Mr D Nicolaou v Secretary of State for Business and Trade and Sandon Road Fish Bar (in Liquidation): 1305832/2023
EMPLOYMENT TRIBUNALS
Case No 1305832/2023
Between
In Person Respondent (1): Mr. Proag Soni, representative Respondent (2) No attendanceClaimantSecretary of State for Business and Trade and Sandon Road Fish Bar (in Liquidation)Respondent
Before
Employment Judge WedderspoonIn person for claimantDate 29 November 2024
JUDGMENT
[1]It was not reasonably practicable for the claimant to have brought the claim within the primary time limit but the claim was brought within a further reasonable period.[2]The case will proceed to final hearing. ______ 06/08/2024
REASONS
[1]On the 10th of November 2024 the claimant requested written reasons for my oral decision issued on the 30th of October 2024.[2]This is an application brought under S188 of the Employment Rights Act 1996 (ERA) against the secretary of State for Business, for a declaration that the claimant should be paid a redundancy payment from the government’s national insurance fund, pursuant to S182 of the ERA.[3]The claimant Mr Demetrios Nicolaou, is the former owner and manager of Sandon Road Fish Bar Limited, a company now in liquidation. There is no dispute that the company is insolvent and entered liquidation on the 13th of April 2023. The claimant duly presented a claim to the respondent for payment of redundancy. That claim was refused on 28th May 2023.[4]The claimant entered a period of early conciliation between 5th of September 2023 and the 11th of September 2023. The claimant presented his claim to the Tribunal on the 16th of September 2023. That was approximately 14 days outside of the limitation period provided for in S188.[5]On the 12th of August 2024 Employment Judge Wedderspoon allowed a Just and equitable extension to the claim being presented out of time. That order listed this final hearing and set case management directions, for the exchange of disclosure and evidence. I have been provided with a bundle of 179 pages by the respondent and a single page witness statement from the claimant. The liquidator takes a neutral stance and accordingly has not participated in the proceedings.
The issues
[6]The claim was refused by the respondent on the basis that the claimant had failed to evidence that he was an employee of the company, rather than simply an officer. Secondly the respondent argued that the claim was not quantifiable in terms of the redundancy payment, as the wage level and employment period was unclear, as was the value of any unclaimed wages. CASE NUMBER: 1305832/2023 3[7]Therefore, in order to resolve the claim, I must determine the following factual matters.a. Whether for the purpose of S230 of the ERA the claimant was an employee of the second respondent (at the point of insolvency) and how long had he been employed.b. Is the claimant entitled to a redundancy payment?c. What was the claimants wage at the point of insolvency?[8]The claimant does not bring a claim for unpaid wages or notice pay. He acknowledged as this was a voluntary situation he was on notice of the liquidation and did not seek anything that may be perceived as unjust, or questionable. Such an approach is to his credit. Preliminary issues[9]I joined the hearing link at 10am and only the claimant had by this point attended. Upon reviewing the file there seemed to be some ambiguity as to the hearing time and whether the parties had been informed that the matter would in fact start at 10.30am. I therefore put the matter back to allow the respondent to attend.
The law
[10]The law is set out in S230 of the ERA. There is no dispute that if I find that the claimant was an employee that some sort of payment (subject to quantification) would be due.[11]As a general rule the owner director of a company is not automatically an employee, they are initially an officer of the company. In order to be considered an employee they must fulfil the criteria set out in S230 ERA, and be paid a wage equivalent at least to the National Minimum Wage.[12]The burden rests on the claimant to show he is an employee rather than an officer and he must prove this on the balance of probabilities.[13]Ultimately the issue of whether the claimant is an employee is a question of fact.[14]The essential requirements of an employment contract are set out in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 ( Ready Mixed Concrete), although that test has been refined and clarified over time its still requires the performance of services in a master servant relationship, a degree of control from the master, and the provision of the contract is such as to make it consistent with a service relationship. CASE NUMBER: 1305832/2023 4[15]I have bene referred to various case law by the respondent. Where I have not expressly mentioned it, I have considered those matters throughout my Judgment, as I have the provisions of the ERA. Findings and analysis[16]I have heard detailed evidence from the claimant and submissions from both parties. I have also considered all of the written material.[17]I wish to say to the claimant that I have enormous sympathy for the situation he has found himself in, and acknowledge that he has taken steps to pay the company’s employees even to his own detriment. The decision I make today is in the cold confines of the law, which may be alien or abstract to the outsider, but I am constrained by those principles, and I must decide matters in accordance with the evidence I have and the legal precedent.[18]The evidence provided by the claimant is limited. It was his obligation to provide evidence and it is clear that much information is missing from the bundle and is not before me for consideration. That is perhaps to the claimant’s detriment, as I can only view the evidence produced. Employment contract[19]The claimant argues that he was an employee of the second respondent. Produced in the bundle is an unsigned contract of employment. The respondent argues at paragraph 18 of their grounds of response that in a questionnaire the claimant confirmed that he had no written contract of employment.[20]The claimant also submitted that he worked a 30 hour week at a rate of £285 per week.[21]The respondent has effectively drawn together an inference from the failure to provide a dated contract in the questionnaire response as a tacit acceptance that a contract did not exist. That is an assumption and I do not find that there was a contradiction in the response.