staff were so-called 'regular casuals', ie they were engaged on a regular basis
by the employers to such an extent that some of them had no other regular work.
Regular casuals were given priority of engagement over other casual workers. The
applicants, who were three regular casuals, sought, through their union,
recognition by the employers that regular casuals were permanent employees
working under contracts of employment because of the length and continuity of
their service and the manner in which they were paid. Thereupon the employers
dismissed the applicants, who then complained to an industrial tribunal,
pursuant to the Employment Protection (Consolidation) Act 1978, that they had
been unfairly dismissed for taking part in trade union activities. On the
question whether the applicants were working under a contract of employment
within s 153(l) a % 456 @a of the 1978 Act and were thus entitled t( complain of
wrongful dismissal, the industrial tribunal concluded that there was no overall
contract between the parties and that the applicants were in business on their
own account as independent contractors supplying services. The applicants
appealed to the Employment Appeal Tribunal, which held that the question whether
a contract was a contract of employment or a contract for services was a
question of law and therefore under s 136(1)b of the 1978 Act the appeal
tribunal had jurisdiction to hear the appeal. The appeal tribunal held, as had
the industrial tribunal, that there was no overall contract of employment
between the parties but further held that each separate contract entered into on
the occasion of each engagement was a contract of employment. The employers
appealed, contending (i) that whether a contract was a contract of employment or
a contract for services was a question of fact and therefore the appeal tribunal
had had no jurisdiction to hear the appeal, and (ii) that instead of itself
considering whether there were separate contracts of employment the appeal
tribunal should have remitted that issue to the industrial tribunal.
Held -(l)(Per
Sir John Donaldson MR and Fox LJ) Where an appellate tribunal was limited to
hearing an appeal on a point of law it had no jurisdiction to consider a
question of mixed law and fact until it had distilled or extracted a question of
pure law, since it was not entitled to intervene unless it was satisfied that
the tribunal below had misdirected itself in law, and, if the tribunal below did
not make any express direction as to the law, the appellate tribunal could only
be so satisfied if it was satisfied that no reasonable tribunal, properly
directing itself on the relevant questions of law, could have come to the
conclusion under appeal (see p 476 e and p 477 f to j, post); Edwards (Inspector
of Taxes) vBairstow [1955] 3 All ER 48 applied. (2)(Per Sir John Donaldson MR
and Fox LJ) Although the formulation of the test of whether a contract was a
contract of employment or a contract for services was a pure question of law,
the application of the test so formulated to the relevant facts depended so much
on the finding and assessment of the relevant facts and the precise quality to
be attributed to them that the primary question was one of fact and degree.
Accordingly, the appeal tribunal had been wrong to assume jurisdiction on the
basis that the issue was a question of law. Furthermore, it was impossible to
say that no reasonable tribunal, properly directed, could have reached the
conclusion the industrial tribunal had come to and therefore on that basis also
the appeal tribunal could not have assumed jurisdiction. It followed (Ackner LJ
concurring on the facts) that the industrial tribunal's decision that there was
no overall contract of employment between the employers and the applicants was
not open to appeal (see p 473 d e, p 476 b cj toj, p 478 d toj, p 479 j to p 480
a c d, post); Simmons v Heath Laundry Co [ 1 9 1 0] 1 KB 543 followed; Currie v
IRC [19211 2 KB 332 applied; dictum of Stephenson LJ in Young & Woods Ltd v West
[1980] lRLR at 205 considered. (3) Furthermore (Ackner LJ dissenting), it was
apparent on the facts that the industrial tribunal had considered the question
whether there were separate contracts of employment between the employers and
the applicants, and since there had been no misdirection by the industrial
tribunal and its conclusion had not been unreasonable on the facts the
applicants had no right of appeal on that issue. Accordingly, the employers'
appeal would be allowed and the industrial tribunal's decision would be restored
(see p 477 a to d, p 479 e toj and p 480 hj, post).
Notes For the
nature of a contract of employment and the characteristics of the relationship
of employer and employee, see 16 Halsbury's Laws (4th edn), paras 501, 520, and
for cases on the subject, see 20 Digest (Reissue) 238-255, 2302 2407. For the
jurisdiction of the Employment Appeal Tribunal, see 16 Halsbury's Laws (4th Edn)
Ahmetv
TrusthouseForte CateringLtd(
AirfixFootivearLtdi, Cope [1978] ICR 1210, EAT.
ConstructionIndustry TrainingBoardvLabourForce [1970] 3 All ER 220, DC.
Currie v1RC,
Durantv1RC [1921] 2 KB 332, CA.
Edwards
(Inspector ofTaxes) vBairstow [1955] 3 All ER 481[1956] AC 14,[1955] 3 WLR
11410, HL.
Global PlantLtd
v Secretary of Statefor Health and Social Security [19711 3 All ER 385,[19721 1
QB
139,[1971] 3 WLR
269.
Massey v Crown
Life Insurance Co [1978] 2 All ER 57641978] 1 WLR 676, CA.
Melon
vHectorPowe Ltd [1981] 1 All ER 313, HL.
Morren v Swinton
andPendleburyBC [19651 2 All ER 349,[1965] 1 WLR 576, DC.
Nethermere (StNeots)
Ltd v Gardiner [1983] ICR 319, EAT.
Pioneer Shipping
Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All ER 1030,[19821 AC 724,[1981] 2 WLR
292, HL.
Ready Mixed
Concrete (South East) Ltd v Minister ofPensions and National Insurance [1968] 1
All ER
433,[19681 2 QB
497,[1968] 2 WLR 775.
Simmons vHeath
Laundry Co [19101 1 KB 543, CA.
Union
ofConstruction, Allied Trades and Technicians vBrain [1981] ICR 542, CA.
Wiltshire CC
vNationalAssociation ofTeachers inFurther andHigherEducation [1980] ICR 455, CA.
Woods v kPMCar
Services (
Young & WoodsLtd
v West [1980] 1RLR 201, CA.
Cases also cited
Challiner v
Coates
vModernMethods &MaterialsLtd [1982] 3 All ER 9461[1983] QB 192, CA.
Devonald vRosser
& Sons [1906] 2 KB 728,[1904-7] All ER Rep 988, CA.
Heathcote
vHaunchwood CollieriesLtd (1917) 117 LT 677, HL.
MarketInvestigationsLtd vMznister ofSocial Security [1968] 3 All ER 732,[1969] 2
QB 173.
Martin v
GlynwedDistributionLtd [1983] ICR 51 1, CA.
National
CoalBoard v Galley [1958] 1 All ER 91,[1958] 1 WLR 16, CA.
Pedersen v
CamdenLondonBorough [1981] ICR 674, CA.
Puttick vJohn
Wright & Sons (Black-wall) Ltd [1972] ICR 457, NIRC.
Reardon Smith
Line v Hansen-Tangen, Hansen-Tangen v Sanko Steamship Co [1976] 3 All ER
570,[1976] 1 WLR
989, HL.
Retarded
Children'sAid Society vDay [1978] 1 WLR 763, CA.
Appeal and
cross-appeal The applicants, Harry O'Kelly, Thomas M Pearman and Philip Florent
(the respondents), who were regular casual workers in the banqueting business
carried on by the appellants, Trusthouse Forte plc (the employers), at the
Grosvenor House Hotel, applied to an industrial tribunal complaining that the
employers unfairly dismissed them from their employment for taking part in trade
union activities and applied for interim relief under s 77 of the Employment
Protection (Consolidation) Act 1978. An industrial tribunal (chairman Mr G E
Heggs) sitting at London Central directed the hearing of a preliminary point,
namely whether the respondents were employees who worked under a contract of
employment within s 153(l) of the 1978 Act (and thus were entitled to complain
of wrongful dismissal and to claim interim relief). By a decision made on 31
March and 1 1 April 1983 the tribunal decided that the respondents were not
employees who worked under a contract of employment within the 1978 Act because
they were in business on their own account as independent contractors supplying
services, and accordingly the tribunal decided that they were not qualified to
claim interim relief under s 77 of the 14. 458 @a 1978 Act. The respondents
appealed to the Employment Appeal Tribunal (Browne-Wilkinson J and Mr T D
Anderson and Mrs M
L Boyle) which
by a judgment given on 1 1 May 1983 allowed the appeal holding that even though
the industrial tribunal were correct in deciding that there was no overall
contract regulating the position between the respondents and the employers,
nevertheless on each occasion that the respondents worked for the employers they
entered into separate contract of service with the employers and accordingly the
respondents were employees under contracts of employment within the 1978 Act and
were qualified to claim interim relief under s 77. The employers appealed to the
Court of Appeal. The grounds of the appeal were (1) that the appeal tribunal
wrongly decided to consider for themselves whether the respondents were engaged
under separate contracts rather than under an overall contract and ought in the
circumstances to have remitted the separate contracts issue to the industrial
tribunal. Alternatively, if it was proper for the appeal tribunal to consider
the separate contracts issue they wrongly concluded that the separate contracts
entered into were contracts of service, rather than for services, and were thus
contracts of employment within the 1978 Act. (2) The appeal tribunal was wrong
in holding that there was no evidence before the industrial tribunal to justify
its findings that it was both parties' view that the relationship between them
was not that of employer and employee, and that it was a recognised custom and
practice of the catering industry that casual workers were engaged to work under
contracts for services. By a respondents' notice the respondents gave notice
that on the hearing of the appeal they would contend that the contracts of
service found by the appeal tribunal to exist were continuous and not
intermittent contracts. They also cross-appealed for an order that there was a
continuing contractual obligation on the employers' part to offer them work as
and when it was available and on the respondents' part to make themselves
available for such work. The grounds of the cross-appeal were that the appeal
tribunal wrongly held that on the facts found by the industrial tribunal there
was no continuing mutuality of obligation between the parties and ought to have
held (a) that economic forces did not negative but supported mutuality of
obligation and/or (b) that the relationship of the parties was only or was best
explicable as one of continuing mutual obligation. The facts are set out in the
judgment of
Alexander Irvine
QC and Timothy Charlton for the employers. Stephen Sedley QC for the
respondents.
