N Sejpal v Rodericks Dental Limited [2022] EAT 91

“I agree with Maurice Kay LJ that there is not “a single key to unlock the words of the statute in every case”

"230 Employees, workers etc. (1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment. (2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing. (3) In this Act "worker" (except in the phrases "shop worker" and "betting worker") means an individual who has entered into or works under (or, where the employment has ceased, worked under)— (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personallyany work or servicesfor another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker's contract shall be construed accordingly."

“As already seen, employment law distinguishes between three types of people: those employed under a contract of employment; those self-employed people who are in business on their own account and undertake work for their clients or customers; and an intermediate class of workers who are self-employed but do not fall within the second class. Discrimination law, on the other hand, while it includes a contract “personally to do work” within its definition of employment (see, now, Equality Act 2010, s 83(2) ) does not include an express exception for those in business on their account who work for their clients or customers. But a similar qualification has been introduced by a different route.”

“Second, within the latter class, the law now draws a distinction between two different kinds of self-employed people. One kind are people who carry on a profession or a business undertaking on their own account and enter into contracts with clients or customers to provide work or services for them. The arbitrators in Hashwani v Jivraj (London Court of International Arbitration intervening) [2011] UKSC 40, [2011] 1 WLR 1872 were people of that kind. The other kind are self-employed people who provide their services as part of a profession or business undertaking carried on by some-one else. The general medical practitioner in Hospital Medical Group Ltd v Westwood [2012] EWCA Civ 1005; [2013] ICR 415 , who also provided his services as a hair restoration surgeon to a company offering hair restoration services to the public, was a person of that kind and thus a “worker” within the meaning of section 230(3)(b) of the 1996 Act.”

“29. However, the question for this court is not whether the two approaches are consistent but what is the correct principle. I unhesitatingly prefer the approach of Elias J in Kalwak and of the Court of Appeal in Szilagyi and in this case to that of the Court of Appeal in Kalwak . The question in every case is, as Aikens LJ put it at para 88 quoted above, what was the true agreement between the parties. I do not perceive any distinction between his approach and the approaches of Elias J in Kalwak , of Smith LJ and Sedley LJ in Szilagyi and this case and of Aikens LJ in this case. 30. In para 57 of Kalwak (set out above) Elias J quoted Peter Gibson LJ's reference to the importance of looking at the reality of the obligations and in para 58 to the reality of the situation. In this case Smith LJ quoted (at para 51) para 50 of her judgment in Szilagyi : “The kernel of all these dicta is that the court or tribunal has to consider whether or not the words of the written contract represent the true intentions or expectations of the parties, not only at the inception of the contract but, if appropriate, as time goes by.” 31. She added in paras 52, 53 and 55: “52. I regret that that short paragraph [ie para 51] requires some clarification in that my reference to ‘as time goes by’ is capable of misunderstanding. What I wished to say was that the court or tribunal must consider whether or not the words of the written contract represent the true intentions or expectations of the parties (and therefore their implied agreement and contractual obligations), not only at the inception of the contract but at any later stage where the evidence shows that the parties have expressly or impliedly varied the agreement between them. 53. In my judgment the true position, consistent with Tanton , Kalwak and Szilagyi , is that where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were. Evidence of how the parties conducted themselves in practice may be so persuasive that the tribunal can draw an inference that that practice reflects the true obligations of the parties. But the mere fact that the parties conducted themselves in a particular way does not of itself mean that that conduct accurately reflects the legal rights and obligations. For example, there could well be a legal right to provide a substitute worker and the fact that that right was never exercised in practice does not mean that it was not a genuine right. … 55. It remains to consider whether the EJ directed himself correctly when he considered the genuineness of the written terms. I am satisfied that he directed himself correctly in accordance with, although in advance of, Szilagyi . In effect, he directed himself that he must seek to find the true nature of the rights and obligations and that the fact that the rights conferred by the written contract had not in fact been exercised did not mean that they were not genuine rights.” 32. Aikens LJ stressed at paras 90 to 92 the importance of identifying what were the actual legal obligations of the parties. He expressly agreed with Smith LJ's analysis of the legal position in Szilagyi and in paras 47 to 53 in this case. In addition, he correctly warned against focusing on the “true intentions” or “true expectations” of the parties because of the risk of concentrating too much on what were the private intentions of the parties. He added: “What the parties privately intended or expected (either before or after the contract was agreed) may be evidence of what, objectively discerned, was actually agreed between the parties: see Lord Hoffmann's speech in the Chartbrook case at [64] to [65]. But ultimately what matters is only what was agreed, either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded. I accept, of course, that the agreement may not be express; it may be implied. But the court or tribunal's task is still to ascertain what was agreed.”