[22]The claimant has been unable to date the contract and I find that no signed version is provided. His argument that these vest with his accountant are perhaps true and it is unsurprising that his accountant has not cooperated given the insolvency of the business.[23]However, having heard the claimant’s evidence I am satisfied that in 2011 or some point thereafter, his accountant issued him with this boiler plate contract for all employees to use and that he would have considered this also CASE NUMBER: 1305832/2023 5 applicable for himself. Why his accountant would then be the custodian of such documents is not clear. But I am prepared to accept, allowing the benefit of the doubt that the claimant did consider that he had signed this, even if it was at the time purely for tax reasons. Whether it meant anything to him (until now) was a separate matter.[24]However, that is the only half the story. I must look at what was happening on the ground, and as per the guidance in Autoclenz [2009] EWCA Civ 1046. In particular, whether the contract represented a true representation of an employee – employer relationship, or whether it was simply a perfunctory document.[25]The existence of an employment contract alone does not satisfy the S230 criteria in an owner managed business. The fact that the claimant is a major shareholder is a special factor I must consider. Master and servant relationship[26]The claimant appears on the face of matters to have been paid sick pay on some occasions. That is a positive indicator of such a relationship. I weigh this in favour of an employment relationship.[27]Whilst there were times that the claimant had deployed family to cover the running of the business, at times of crisis, his evidence was clear that he was the business, and it required him to function. He would have had to employ a manager if he was not there. This fact is perhaps not determinative, of the S230 relationship. Mutuality of obligation[28]The claimant has a contract set out at a minimum wage calculation. Such an approach is tax efficient and the claimant confirmed he had taken dividends in the past.[29]His pay slips and P45 do not conform with the bank statements and the claimant confirmed that he had paid himself cash most of the time, depending on the profitability of the week. If there was no money he would not take a wage and he only took what was available, and not a full reflection of his hours estimated to be 50 to 70 per week.[30]Here I find that there is a lack of mutuality of obligation. The claimant is clear that if the money was not present then he did not take his full wage and he did not account for his additional hours. He took cash. There is no accounting of a week where he was owed money. No record of an unpaid wages bill which needed to be reconciled. No reference in the pay slips. In short there is no way of verifying whether the claimant took his £285 in cash, or for example £85 one week and £485 the next. Equally it could have been something manifestly different. The number of hours divided by the pay, comes out far CASE NUMBER: 1305832/2023 6 lower that the N ational Minimum Wage and is more of an indicator of an officer taking remuneration rather than a wage.[31]This issue is further compounded by the fact that there is a business loan account which is unclear. There are two versions, one falling due in 12 months and the other falling due after 12 months. The figures vary. There is no evidence of what this relates to. The claimant says it is to Lloyds bank for the premises, which are owned by him (personally) and paid for directly by the business, rather than charging the business rent. The evidence of this is not present and therefore it is not possible to reconcile whether this represents the whole directors loan figure or whether an effective dividend was also being taken. On balance, I find that the claimant has not discharged his evidential burden here and I find that the loan account also represented an element of drawings. This is more indicative of an officer rather than an employee. Control[32]For the reasons outlined above, I find that the claimant was in fact in control of his own relationship with the business. His expectation was that he would cover all bases and whenever needed as the situation developed. There is little if any evidence of the business being structured in such a way as to reflect that commitment, or to provide a mechanism for cover if he was unavailable for a task. He closed the business when on holiday rather than relinquish that control, to others who were perhaps capable. Provision of services[33]I also find that the essential element of the contract being for services is missing. What the claimant was doing represented so much more than the provision of his services under a contract.[34]A contract can only exist because of an agreement between a person and another legal entity. The contract that did exist was a perfunctory issue from the accountant. Aside from the remuneration elements, it held little if any relevance to the claimant, and I cannot see that he placed much store in it. The contract did not come about because the claimant was willing to work for the company but more that he was using the company as a more efficient tax vehicle than his previous sole trader arrangement.[35]The irreducible minimum service element is also arguably not present. The flexibility around wages, clearly shows something more of a custodian than a provider of services. Conclusions and application of the law to the facts[36]On balance I find that the claimant was running the business as an operator/officer rather than an employee. He sacrificed when needed and CASE NUMBER: 1305832/2023 7 profited when appropriate, but there was not a consistent mutuality of obligation. He was very much the dictator of terms and this conduct existed and perpetuated without reference to the contract, wages or hours worked. There is scant reference to anything amounting to a personal service provision, to a master.[37]For the reasons set out above I find on the balance of probabilities that the claimant has failed to demonstrate he is an employee of the second respondent within the meaning of S230 ERA.[38]Accordingly he is unable to satisfy the employee requirements of S182 ERA and his claim under S188 ERA cannot succeed.[39]Accordingly the claim fails and I shall dismiss it.