Cur adv vult
ACKNER LJ
(giving the first judgment at the invitation of Sir John Donaldson MR). At the
Grosvenor House Hotel the appellants (the employers) carry on two distinct
operations. They operate an hotel and a restaurant business which is open to the
public, and by reason of the regular and continuous nature of that business the
staff engaged are all employees working under contracts of employment. The
employers also carry on the business of hiring out rooms for private functions
for which they provide the catering and other services. This part of the
business is undertaken by the banqueting department. Because of the fluctuating
and seasonal nature of this trade there are only 34 permanent staff, including
the banqueting staff manager, Mr Hourigan, the bar manager, Mr Mardel, and the
managerial and supervisory staff and the head waiters. All the other staff in
the department are known as casual staff and they are paid at a set rate for the
work actually performed. Because of the large number of casual staff required
during the busy season and the difficulty of finding staff in sufficient numbers
during the slack season Mr Hourigan maintains a list of some 44 wine butlers and
60 food service waiters and waitresses. They are known as 'regulars' and are
rostered in preference to other casual staff, numbering between 200 and 300, who
work less regularly and are employed for fewer functions. 14. 459 @a Th,
,regulars' are members of staff who can be relied on by the employers to offer
their services regularly and, in return, have the assurance of preference in the
allocation of an available work. They receive exactly the same rate of
remuneration as other casuals, but have the ability to earn more money by being
offered more frequent engagements, and there is more regularity in their
earnings. 'Regulars' are offered any available engagement the slack season.
Because of the extent of the work they are offered they may work longer hours
than the permanent staff working a regular 40-hour week. Because of the extent
to which they make their services available to the employers some 'regulars',
including the respondents, have no other regular employment.
The employers'
practice of staffing banquets and other functions with workers designated as
casual staff is widespread throughout the hotel and catering industry in
,The principles
on which a casual worker is employed are simple. There is no obligation for the
worker to offer his services and there is no obligation for the employer to
provide work.' The accuracy of this proposition, in so far as it related to
'regulars', was strongly contested before us. They continued:
'If an
engagement is undertaken the worker is paid at the appropriate hourly or
sessional rate for the work performed. During the function the casual worker
works under the direction and control of the employer as part of his
Organisation and the relationship ends automatically at the end of the function
without the need of notice on either side. Many casual workers have other
regular employment.' The industrial tribunal conveniently set out a number of
headings under which they considered the facts of the case, and it would be
convenient if I now referred to these in summary form. Engagement. Mr Hourigan
has the responsibility of engaging casual staff for functions. He receives a
list of functions for the following month and this is updated weekly on Thursday
mornings. He prepares a list of wine service staff and a separate list of food
service staff required for the following days. The lists are posted on Thursday
evenings showing the names of the casual staff rostered for each function. Thus,
the casual staff know what work, if any, is available for them for the week
commencing on a Friday. During the slack period the lists are posted
fortnightly. A similar roster of bar staff is prepared by Mr Mardel. Tax
treatment and payment. The Inland Revenue requires the employers to deduct from
the remuneration they pay to casual workers income tax under PAYE and social
security contributions and to account to the Inland revenue for the money
deducted. As a matter of necessary convenience the employers ensure that any
casual staff working regularly at the hotel are entered on the computer payroll
and they are paid weekly, in arrear, on Thursdays like any weekly paid
employees. The industrial tribunal accepted that the tax and social security
contributions are deducted as a requirement imposed on the employers by the
Inland Revenue and that this is not, of itself, indicative of the legal basis of
the relationship between the employers and the casual staff, for employment
protection purposes.
'10. It is an
essential feature of casual work that the worker has the right to choose,
without penalty, whether or not to come to work. It is, however, necessary to
the running of the banqueting business that the employer should be assured that
a casual worker who has accepted an engagement does not withdraw at the last
minute. As the employer has no obligation to offer future engagements he has the
opportunity of exercising extremely effective control over attendance. The
balance in the relationship exclusively favours the employer because a casual
worker can be denied future engagements without reason given and without any
form of inquiry or the right to be heard. 1 1. For a banqueting business
operated on the scale of Grosvenor House it would clearly be impracticable to
recruit casual workers on a daily basis. The publication of weekly rosters was
not merely of convenience to the casual workers but it was of importance to Mr
Hourigan to be assured in advance that all necessary staff were available and
booked for each function. While the Fostering of staff might be considered as an
offer of engagement for each of the functions, which a worker could decline by
asking that his name be removed from the roster prior to the function, it is
only a short step for the employer to exercise his dominant position to require
a casual worker to accept an engagement he would prefer to decline. It was the
uncontested evidence on behalf of the applicants [the respondents] that
difficulty was experienced in securing variations to the published roster, that
Mr Hourigan would raise objection to medical appointments, and that he was
unsympathetic towards certified sickness. While the [employers] could have
declined to offer any future engagements, the penalty imposed on "regulars" for
non-attendance or other infractions was to "suspend" the worker from a limited
number of future engagements, even if those engagements had been rostered and
therefore impliedly accepted by the worker. We did not have the benefit of Mr
Hourigan's evidence, and the fact that he may have exceeded his authority does
not in itself alter the contractual nature of the relationship, but we refer to
the system as indicative of the fact that the freedom to choose whether or not
to come to work, if Mr Hourigan wanted the individual to work, was more apparent
than real if that individual wished to continue working at the hotel. A
"regular" had to conform with the requirements of Mr Hourigan both in respect of
rostered engagements and future engagements or he would risk losing his assured
livelihood. In the context of 'i4. 462 @a casual work for these or any other
employees the expression "without penalty" has little practical meaning when the
consequences of failure to attend can so nearly imply an obligation to attend.'
Acts exempli)@ing the understanding of the parties . The industrial tribunal,
though accepting that the understanding of the parties was only one of the
relevant factors since they may well be mistaken and the relationship may alter
as a result of developments, made the following findings. From the commencement
of their engagement the respondents were treated by the employers as casual
staff on terms and conditions entirely distinct from those accorded to the wine
butlers and dispense barmen who were permanent employees and issued with written
contracts of employment. The respondents were aware of the distinction and did
not challenge it. It was not until October 1982 that Mr O'Kelly and Mr Pearman
first raised the question of contracts of employment with Mr Green, one of the
employers' senior managers. They asked that the casual wine butlers should be
classified as full-time staff 'because of the hours we done'. Mr O'Kelly said
that he was seeking recognition as 'permanent employees', but Mr Green said,'No,
we were casual'. After that Mr O'Kelly raised the matter with the union, it
being his wish to obtain recognition of a change in the status of the employment
in order to obtain the benefits accorded to permanent employees. The industrial
tribunal referred to the correspondence from Miss T A Gudgin, the union's
recruitment officer for
'I. They are
regularly called upon to serve at banquets according to rota arrangements which
are posted a week in advance. 2. They normally work over 16 hours a week. 3.
They are paid weekly and tax and national insurance is deducted by your clients.