“recognising as it does that while employment is a matter of contract, the factual matrix in which the contract is cast is not ordinarily the same as that of an arm's length commercial contract.”

“92. I respectfully agree with the view, emphasised by both Smith and Sedley LJJ, that the circumstances in which contracts relating to work or services are concluded are often very different from those in which commercial contracts between parties of equal bargaining power are agreed. I accept that, frequently, organisations which are offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept. In practice, in this area of the law, it may be more common for a court or tribunal to have to investigate allegations that the written contract does not represent the actual terms agreed and the court or tribunal must be realistic and worldly wise when it does so … ” 35. So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description.”

“62. Beginning at para 22 of the judgment, Lord Clarke considered three cases in which "the courts have held that the employment tribunal should adopt a test that focuses on the reality of the situation where written documentation may not reflect the reality of the relationship". From these cases he drew the conclusion (at para 28) that, in the employment context, it is too narrow an approach to say that a court or tribunal may only disregard a written term as not part of the true agreement between the parties if the term is shown to be a "sham", in the sense that the parties had a common intention that the term should not create the legal rights and obligations which it gives the appearance of creating: see Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802 (Diplock LJ) . Rather, the court or tribunal should consider what was actually agreed between the parties, "either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded": see para 32, again agreeing with observations of Aikens LJ in the Court of Appeal. … 68. The judgment of this court in the Autoclenz case made it clear that whether a contract is a "worker's contract" within the meaning of the legislation designed to protect employees and other "workers" is not to be determined by applying ordinary principles of contract law such as the parol evidence rule, the signature rule and the principles that govern the rectification of contractual documents on grounds of mistake. Not only was this expressly stated by Lord Clarke but, had ordinary principles of contract law been applied, there would have been no warrant in the Autoclenz case for disregarding terms of the written documents which were inconsistent with an employment relationship, as the court held that the employment tribunal had been entitled to do. What was not, however, fully spelt out in the judgment was the theoretical justification for this approach. It was emphasised that in an employment context the parties are frequently of very unequal bargaining power. But the same may also be true in other contexts and inequality of bargaining power is not generally treated as a reason for disapplying or disregarding ordinary principles of contract law, except in so far as Parliament has made the relative bargaining power of the parties a relevant factor under legislation such as the Unfair Contract Terms Act 1977 . 69. Critical to understanding the Autoclenz case, as I see it, is that the rights asserted by the claimants were not contractual rights but were created by legislation. Thus, the task for the tribunals and the courts was not, unless the legislation required it, to identify whether, under the terms of their contracts, Autoclenz had agreed that the claimants should be paid at least the national minimum wage or receive paid annual leave. It was to determine whether the claimants fell within the definition of a "worker" in the relevant statutory provisions so as to qualify for these rights irrespective of what had been contractually agreed. In short, the primary question was one of statutory interpretation, not contractual interpretation. 70. The modern approach to statutory interpretation is to have regard to the purpose of a particular provision and to interpret its language, so far as possible, in the way which best gives effect to that purpose. … 76. Once this is recognised, it can immediately be seen that it would be inconsistent with the purpose of this legislation to treat the terms of a written contract as the starting point in determining whether an individual falls within the definition of a "worker". To do so would reinstate the mischief which the legislation was enacted to prevent. It is the very fact that an employer is often in a position to dictate such contract terms and that the individual performing the work has little or no ability to influence those terms that gives rise to the need for statutory protection in the first place. The efficacy of such protection would be seriously undermined if the putative employer could by the way in which the relationship is characterised in the written contract determine, even prima facie, whether or not the other party is to be classified as a worker. Laws such as the National Minimum Wage Act were manifestly enacted to protect those whom Parliament considers to be in need of protection and not just those who are designated by their employer as qualifying for it.”