4. They receive holiday pay.' It was thus, said the industrial tribunal, a claim
based on length and continuity of service and the manner of payment. It noted
that despite discussing the basis of a claim for some two months it was not the
respondents' assertion that there was a mutual obligation to provide and perform
work. I observe that no alternative was then
raised of
employment by successive individual contracts of service. Before the industrial
tribunal the submission was made on behalf of the respondents that the
'regulars' were employees because they were provided with regular and frequent
work on the basis of weekly engagements, with a build-up of holiday entitlement
over the year. The contention was that there was no freedom to refuse work and
accordingly there was an implied obligation on the part of the employers to
provide work. The industrial tribunal did not accept that it was necessary to
imply an obligation to provide work in order to give business efficacy to the
contract. They stated:
'The rights and
obligations of casual workers and employers are well established by the custom
and practice of the trade. In return for making their services available, the
"regulars" were assured of preferential treatment in the allocation of work.
There was mutual advantage to the parties of which both were well aware, and it
is not necessary to imply any terms, even if they could be expressed with
precision, to give business sense to the arrangement ... It would be impossible
in an objective sense to draw a line between the time when an individual ceases
being a casual worker disentitled to protection and a "regular" who is to be
considered an employee.' It is common ground that the industrial tribunal's
approach was not open to criticism. % 463 @a It was in thesc terms:
,The tribunal
should consider all aspects of the relationship, no single feature being in
itself decisive and each of which may vary in weight and direction, and having
given such balance to the factors as seems appropriate to determine whether the
person was carrying on business on his own account.' In making their assessment,
the industrial tribunal took into account the following factors which they
considered consistent with a contract of employment: (a) The respondents
provided their services in return for remuneration for work actually performed.
They did not invest their own capital or stand to gain or lose from the
commercial success of the functions organised by the banqueting department. (b)
They performed their work under the direction and control of the employers. (c)
When the casual workers attended at functions they were part of the employers'
Organisation and for the purpose of ensuring the smooth running of the business
they were represented in the staff consultation process. (d) When working they
were carrying on the business of the employers. (e) Clothing and equipment were
provided by the employers. (f) The respondents were paid weekly in arrear and
were paid under deduction of income tax and social security contributions. (g)
Their work was organised on the basis of a weekly rota and they required
permission to take time off from rostered duties. (h) There was a disciplinary
and grievance procedure. (i) There was holiday pay or an incentive bonus
calculated by reference to past service. The following additional factors in the
relationship the industrial tribunal considered were not inconsistent with the
contract of employment: 0) The respondents were paid for work actually performed
and did not receive a regular wage or retainer. The method of calculating
entitlement to remuneration is not an essential aspect of the employment
relationship. (k) Casual workers were not remunerated on the same basis as
permanent employees and did not receive sick pay and were not included in the
employers' staff pension scheme and did not receive the fringe benefits accorded
to established employees. There is, however, no objection to employers adopting
different terms and conditions of employment for different categories of
employee (eg, different terms for manual and managerial staff). (1) There were
no regular or assured working hours. It is not a requirement of employment that
there should be 'normal working hours'(see Sch 3 to the 1978 Act). (in) Casual
workers were not provided with written particulars of employment. If it is
established that casual workers are employees there is a statutory obligation to
fumish written particulars. The following factors were considered by the
industrial tribunal to be inconsistent with a contract of employment: (n) The
engagement was terminable without notice on either side. (o) The respondents had
the right to decide whether or not to accept work, although whether or not it
would be in their interest to exercise the right to refuse work is another
matter. (p) The employers had no obligation to provide any work. (q) During the
subsistence of the relationship it was the parties' view that casual workers
were independent contractors engaged under successive contracts for services.
(r) It is the recognised custom and practice of the industry that casual workers
are engaged under a contract for services. I shall return later to deal in some
little detail with the third category, because this has given rise to a
substantial degree of controversy. The majority decision of the industrial
tribunal was in these terms:
'It is freely
recognised that the relationship of the [respondents] to the employers had many
of the characteristics of a contract of service. In our view the one important
ingredient which was missing was mutuality of obligation. The [respondents]
entered into their relationship with the employers in the expectation that they
would be provided with any work which was currently available. It was a purely
commercial transaction for the supply and purchase of services for specific
events, because there was no obligation for the [employers] to provide further
work 14. 464 @a and no obligation for the [respondents] to offer their further
services. By making themselves available on a regular basis the [respondents]
had the prospect of enhanced profit for themselves. If they could obtain more
regular and profitable work elsewhere they were free to take it. The
[respondents] were in no different position than any independent contractor who
offers his services for a particular purpose or event (eg, a jobbing gardener or
a day Tabourer) and it was by their choice that they made their services
available to a single customer. Where the commodity offered is the simple supply
of semi-skilled labour for a specific occasion, or series of occasions, it is
not to be expected that there would be a financial investment or participation
in the profits or losses of the business. We are, of course, aware that lack of
mutuality of obligation is not, in itself, a decisive factor and that outworkers
can, in appropriate circumstances, be employees working under a contract of
employment, even though there is no obligation to provide work or perform it:
see Airfix Footivear Ltd v Cope [ 1 978] ICR 12 1 0 and Nethermere (St Neots)
Ltd v Gardiner [1983] ICR 319. Nevertheless, this was a factor on which we
placed very considerable weight in making our assessment. What is required of us
in these proceedings is to determine the nature of the contractual relationship
between the parties. This is not the description which the parties give to their
relationship but the nature of the engagement resulting from the terms (whether
express or implied) of their mutual agreement. No detailed terms were discussed
at the time of engagement because there was no need to discuss them. All parties
were fully aware of the custom and practice of the industry that casual workers
were not considered to be employees working under a contract of employment. They
entered into and continued the relationship on that understanding until Mr
O'Kelly and the union attempted to negotiate an alteration in the fundamental
basis of the relationship. As Lord Denning MR said in Massey v Crown Life
Insurance Co [19781 2 All ER 576 at 580,[1978] 1 WLR 676 at 680: "It seems to me
on the authorities that, when it is a situation which is in doubt or which is
ambiguous, so that it can be brought under one relationship or the other, it is
open to the parties by agreement to stipulate what the legal situation shall be.
That was said in Ready Mixed Concrete (South East) Ltd v Minister ofPensions and
National Insurance [1968] 1 All ER 433,[1968] 2 QB 497 in 1968 by MacKenna J. He
said ([1968] 2 QB 497 at 513)'If it were doubtful what rights and duties the
parties wished to provide for, a declaration of this kind might help in
resolving the doubt and fixing them in the sense required to give effect to that
intention.' So the way in which they draw up their agreement and express it may
be a very important factor in defining what the true relation was between them.
If they declare that he is self-employed, that may be decisive." We conclude
that when the parties embarked on their engagement pursuant to the known custom
and practice of the industry, it was indicative of their intention not to create
an employment relationship.' The majority decision concluded by stating that
custom and practice is not, in itself, decisive because each case must be
determined on its individual facts and the evidence may indicate that other
developments occurred to alter the status of the relationship. However, they
considered that it would be irresponsible lightly to disregard the clear
evidence of the intentions of the parties derived from an engagement under
custom and practice, because this could have widespread and damaging
repercussions throughout the whole industry. In the industrial tribunal's
judgment the respondents were in business on their own account as independent
contractors supplying services and were not qualified for interim relief because
they were not employees who worked under a contract of employment.
JURISDICTION
Under the provisions of s 136(l) of the 1978 Act an appeal lies to the
Employment Appeal Tribunal only on a question of law'. The proceedings before
the Employment 14. 465 @a Appeal Tribunal are thus by way of appeal and not by
way of rehearing. If the Employment Appeal Tribunal is to allow the appeal it
can only do so on the basis that the industrial tribunal was wrong in law. The
employers contend that the appeal tribunal can only interfere with the decision
of the industrial tribunal if it is shown that they have applied the wrong legal
principles or that they have reached a conclusion on the facts which no
reasonable tribunal applying the law could have reached. In the submission of
counsel for the employers the limited question which the Employment Appeal
Tribunal was entitled to ask itself was: on the facts found by the industrial
tribunal, have they arrived at a conclusion which could be reasonably
entertained? In his submission, the appeal tribunal are not entitled to ask
themselves whether, on the facts found, the industrial tribunal have reached the
correct conclusion. The issue before the industrial tribunal was whether the
respondents worked for the employers pursuant to a contract or contracts of
service or a contract or contracts for services. Before dealing with the
substance of the appeal the appeal tribunal dealt with the extent of their
jurisdiction in the following terms:
'As is well
known, an appeal lies here on a question of law only. There is a pronounced
difference of judicial view whether the question,"Is a contract a contract of
employment or a contract for services?" is a mixed question of fact and law or a
question of law. The older view was that it was at best a mixed question of fact
and law. As a result, an appellate court with jurisdiction to correct errors of
law only could not intervene in the decision of the lower court unless it was
shown that the lower court, in deciding whether or not there was a contract of
employment, had on the face of its reasons for its decision indicated that it
had misdirected itself in law, or had reached a conclusion that was in a legal
sense "perverse".
This was the
approach of the Court of Appeal in Simmons v Heath Laundry Co [ 1 9 1 0] 1 KB
543, and of the Queen's Bench Divisional Court in Construction Industry Training
Board v Labour Force Ltd [ 1 970] 3 All ER 220 and Global Plant Ltd v Secretary
of State for Health and Social Security [ 1 971] 3 All ER 3 85,[1972] 1 QB 139.
It was also the approach of Browne LJ in the Court of Appeal in Ferguson v John
Dawson & Partners [ 1 976] 3 All ER 817 at 832,[1976] 1 WLR 1213 at 1230, a case
in which the appeal to the Court of Appeal lay on questions of fact as well as
law. On the other side, in Young & Woods Ltd v West [1980] IRLR 201 at 205
Stephenson LJ following the view which he understood Megaw LJ to have expressed
in Ferguson's case, held that the question was one of pure law so that the
appellate court can, and indeed must, reach its own view whether or not, on the
findings of fact made by the lower court, the true legal analysis is that there
was a contract of employment. Ackner LJ, whilst agreeing with the conclusion
reached by Stephenson LJ, did not specifically deal with this point. Since the
Young & Woods case this appeal tribunal has often been confronted with a choice
between these two conflicting views but in general has felt bound to follow the
views of Stephenson LJ in Young & Woods: see, eg, Addison v London Philharmonic
Orchestra [1981] ICR 261 at 270, Ahmet v Trusthouse Forte Catering Ltd (13
January 1983, unreported), Nethermere (St Neots) Ltd v Gardiner [1983] ICR 319.
We do not propose to increase the leaming onthis matter. Very many cases come
before this appeal tribunal on the point and it is in the highest degree
desirable that the matter should be settled by the Court of Appeal one way or
another at an early date. In the meantime it seems to us important to maintain a
consistency of approach by this appeal tribunal. For that reason we, too, will
approach the case on the basis laid down by Stephenson LJ, ie, that the question
is a question of law on which we must make up our own minds on the basis of the
facts found by the industrial tribunal whether the relationship between the
parties is or is not a contract of employment.' I think it may be helpful to go
straight to Young & Woods Ltd v West. Mr West was a skilled sheet metal worker
and when he joined Young & Woods Ltd he was offered alternative methods of
payment: either he could become an employee in the ordinary way or he could be
treated as a self-employed person. Mr West chose to be treated as 'la 466 @a
self-employed. No deductions were made from his pay for tax, he was responsible
for his own national insurance contributions, he did not receive any holiday pay
or sickness benefit from the company. This agreement was entered into with the
knowledge of the Inland Revenue, who treated Mr West for tax purposes as
self-employed. When Mr West's work was terminated he complained that he had been
unfairly dismissed. Young & Woods Ltd contended that he was not an employee
under a contract of service, but he was self-employed under a contract for
services. The industrial tribunal held that Mr West was an employee as defined
by the statute and not self-employed as he and the company had agreed that he
was. The Employment Appeal Tribunal, by a majority, dismissed the company's
appeal. They held that the parties cannot, by a mere label, alter realities and
that the realities were that Mr West was no more than a skilled sheet metal
worker working under a contract of service, just as other employees who were
admittedly working under a contract of service. The minority view was that a
deliberate choice had been made by Mr West to be treated as self-employed in
order that he might reap fiscal advantages. The reality was that he deliberately
chose to be in the position of a self-employed person. On behalf of Young &
Woods Ltd it was argued in the Court of Appeal, inter alia, that the presumption
created by Mr West deliberately and openly choosing the relationship of
self-employed, although rebuttable, was not easily rebutted and had not been
rebutted by him. The complaint was made that the appeal tribunal did not pay
any, or any adequate, regard to those facts which pointed away from a contract
of service to a contract for services. In the course of his judgment Stephenson
LJ commented on the observation made by Browne LJ at the conclusion of his
judgment in Ferguson v Dawson & Partners (Contractors) Ltd [ 1 976] 3 All ER 817
at 832,[1976] 1 WLR 1213 at 1230, which was in these terms:
'When the right
tests have been applied, the conclusion to be drawn is in my view a question of
fact: see Global Plant Ltd v Secretary of State for Health and Social Security
[19711 3 All ER 385 at 391-393,[19721 1 QB 139 at 152-155.' The Global Plant
case was a decision of the
'It may be
stated here that whether the relation between the parties to the contract is
that of master and servant or otherwise is a conclusion of law dependent upon
the rights conferred and the duties imposed by the contract. If these are such
that the relation is that of master and servant, it is irrelevant that the
parties have declared it to be something else. I do not say that a declaration
of this kind is always necessarily ineffective. If it were doubtful what rights
and duties the parties wished to provide for, a declaration of this kind might
help in resolving the doubt and fixing them in the sense required to give effect
to that intention.' That part of Stephenson LJ's judgment which the appeal
tribunal rely on in Young & Woods Ltd v West [1980] IRLR 201 at 205 is as
follows:
'... but I must
respectfully express my dissent from what [Browne LJ] said at the very
conclusion of his judgment, that the conclusion to be drawn from the facts as to
the true legal relationship between the parties after the right tests have been
applied is a question of fact. If by that he meant that it was a question on
which this court cannot interfere, I prefer the view of Lord Justice Megaw that
it is a question of law, in those cases of service or services as in the case of
lease or licence, whether the true inference from the facts, the true
construction or interpretation of a written 14. 467 @a agreement or of an
agreement partly oral and partly written or of a wholly oral agreement, is a
matter of law on which there is a right and a wrong view, and if an Industrial
Tribunal comes to what in the view of this court is a wrong view of the true
nature of the agreement, it can and should find an error in law on the part of
the Industrial Tribunal and reverse its decision. It cannot say that two views
are possible of the true construction of this particular agreement on the facts
which the Industrial Tribunal has found, and we cannot say that no reasonable
tribunal could have come to the interpretation which the Industrial Tribunal has
put upon the facts. It must make up its mind what the true interpretation of the
facts and the true legal relationship created by the contract between the
parties is.' Stephenson LJ rejected the submission that the appeal tribunal had
ignored or undervalued those facts which pointed away from a contract of service
to a contract for services. He took the view that the pointers in the other
direction were strong enough to satisfy the burden which no doubt rested on Mr
West to show that the label was a false label and that, though the mutual
intention of the parties was undoubtedly to call the work which Mr West was
going to do for them services under a contract for services, nevertheless it was
in reality service rendered under a contract of service. There was no such
ambiguity in the relationship between Mr West and the company as could make
their declared intention as to what it should be decisive of it. The extent of
the appeal tribunal's jurisdiction was not called into question, as I recall the
appeal, and in my judgment I did not deal with that subject in express terms. I
did, however, at the outset of my judgment, express my agreement with the
judgment of Stephenson LJ, and this was certainly intended to cover all that he
said.
=El
Sir David Cairns
began his judgment in these terms (at 208-209):
'I found this a
difficult case. I was much impressed by [counsel for the respondent's]
contention that the right conclusion from the facts found in paragraph 3 of the
decision of the Industrial Tribunal was that there was in reality, and not
merely as a matter of label, a contract for services rather than a contract of
service. An alternative argument of [counsel] which also seemed to me to have
much force was that, taking account of the facts in paragraph 3 together with
those in paragraph 5 of the decision indicating that Mr West's working
conditions were indistinguishable from those of the company's employees, the
case was one of ambiguity where the label might be decisive.' It seems to me
clear that Sir David Cairns was approaching the case not on the basis that the
appeal court had merely to be satisfied that the industrial tribunal reached a
decision which was reasonably open to them when properly applying the law to the
facts. The appellate tribunal, be it the Employment Appeal Tribunal or the Court
of Appeal, had to be satisfied that the industrial tribunal had reached the
correct decision. Towards the end of his judgment he said (at 209):
'... on balance,
the matters pointing to its being a contract of service do outweigh the matters
pointing in the other direction ...' It is clear that the approach of the Court
of Appeal in the Young & Woods Ltd v West case was that an error of law could be
established if. (a) the industrial tribunal took into account the wrong criteria
in concluding that a contract was a contract of service or a contract for
services and/or (b) if the tribunal, although applying the proper criteria, gave
the wrong weight to one or more of the relevant factors. Counsel for the
employers, while accepting that it is a question of law whether or not the right
criteria had been applied in answering the question 'Contract of service or
contract for servicesT, contends that it is entirely a matter of fact as to the
weight given to the relevant criteria. I am bound to say that I find this
submission difficult to accept. For example, it is well established that the
power to direct and control the work of the employee is an important factor, but
only one of the factors to be considered. If an 14. 468 @a industrial tribunal
decided that so much weight should be given to the control exercised or
exercisable by the employer that it concluded the issue, I would have thought
that an appeal tribunal would clearly be entitled itself to make the proper
evaluation of that particular factor and reverse the decision. The one case in
the Court of Appeal on which counsel for the employers relies is Simmons v Heath
Laundry Co 1 9 1 0] 1 KB 543. The facts are quite simple. A laundry girl had her
hand injured by an accident arising out of and in the course of her employment.