“80. These provisions, as I read them, apply to any provision in an agreement which can be seen, on an objective consideration of the facts, to have as its object excluding or limiting the operation of the legislation. It is just as inimical to the aims of the legislation to allow its protection to be limited or excluded indirectly by the terms of a contract as it is to allow that to be done in direct terms.”

“102 I would add that the fact that some aspects of the way in which Uber operates its business are required in order to comply with the regulatory regime - although many features are not - cannot logically be, as Uber has sought to argue, any reason to disregard or attach less weight to those matters in determining whether drivers are workers. To the extent that forms of control exercised by Uber London are necessary in order to comply with the law, that merely tends to show that an arrangement whereby drivers contract directly with passengers and Uber London acts solely as an agent is not one that is legally available.”

“10. An issue that arises in this case is the significance of mutuality of obligation in the employment contract. Every bilateral contract requires mutual obligations; they constitute the consideration from each party necessary to create the contract. Typically an employment contract will be for a fixed or indefinite duration, and one of the obligations will be to keep the relationship in place until it is lawfully severed, usually by termination on notice. But there are some circumstances where a worker works intermittently for the employer, perhaps as and when work is available. There is in principle no reason why the worker should not be employed under a contract of employment for each separate engagement, even if of short duration, as a number of authorities have confirmed: see the decisions of the Court of Appeal in Meechan v Secretary of State for Employment [1997] IRLR 353 and Cornwall County Council v Prater [2006] IRLR 362.”

“41. Ms Darwin, together with Ms Swords-Kieley, for the respondent submits that a contract cannot fall within the scope of limb (b) of reg 2(1) of the Regulations unless it includes an irreducible minimum of obligations on the parties. That meant, submitted Ms Darwin, that each contract had to include an obligation on the part of the worker to perform some minimum amount of work. …48. The employment tribunal also found that the claimant and the Council entered into a series of individual contracts. Each time the Council offered a hearing date, and the claimant accepted it, he agreed to attend that hearing and the Council agreed to pay him a fee. By those individual agreements, and the obligations contained in the 2012 and 2016 Agreements setting out how the claimant was to carry out the task of conducting a hearing, the claimant “agreed to provide his services personally” (see para 219, and paras 189 and 191, of the employment tribunal's reasons). The employment tribunal went on to find that the Council was not the client or customer of a profession or business carried on by the claimant. Those findings were sufficient to entitle the employment tribunal to conclude that the claimant was a worker in that he entered into (and had worked under) a contract whereby he undertook to perform services personally for the respondent and the respondent was not a client of his business or professional undertaking. There is no need, and no purpose served, in seeking to introduce the concept of an irreducible minimum of obligation in the way defined by the respondent.”

“84 Some of those cases are decisions of the Court of Appeal, which are binding on us. Some of them are decisions of the appeal tribunal, which are not. In the light of the cases and the language and objects of the relevant legislation, I would summarise as follows the applicable principles as to the requirement for personal performance. Firstly, an unfettered right to substitute another person to do the work or perform the services is inconsistent with an undertaking to do so personally. Secondly, a conditional right to substitute another person may or may not be inconsistent with personal performance depending upon the conditionality. It will depend on the precise contractual arrangements and, in particular, the nature and degree of any fetter on a right of substitution or, using different language, the extent to which the right of substitution is limited or occasional. Thirdly, by way of example, a right of substitution only when the contractor is unable to carry out the work will, subject to any exceptional facts, be consistent with personal performance. Fourthly, again by way of example, a right of substitution limited only by the need to show that the substitute is as qualified as the contractor to do the work, whether or not that entails a particular procedure, will, subject to any exceptional facts, be inconsistent with personal performance. Fifthly, again by way of example, a right to substitute only with the consent of another person who has an absolute and unqualified discretion to withhold consent will be consistent with personal performance.”