She earned 7s a week at the laundry, but she also gave piano lessons to a man's
children at his house at 3s a week. She applied under the Workmen's Compensation
Act 1906 that the latter sum might be taken into account under para 2(b) of Sch
1 to that Act in assessing her compensation. This paragraph provided that where
a workman had entered into concurrent contracts of service with two or more
employers under which he worked at one time for one such employer and at another
time for another such employer his average weekly earnings should be computed as
if his earnings under all such contracts were earnings in the employment of the
employer for whom he was working at the time of the accident. 'Workman' in s 13
of the 1906 Act meant any person who has entered into or works under a contract
of service or apprenticeship with an employer, whether by way of manual labour,
clerical work, or otherwise, and whether the contract is expressed or implied,
is oral or in writing ...' Liability was admitted on the footing of the wages of
7s per week paid by the respondents, but they denied that the case fell within
para 2(b) of Sch 1, contending successfully before the county court judge that
the appellant had not entered into concurrent contracts of service. The issue
which had to be decided was whether the girl, as a teacher of music, came within
the definition of 'workman' in the Act. In his judgment, Cozens-Hardy MR said
(at 548):
'In any
particular case it will be for the arbitrator, after considering all the
circumstances, to decide whether the injured professional person is or is not a
"workman". This is not a question of law, but a question of fact, and, unless
the arbitrator has misdirected himself, this court ought not to interefere.'
Fletcher Moulton LJ said (at 549):
'These facts,
although very simple, raise a question of law of considerable importance and
difficulty. It turns substantially on the scope which is to be given to the
phrase "contract of service" in the [Workmen's Compensation] Act.' Towards the
end of hisjudgment he said (at 550):
'The learned
county court judge has decided that it was not a contract of service, and that
therefore the earnings under it cannot be counted in assessing the compensation
to be paid to the injured girl. This is a question of fact as to which we cannot
interfere with his decision.' Buckley LJ began hisjudgment in these words (at
550):
'This appeal
involves a decision trifling in pecuniary amount, but of the largest consequence
in its possible application to other cases. The question in substance is as to
the true meaning of the words "contract of service" in the definition of a
workman contained in s. 13 of the Act.' Buckley LJ dealt in some little detail
with examples of contracts under which services are rendered but which could not
be described as contracts of service. He then said (at 5 5 3):
'The question to
be answered is, Was he employed as a workman or was he employed as a skilled
adviser? I do not know whether it is possible to approach more closely to an
answer to the question as to what is a contract of service under this Act 14.
469 @a than to say that in each case the question to be asked is what was the
man employed to do; was he employed upon the terms that he should within the
scope of his employment obey his master's orders, or was he employed to exercise
his skill and achieve an indicated result in such a manner as in his judgment
was most likely to ensure success? Was his contract a contract of service within
the meaning which an ordinary person would give to the words? Was it a contract
under which he would be appropriately described as the servant of the employer?
If the question which the county court judge puts to himself is that question,
and his answer is given in view of those principles, then I think his finding is
a finding of fact.' I must confess that I was surprised at the terms of this
decision, emanating, as it does, from so strong a Court of Appeal. I am relieved
to find that my diffedent conclusion that the decision was wrong seems to me to
be amply home out by the two main speeches in the well-known case of Edwards
(Inspector of Taxes) v Bairstow [ 1 9 5 5 ] 3 All ER 48,[19561 AC 14. The facts
of the case are simple enough. In 1946 Mr Bairstow and Mr Harrison embarked on a
joint venture involving the purchase of a complete spinning plant, agreeing
between themselves not to hold it but to make a quick resale. After much
negotiation and not until 1948 the plant was sold in several lots at a
substantial profit. Expenses had been incurred, inter alia, for commission for
help in effecting the sales, for insurance, renovation of the plant, etc The
General Commissioners found that there was not an adventure in the nature of
trade to justify an assessment to income tax under Case 1 of Sch D to the Income
Tax Act 1918. Viscount Simonds said ([ 1 95 5] 3 All ER 48 at 54J19561 AC 14 at
30-3 1):
'To say that a
transaction is, or is not, an adventure in the nature of trade is to say that it
has or has not the characteristics which distinguish such an adventure. But it
is a question of law, not of fact, what are those characteristics, or, in other
words, what the statutory language means. It follows that the inference can only
be regarded as an inference of fact if it is assumed that the tribunal which
makes it is rightly directed in law what the characteristics are and that, I
think, is the assumption that is made. It is a question of law what is murder; a
jury finding as a fact that murder has been committed has been directed on the
law and acts under that direction. The commissioners making an inference of fact
that a transaction is, or is not, an adventure in the nature of trade are
assumed to be similarly directed, and their finding thus becomes an inference of
fact.' Lord Radcliffe said ([1955] 3 All ER 48 at 55,[1956] AC 14 at 33):
'My Lords, I
think that it is a question of law what meaning is to be given to the words of
the Income Tax Act "trade, manufacture, adventure or concern in the nature of
trade" and for that matter what constitutes "profits or gains" arising from it.
Here we have a statutory phrase involving a charge of tax, and it is for the
courts to interpret its meaning, having regard to the context in which it
occurs, and to the principles which they bring to bear on the meaning of
income.' He then went on to observe that the law did not supply a precise
definition of the word 'trade', much less did it prescribe a detailed or
exhaustive set of rules for application to any particular set of circumstances.
He said ([1955] 3 All ER 48 at 55-56,[19561 AC 14 at 33):
'In effect, it
lays down the limits within which it would be permissible to say that a "trade"
as interpreted by s. 237 of the Act does or does not exist. The field so marked
out is a wide one and there are many combinations of circumstances in which it
could not be said to be wrong to arrive at a conclusion one way or the other. If
the facts of any particular case are fairly capable of being so described, it
seems to me that it necessarily follows that the determination of the
commissioners, special or general, to the effect that a trade does or does not
exist is not "erroneous in point of law"; and, if a determination cannot be
shown to be erroneous in point of law, the statute does not admit of its being
upset by the court on appeal. I except the 14.470 U occasions when the
commissioners, although dealing with a set of facts which would warrant a
decision either way, show by some reason they give or statement they make in the
body of the Case that they have misunderstood the law in some relevant
particular. All these cases in which the facts warrant a determination either
way can be described as questions of degree and therefore as questions of fact.'
It seems to me clear that in the Heath Laundry case it was a question of law
what meaning had to be given to Para 2(b) of Sch 1 to the Workmen's Compensation
Act 1906. Further, it must be axiomatic that whether or not A has entered into a
contract with B, whether such contract be in writing or partly in writing and
partly oral, or wholly oral, is a question of law involving the true
interpretation of a document and/or the conduct of the parties. The facts cannot
warrant a determination either way. It is not a question of degree, as in the
case of the meaning of reasonableness (see Union ofConstruction, Allied Trades
and Technicians vBrain [1981] ICR 542) or whether a breach amounted to a
repudiatory breach (see Woods v RPM Car Services (Peteroborough) Ltd [1982] ICR
693). If then it is a question of law, whether on the correct interpretation of
a document or whether on the true inference from the facts, parties have entered
into a contract, then in my judgment it must be equally a question of law what
on the facts found is the true nature or quality of that legal relationship?