“Discussion Preliminary observations 34 In considering the question of the employment status of an individual, it is helpful to start with a reminder of what the relevant issue is. Much of the discussion in the present case had focused on analysis of what were said to be different categories recognised by the Court of Appeal in Pimlico Plumbers [2017] ICR 657and attempts to shoehorn particular facts, or particular findings of the employment tribunal, into what were said to be relevant categories. It is more appropriate to identify first the basic issue and then to consider the decision of the employment tribunal, read fairly and as a whole, to determine whether it identified the correct issue, applied the relevant principles to that issue and whether it reached findings it was entitled to reach on the material before it. The issue 35 The issue here is that the 1996 Act and the other relevant legislation confer rights on a “worker”

"I am unable to accept Mr Green's submissions for a number of reasons. Firstly, they effectively emasculate the words of the statute. If Parliament had intended to provide for an excluded category defined as those in business on their own account, it would have said so, rather than providing a more nuanced exception. Secondly, whilst it is true that Mr Green's approach has the attraction of greater simplicity and predictability, it simply does not fit with the words of the statute. The status exception does indeed provide a third, albeit negative hurdle. Thirdly, it is counterintuitive to see HMG as Dr Westwood's 'client or customer'. HMG was not just another purchaser of Dr Westwood's various medical skills. Separately from his general practice and his work at the Albany Clinic, he contracted specifically and exclusively to carry out hair restoration surgery on behalf HMG. In its marketing material, HMG referred to him as 'one of our surgeons'. Although he was not working for HMG pursuant to a contract of employment, he was clearly an integral part of its undertaking when providing services in respect of hair restoration, even though he was in business on his own account."

“63. The nine aspects identified by counsel for the Claimant were set out as being: (1) The Claimant's mode of appointment and selection (including the probation period); (2) The terms of the contract; (3) Mutuality of obligations; (4) The requirement for personal service and the true position as regards cancellation and substitution; (5) Pay and apportionment of financial risk; (6) The use of the Respondent's resources; (7) Control; (8) Integration within the Respondent's operations; and (9) Integration in the eyes of the public (Was the Claimant in business on her own account?). 64. The evaluation of the Tribunal follows the order of those matters as presented by counsel for the Claimant.”

“The ET erred in its approach to the written terms (Ground One: Written Terms); The ET erred in finding that there was insufficient mutuality of obligations (Ground Two: Mutuality of Obligations); The ET erred in its Approach to Personal Service (Ground Three: Personal Service); The ET erred in its approach to control (Ground Four: Control); The ET erred in its approach to integration (Ground Five: Integration); The ET erred in diverging worker status from vicarious liability (Ground Six: Vicarious Liability); The ET failed to exercise its interpretative obligations under s3 HRA 1998 and/or Article 14 ECHR (Ground Seven: Article 14 ECHR).”

“At the heart of this case is a written document reflecting the terms of a contract into which the parties entered, referred to as an “Associateship Contract”.”

“52. On the face of its wording the 2013 “Associateship Contract” into which the parties entered is drafted unequivocally in language which is intended to exclude the Claimant enjoying the employment status of “employee”

“In the event of the Associate's failure (through ill health maternity paternity or other cause) to utilise the facilities for a continuous period of more than 14 days the Associate shall use his best endeavours to make arrangements for the use of the facilities by a locum tenens, such locum tenens being acceptable to the Primary Care Trust and the Company to provide Personal Dental Services Plus/Personal Dental Services as a Performer at the practice, and in the event of the failure by the Associate to make such arrangements the Company shall have authority to engage a locum tenens on behalf of the Associate and to be paid for by the Associate. The Company and Associate will agree the method of payment of the locum tenens. The Company will notify the PCT that the locum tenens is acting as a Performer at the Practice. The Associate will be responsible for obtaining and checking references and the registration status of the locum and ensuring that the locum is entered into the Performers list of a Primary Care Trust in England and will confirm to the Company that these requirements have been carried out, The Associate will provide the Company with such relevant information as he may reasonably require.”

“In the event of your failure (through ill health, maternity leave or other causes excluding up to 30 days’ annual holiday allowance) to utilise the facilities for a continuous period of more than five days you shall make arrangements for the use of the facilities by a locum tenens acceptable to [the respondent] and in the event of your failure to make such arrangements [the respondent] shall have authority to appoint a locum tenens if possible to act on your behalf who should be your servant or agent and shall be paid by you”