Given that A has entered into a contract with B to allow him to use his, A's,
premises, I would have thought it axiomatic that whether such an agreement
amounts to a lease or a licence is a question of law depending on either a
proper construction of the relevant document(s) and/or on the true
interpretation of the facts. If this be correct, then having established as a
matter of law that there was a contract of employment between A and B, the
quality or nature of that contract must equally be a question of law: Was it a
contract of service or a contract for services, did B enter A's employment as an
ordinary employee or was he employed by A as an independent contractor? I do not
think that it is profitable to consider all the other cases of a lesser status
than that of the Heath Laundry case. I should perhaps refer to Morren v Swinton
and Pendlebury BC [19651 2 All ER 349,[1965] 1 WLR 576, which involved a case
stated by the Minister of Housing and Local Government under s 35 of the Local
Government Superannuation Act 1937 for the opinion of the High Court on 'any
question of law ...' The dispute was between a local authority and a resident
engineer whom they had appointed, and the issue was whether or not he came
within the definition of 'employee' in s 40(l) of the Local Government
Superannuation Act 1937. Lord Parker CJ, with whose judgment Marshall and
Widgery JJ agreed, said Q19651 2 All ER 349 at 352,[1965] 1 WLR 576 at 583):
'Counsel for the
respondents has pressed on the court that the question of what is the legal
quality of the contract is a question of fact, and that, being a question of
fact, it is for the Minister and not for this court to determine, provided that
there is any evidence which would justify the Minister in arriving at this
conclusion. For my part, I am quite unable to accept that. The terms of the
contract of course are fact, and to that extent the determination depends on
fact, but it seems to me perfectly clear that, once the primary facts are found,
then it is a pure question of law what is the reasonable inference based on the
legal interpretation of the contract.' In Global Plant Ltd v Secretary of
Statefor Health and Social Security [ 1 971] 3 All ER 3 85 [1972] 1 QB 139 Lord
Widgery CJ declined to follow the view expressed by Lord Parker CJ,
distinguishing it on the ground that in that case the issue of contract of
service or no had to be determined substantially from a written contract. I
cannot accept the validity of this distinction. It was objected by counsel for
the employers that if the Employment Appeal Tribunal and the Court of Appeal
were entitled to intervene where in their opinion the industrial tribunal had
reached the wrong, although an arguable decision, this would lead to a
multiplicity of litigation. In my judgment the contrary would be the case.
Without the Employment Appeal Tribunal being entitled to intervene where in its
view the industrial % 471 @a tribunal hw wrongly evaluated the weight of a
relevant considerations) then it will be open to industrial tribunals to reach
differing conclusions, so long as they are reasonably maintainable, on
essentially the same facts. This is clearly highly undesirable, particularly
where a substantial number of statutory provisions impose duties on an employer
in relation to his employees, or confer benefits on employees, where they work
under a contract of service, but not under a contract for services. Quite apart
from the 1978 Act, there are the Transfer of Undertakings (Protection of
Employment) Regulations 1981, SI 1981/1794 dealing with rights and obligations
relating to employers and employees on certain transfers or mergers of
undertakings, business or parts of business, the Social Security Act 1975, which
makes the employer responsible for contributions in respect of an employed
'eamer', and the Factories Acts. To permit conflicting decisions on the basis
that a broad band exists where a tribunal or a court might be said reasonably
entitled to decide the issue either way would seem most unsatisfactory. At the
appeal tribunal two attacks were mounted on the decision of the industrial
tribunal and I will seek to deal with these separately. 1. Thefinding that there
is no contractual obligation either on the employers, TrusthouseForte, to offer
work or on the respondents to do work once rostered It was submitted that the
industrial tribunal, having found that in practice 'regular' casuals on the list
had priority in the offer of available work and a reciprocal practical
requirement to do the work once rostered (because failure to do the work could
lead to possible suspension and subsequent removal from the list) the right
conclusion to draw was that there was a contractual obligation on the employers
to offer work to 'regulars' in priority and on 'regulars' to do the work when
offered. It was therefore contended that factors (o) and (p) in Para 23 of the
industrial tribunal's reasons should not have been placed in the balance against
there being a contract of employment. On the contrary,'the one important
ingredient'(namely mutuality of obligation) which the industrial tribunal found
to be missing was indeed present. The appeal tribunal rejected this submission.
It was, as found by the industrial tribunal, the commanding economic power of
the employers and the financial advantages to the respondents of conforming with
the employers' requirements which enabled the employers to be able to rely on
the 'regulars' accepting the work when it was rostered, and the 'regulars', for
their part, being able to rely on receiving the priority to which I have
referred. The same attack has been repeated before us. Counsel for the
respondents complained that the industrial tribunal had begged the question in
factors (o) and (p). I do not think this is right. The 'assurance of preference
in the allocation of any available work' which the 'regulars' enjoyed was no
more than a firm expectation in practice. It was not a contractual promise. The
employers, of course, expected the respondents to accept engagements rostered,
but to suggest that a failure to accept amounted to a breach of contract is
going too far. They were entitled to choose whether or not to attend, and
however irritating it might have been to the employers if faced with a refusal,
it would have been quite unreal to conclude that either party would have thought
it was a breach of contract. 2. The industrial tribunal erred in law in weighing
in the balancefactors (q) and (r) Factor (q) was that during the subsistence of
the relationship it was the parties' view that the casual workers were
independent contractors engaged under successive contracts for services. Factor
(r) was that it is the recognised custom and practice of the industry that
casual workers are engaged under a contract for services.
The Employment
Appeal Tribunal accepted this submission, concluding that the evidence fell far
short of showing that the parties had any view of the nature of the existing
contractual relationship between them, let alone a shared intentional desire to
produce a particular legal relationship. Having accepted the finding by the
industrial tribunal that there was no overall contractual obligation to roster
any 'regular' casuals and accordingly unless and until in each week a 'regular'
casual was rostered for a job there could be no contractual bond of any kind
between the employers and the employee, 'la 472 @a the respondents' success on
this subsidiary issue was, however, considered to be irrelevant. Since I agree
that the Employment Appeal Tribunal were right to conclude that the respondents'
success on the subsidiary point was of no practical consequence, there is no
need to inquire into the correctness or otherwise of their accepting the
respondents' submissions with regard to paras (q) and (r). I add, however, these
short observations since they may have some relevance to the next main heading.
I accept counsel for the employers' submission that there was ample evidence
that the respondents and the employers were aware of the factual distinctions
between 'regular' casuals and the employees of the employers, but since there
was no ambiguity as to the relationship it seems to me to be irrelevant to
consider what was the legal result the parties intended to produce. Clearly the
'custom and practice' found in factor (r) did not amount to a legal custom
properly so described. However, the respondents' evidence was initially that the
employers were out of step with the industry. They said that they were the only
employers who did not issue contracts of employment. This was subsequently
withdrawn as a result of the employers, during an adjournment, calling evidence
to establish that the practice which they adopted, referred to earlier in this
judgment, was indeed the practice adopted generally throughout the trade. This
was a factor, although not a particularly important factor, which the industrial
tribunal were entitled to take into account as part of the background against
which the parties regulated their relationship. The industrial tribunal were
entitled to find as they did that from the commencement of their engagement the
respondents were treated by the employers as casual staff, on terms and
conditions entirely distinct from those accorded to the wine butlers and
dispense barmen who were permanent employees and issued with written contracts
of employment. The respondents were aware of the distinction and did not
challenge it. Separate contracts. It seems quite clear that at the hearing
before the industrial tribunal the essence of the respondents' case was that
there was one overall or continuous contract in relation to the 'regulars'. The
chairman's notes show that it was in his mind that certainly one alleged
feature, the casual nature of the contract, might affect 'whether we conclude a
continuing or successive contract'. The tribunal note of counsel for the
employers' closing speech again makes it clear that he was dealing with a case
in which it had been maintained throughout that the nature of the relationship
was not short-term but a continuous contract of service, which had been
terminated by the employers' letter of 26 February. The reply by Mrs Gill, on
behalf of the respondents, again made it clear that the employment was
'continuous'. However, it was accepted before the appeal tribunal, before whom
Mr Irvine did not appear for the employers, that the point had been made that
each hiring was a separate contract and the nature of that contract was a
contract of service. The point was not dealt with by the industrial tribunal,
but the appeal tribunal felt at liberty to decide it. They took the view that
the factors relied on as indicating the existence of a contract of employment
enumerated by the industrial tribunal was as much applicable to each individual
contract as to an overall contract. They left out of account factors 0) to (in)
which the industrial tribunal, rightly in the view of the appeal tribunal,
regarded as neutral. When they came to the factors which in relation to the
overall contract were treated as being inconsistent with a contract of
employment, the lack of mutuality factors (o) and (p) did not apply to the
individual contracts, since once a 'regular' had turned up for the function then
it was accepted there was a contractual obligation to allow the work to be done.
They repeated their views in relation to factors (q) and (r), namely that there
was no evidence justifying a finding of any specific intention by the parties as
to the nature of the legal relationship that they were creating. They therefore
concluded that all those elements pointing against a contract of employment had
disappeared, leaving in existence factors all of which point to there being a
contract of employment. The appeal tribunal said:
'We find it
difficult to see on what grounds it can be urged that each individual contract
is a contract for services, given the degree of control, the nature of payment,
the holiday pay, the background of recurrence, the de facto requirement to work
for one person only.' ,1@ 473
However, the
nature of payment, the holiday pay, the background of recurrence and the de
facto requirement to work for one person only are not relevant to status when
working pursuant to an individual contract: they are only
relevant to the
issue,'Was there an overall contractT, as to which the appeal tribunal have
agreed with the decision of the industrial tribunal. The appeal tribunal
concluded that each individual contract was a contract of employment and not a
contract for services. Counsel for the employers, of course, accepts that there
were individual contracts with the 'regulars', as, indeed, with all casuals. He
contends that they were not contracts of employment and that this issue was
never properly before the industrial tribunal. He takes the further point that
in each single contract the engagement was for a particular task and when that
task was performed that engagement was discharged by performance. In such
circumstances there was no dismissal and therefore no entitlement to invoke the
Act: see Wiltshire County Council v National Association of Teachers in Further
and Higher Education [ 1 980] ICR 45 5, a decision of this court. There is, in
fact, indeed a finding in this regard in Para 6 of the industrial tribunal's
reasons for its decision:
'If an
engagement is undertaken the worker is paid at the appropriate hourly or
sessional rate for the work performed. During the function the casual worker
works under the direction and control of the employer as part of his
Organisation and the relationship ends automatically at the end of the function
without the need of notice on either side.' It appears to have been accepted
before the industrial tribunal that it cannot be determined in advance precisely
how long each function will last, therefore how long the casual will be employed
in relation to that function. He will, of course, stay until he has completed
all the work for which he was engaged. The point whether the expiry of each such
individual contract at the conclusion of each session constitutes a 'dismissal'
within the meaning of s 55 of the 1978 Act was not considered by the appeal
tribunal and, indeed, was not investigated by the industrial tribunal. In my
judgment the appeal tribunal, having allowed the individual contract point to be
raised, should have remitted it to the industrial tribunal in order to consider
not only whether such individual contracts were contracts of service or for
services, but also whether, since counsel for the respondents wishes to contest
the point, each such contract was discharged by performance at the conclusion of
the work involved in the session and whether, in such circumstances, where was a
'dismissal' within the meaning of s 5 5 of the 1978 Act. I would accordingly
have allowed this appeal to the limited extent of ordering the remission to the
industrial tribunal of what can be called, conveniently,'the single or
successive contract issue', and dismissed the cross-appeal.
FOX LJ. The
preliminary issue with which we are concerned is whether the applicants, the
respondents in this court, were 'employees' under a 'contract of employment'
within s 153(l) of the Employment Protection (Consolidation) Act 1978 or whether
they were independent contractors working under a contract for services. Under s
136(l) of the Act an appeal lies to the Employment Appeal Tribunal 'on a
question of law' arising from a decision of the industrial tribunal. The first
question which we have to determine is the extent of the jurisdiction of the
Employment Appeal Tribunal to interfere with the decision of the industrial
tribunal. It is said, by the applicants, that the question whether a contract is
a contract of service or a contract for services is a question of law, that s
136(l) permits an appeal on a question of law, and that accordingly the
Employment Appeal Tribunal were free to make up their own minds on that question
of law on the basis of the facts found by the industrial tribunal. I accept that
the question whether a contract is a contract of service can, in a general
sense, be called one of law. But I doubt if that is useful in relation to the
present problem. It gives too general an answer to a more complex matter. Thus
it is evident from the authorities that a question can, in a general sense, be
characterised as one of law without excluding the possibility that, in the end,
it resolves itself into a question of fact ini4. 474 @2 individua cases. In
Currie v IRC [1921] 2 KB 332 the question was whether a person was carrying on a
'profession' within the meaning of exception (c) of s 39 of the Finance (No 2)
Act 1915. Lord Stemdale MR said (at 335-336):
'Is the question
whether a man is carrying on a profession or not a matter of law or a matter of
fact? I do not know that it is possible to give a positive answer to that
question; it must depend upon the circumstances with which the Court is dealing.
There may be circumstances in which nobody could arrive at any other conclusion
than that what the man was doing was carrying on a profession; and therefore,
looking at the matter from the point of view of the judge directing a jury, the
judge would be bound to direct them that on the facts they could only find that
he was carrying on a profession. That reduces it to a question of law. On the
other hand, there may be facts on which the direction would have to be given the
other way. But between those two extremes there is a very large tract of country
in which the matter becomes a question of degree; and where that is the case the
question is undoubtedly, in my opinion, one of fact ...' In Edwards (Inspector
of Taxes) v Bairstow [1955] 3 All ER 48,[19561 AC 14 the question was whether a
transaction was 'an adventure or concern in the nature of trade' and so taxable
under Case I of Sch D to the Income Tax Act 1918. Lord Radcliffe said that was a
question of law: see [1955] 3 All ER 48 at 55,[1956] AC 14 at 33. But he also
said that the law provided no precise definition of the word 'trade' and that
there were many combinations of circumstances in which it could not be said to
be wrong to arrive at a conclusion one way or the other. All such cases could be
described 'as questions of degree and, therefore, as questions of fact'. Simmons
v Heath Laundry Co [19 101 1 KB 543 is a much earlier example of the principle
stated in Currie v IRC and Edwards v Bairstow. The case turned on the meaning of
the term 'contract of service' in the Workmen's Compensation Act 1906; the
problem related to part-time earnings of the applicant from giving piano lessons
and giving accompaniments on the piano. The arbitrator decided that the earnings
did not arise under contracts of service. That was held to be a question of fact
for the arbitrator, and accordingly the Court of Appeal refused to interfere.
Fletcher Moulton LJ said (at 549):
'Some cases
present no difficulty. For example, where the proprietor of a private boarding
school engages ushers to teach the boys and to maintain discipline, it does not,
in my opinion, admit of reasonable doubt that the contracts into which those
ushers enter are "contracts of service" within the Act. On the other hand it is
in my mind equally clear that where a person goes to a music or singing master
to take lessons it would be absurd to hold that the person giving the lessons is
the servant of the person taking them in any sense of the word. The contract
between them is a contract for services, but it is not a contract of service.
Between these two extreme cases lie an infinite number of intermediate cases
where the special circumstances point with greater or less force towards the one
conclusion or the other, and in my opinion it is impossible to lay down any rule
of law distinguishing the one from the other. It is a question of fact to be
decided by all the circumstances of the case.' Woods v RPM Car Services
(Peterborough) Ltd [ 1 982] ICR 693, which was concerned with the question
whether the employer had repudiated the contract of service, seems to me to
follow the same principles as those stated by Lord Stemdale MR, Fletcher Moulton
LJ and Lord Radcliffe. In Woods (at 698) Lord Denning MR said:
'In each case it
depends on whether the misconduct amounted to a repudiatory breach ... The
circumstances are so infinitely various there can be, and is, no rule of law
saying what circumstances justify and what do not. It is a question of fact for
the tribunal of fact in this case the industrial tribunal.' Now what is said on
behalf of the respondents in the present case is this. It is accepted that in
Woods v kvm Car Services, for example, the nature of the issue before the court
14. 475 @a was such that there was a grey area, or a band of uncertainty, where
one could not say that it would be wrong for the tribunal to decide the case one
way or the other. The confines of the law were imprecise and, within the grey
area, it was a matter of degree in individual cases whether the case was within
the statutory provision or not. That, however, is not, so it is said, the
position here. There can only be one correct answer to the question whether a
contract of service exists. Reliance is placed on the decision of this court in
Young & Woods Ltd v West [1980] IRLR 201 and, in particular, the observations of
Stephenson LJ (at 205). 1 do not feel able to accept that argument. The issue
seems to me to be no more susceptible of the analysis that there is a right and
a wrong answer to be determined as a matter of pure law than was the issue in
Heath Laundry or Currie v IRC or Woods v RPM Car Services. The precise quality
to be attributed to various individual facts is so
much a matter of
degree that is is unrealistic to regard the issue as attracting a clear 'legal'
answer. I do not think that Heath Laundry was wrongly decided. It seems to me to
be consistent with the principles applied by the Court of Appeal in Currie v IRC
and the House of Lords in Edwards v Bairstow, and if there be any conflict
between it and Young & Woods v West (in which, in fact, the Court of Appeal was
of opinion that the decision of the industrial tribunal was right and did not
have to interfere with it), I would follow the Heath Laundry case. I should add
that I do not detect in the more recent authorities any tendency to depart from
the Edwards v Bairstow principles. In Melon v Hector Powe Ltd [ 1 9 8 1 ] 1 All
ER 3 13 they were applied by the House of Lords in an appeal from an industrial
tribunal under the Redundancy Payments Act 1965: see the speech of Lord Fraser
(at 316). And in Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All
ER 1030 at 1047,[19821 AC 724 at 752 Lord Roskill said that in Edwards v
Bairstow the House of Lords made it clear that the court should only interfere
with the conclusion of special commissioners if it were shown either that they
had erred in law or had reached a conclusion which no reasonable tribunal,
properly instructed, could have reached. And he went on to deprecate the
suggestion that since the question whether a contract was frustrated was one of
law the court was free to decide the matter itself and contrary to the decision
of the arbitrators. In the present case the industrial tribunal in their full
and careful reasons list nine circumstances which are consistent with the
existence of a contract of employment, four which are not inconsistent with it
and five which are inconsistent with it. It seems to me that the case was indeed
one where the answer, in the end, was a matter of degree and, therefore, of
fact. For example there may, I think, be a narrow line between the conclusion
that the employers were undertaking to offer work to the regular casuals in
return for the regular casuals undertaking to accept the work which was offered
(ie a contract of employment) and the conclusion that there was no contract to
employ and that the arrangement was simply the consequence of market forces (in
effect, the dominant economic position of the employers). It was essentially a
matter of fact for the industrial tribunal to decide which was correct after
considering the evidence. The result, in my view, is that the Employment Appeal
Tribunal was not entitled to interfere with the decision of the industrial
tribunal unless that tribunal misdirected itself in law or its decision was one
which no tribunal, properly instructed, could have reached on the facts. Neither
of those exceptions can be demonstrated here in relation to the overall contract
question. I cannot see any misdirection and I find it quite impossible to say
that no reasonable tribunal, properly instructed, could have reached the
conclusion that the industrial tribunal did. They had evidence on which to do
so. I agree, therefore, with the conclusion of the appeal tribunal that the
industrial tribunal's decision that there was no overall contract of employment
must stand. There remains the question whether there was a series of individual
contracts of employment of the 'regular' casuals. The appeal tribunal were of
the opinion that the industrial tribunal had not dealt with the point at all.
Mrs Gill, who appeared for the respondents before the industrial tribunal, is,
we are informed, in no doubt that she put the point. In the light of its careful
reasons, I should be surprised if this tribunal overlooked it. ,1@ 476 @a If the
point was not dealt with by the industrial tribunal I do not think that the
appeal tribunal was justified in dealing with the point itself. The appeal
tribunal should, in the circumstances of this case, have remitted the matter. In
fact, however, what the industrial tribunal decided was this:
'The majority
decision of the tribunal is that the applicants [the respondents] are not
qualified for interim relief because they are not employees who worked under a
contract of employment.' That was the question the industrial tribunal were
required to decide. Now the industrial tribunal, no doubt, decided that there
was no overall contract of employment. But they decided more than that. In the
final paragraph of their reasons they state:
'It is our
decision that the applicants [the respondents] were in business on their own
account as independent contractors supplying services and are not qualified for
interim relief because they were not employees who worked under a contract of
employment.' That seems to me to be inconsistent with the 'separate contracts'
contention. Since it does not appear to me that there was any misdirection by
the industrial tribunal and the conclusion was not unreasonable on the facts, I
would therefore regard the point as concluded.
I would allow
the appeal and dismiss the cross-appeal.
SIR JOHN
DONALDSON MR. The judgment of the Employment Appeal Tribunal in this case
suggests that there is a difference of judicial view whether the question 'Is a
contract a contract of employment or a contract for servicesT is a mixed
question of fact and law or a question of law, but I do rather doubt whether the
triple categorisation of issues as 'fact','law' and 'mixed fact and law' is very
helpful in the context of the jurisdiction of the Employment Appeal Tribunal.
The Employment Appeal Tribunal is a court with a statutory jurisdiction. So far
as is material, that jurisdiction is limited to hearing appeals on questions of
law arising from any decision of, or arising in any proceedings before, an
industrial tribunal: see s 136(l) of the Employment Protection (Consolidation)
Act 1978. If it is to vary or reverse a decision of an industrial tribunal it
has to be satisfied that the tribunal has erred on a question of law. Whilst it
may be convenient for some purposes to refer to questions of 'pure' law as
contrasted with 'mixed' questions of fact and law, the fact is that the
Employment Appeal Tribunal has no jurisdiction to consider any question of mixed
fact and law until it has purified or distilled the mixture and extracted a
question of pure law. The purification methods are well known. In the last
analysis all courts have to direct themselves as to the law and then apply those
directions in finding the facts (in relation to admissibility and relevance) and
to the facts as so found. When reviewing such a decision, the only problem is to
divine the direction on law which the lower court gave to itself. Sometimes it
will have been expressed in its reasons, but more often it has to be inferred.
This is the point of temptation for the appellate court. It may well have a
shrewd suspicion, or gut reaction, that it would have reached a different
decision, but it must never forget that this may be because it thinks that it
would have found or weighed the facts differently. Unpalatable though it may be
on occasion, it must loyally accept the conclusions of fact with which it is
presented and, accepting those conclusions, it must be satisfied that there must
have been a misdirection on a question of law before it can intervene. Unless
the direction on law has been expressed it can only be so satisfied if, in its
opinion, no reasonable tribunal, properly directing itself on the relevant
questions of law, could have reached the conclusion under appeal. This is a
heavy burden on an appellant. I would have thought that all this was trite law,
but if it is not, it is set out with the greatest possible clarity in Edwards
(Inspector of Taxes) v Bairstow [1955] 3 All ER 48,[1956] AC 14. ,1@ 477 Why,
then, is there a problem in relation to an issue whether an applicant to an
industrial tribunal is or is not employed under a contract of employment? The
answer lies in the interpretation which the Employment Appeal Tribunal has
placed on a passage in ajudgment of Stephenson LJ in Young & Woods Ltd v West
[1980] IRLR 201 at Para 15, which, in the appeal tribunal's judgment,
Browne-Wilkinson J interpreted as authority for the proposition that 'the
question is one of pure law, so that the appellate court can, and indeed must,
reach its own view on whether or not, on the findings of fact made by the lower
court, the true analysis is that there was a contract of employment.' If this is
the true interpretation of Stephenson LJ's judgment, it represents a sudden and
unexplained departure from what has been understood to be the law for over 70
years, for it was as long ago as that that this court went so far, in Simmons v
Heath Laundry Co [19101 1 KB 543, as to described the issue as one of fact with
which an appellate court could not interfere in the absence of reason to believe
that the arbitrator had misdirected himself. For my part I do not think that
Stephenson LJ can be taken as having intended to make such a departure. There is
no doubt that there are pure questions of law which throw a court back to
questions of fact. The most obvious example is what length of notice is required
to terminate a contract which does not expressly make provision for termination.
This is a pure question of law and the answer is: such time as is reasonable in
all the circumstances. Applying that direction to facts whose nature, quality
and degree are known with complete precision will no doubt always produce the
same answer. But this is not real life. In reality every tribunal of fact will
find and assess the factual circumstances in ways which differ to a greater or
lesser extent and so can give rise to different conclusions, each of which is
unassailable on appeal. In this sense, but in this sense alone, their
conclusions are conclusions of fact. More accurately they are conclusions of law
which are wholly dependent on conclusions of fact.
The test to be applied in identifying whether a contract is one of employment or for services is a pure question of law and so is its application to the facts. But it is for the tribunal of fact not only to find those facts but to assess them qualitatively and within limits, which are indefinable in the abstract, those findings and that assessment will dictate the correct legal answer. In the familiar phrase, it is all a question of fact and degree. It is only if the weight given to a particular factor shows a self-misdirection in law that an appellate court with a limited jurisdiction can interfere. It is difficult to demonstrate such a misdirection and, to the extent that it is not done, the issue is one of fact. This, I think, is what this court meant in Simmons v Heath Laundry Co which, so construed, is consistent with Edwards v Bairstow. In the instant appeal the industrial tribunal directed itself to 'consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account.' This is wholly correct as a matter of law and it is not for this court or for the Employment Appeal Tribunal to reweigh the facts. The industrial tribunal then concluded that there was no contract of employment extending over a series of engagements. This conclusion was based on an evaluation of the large number of factors set out in their reasons, but it is clear that the majority attached great importance to the fact that, as they saw it, there was no mutuality of obligation and that in the industry casual workers were not regarded as working under any overall contract of employment. The Employment Appeal Tribunal refused to interfere with this conclusion and in myjudgment they were right to do so. So far as mutuality is concerned, the 'arrangement', to use a neutral term, could have been that the employers promised to offer work to the regular casuals and, in exchange, the regular casuals undertook to accept and perform ,4. 478 @a such work as was offered. This would have constituted a contract. But what happened in fact coul( equally well be attributed to market forces. Which represented the true view could only be determined by the tribunal which heard the witnesses and