Employment Judge Mr. M. SalterMr. J. Williams (instructed by counsel) for claimantMr. S. Healey (instructed by counsel.) for respondentDate 27 April 2023
JUDGMENT
The Claimant was not a worker within the meaning of the Working Time Regulations
REASONS
References in square brackets below are unless the context suggests otherwise to the page of the bundle. Those followed by a with a § refer to a paragraph on that page and references that follow a case reference, or a witness’ initials, refer to the paragraph number of that authority or witness statement. References in round brackets are to the paragraph of these reasons or to provide definitions.
INTRODUCTION
[1]These are my reasons for the reserved judgment above.[2]The Employment Tribunal is required to maintain a register of all judgments and written reasons. The register must be accessible to the public. It has recently been moved online. All judgments and reasons since February 2017 are now available at: https://www.gov.uk/employment-tribunal-decisions. The Employment Tribunal has no power to refuse to place a judgment or reasons on the online register, or to remove a judgment or reasons from the register once they have been placed there. If you consider that these documents should be anonymised in any way prior to publication, you will need to apply to the Employment Tribunal for an order to that effect under Rule 50 of the Tribunal’s Rules of Procedure. Such an application would need to be copied to all other parties for comment and it would be carefully scrutinised by a judge (where appropriate, with panel members) before deciding whether (and to what extent) anonymity should be granted to a party or a witness. BACKGROUND The Claimant’s case as formulated in his ET1
BACKGROUND
[3]The Claimant’s complaint, as formulated in his Form ET1, presented to the tribunal on 27th March 2019, is in short, he was an employee or, alternatively a worker, and entitled to holiday pay [13 §5]. The value of his claim was for £229,411.98. The Respondent’s Response[4]In its Form ET3, received by the tribunal 26th April 2019 [16], the Respondent denied the Claimant was an employee or worker but contended he was, in fact, self-employed. Relevant Procedural History[5]On 29th March 2019, by way of Notice of Claim that was sent to the parties upon receipt of the ET1 the was listed for a one-hour hearing. Employment Judge Harper MBE later ordered that time estimate for the hearing be extended to oneday.[6]The matter came before me for that hearing. The day before the hearing however, the claimant’s Trustee in Bankruptcy, Mr. Timothy Alexander Close (“the Trustee”), became aware of these proceedings and instructed Mr. Parsons of counsel to attend on his behalf to object to the hearing progressing until the Trustee had had an opportunity to consider the claim.[7]The Claimant was represented by Mr. Williams of Counsel and the Respondent by Mr. Healey of Counsel.[8]After some discussion a useful and practical way forward was agreed by counsel which was that the hearing proceed to determine one issue: the claimant’s employment status. Mr. Williams then agreed he would provide the Trustee in Bankruptcy with a copy of the judgment. This approach avoided the matter having to be adjourned to another day with the inevitable delay and cost consequences that would result.[9]With this approach agreed, and with my permission, Mr. Parsons left the tribunal, and the Trustee took no further part in the Preliminary Hearing. I will not, therefore refer to them further, but am grateful for Mr. Parson’s skeleton argument setting out the Trustee’s position.[10]In discussion of how to proceed with the day’s hearing the Claimant confirmed he was not advancing an argument that he was an employee, rather he was arguing he was a worker. DOCUMENTS AND EVIDENCE Witness Evidence[11]I heard evidence from the Claimant on his own behalf and from Christopher John Conyngsby Hilling, the managing director of the Respondent and Sandra Jane Smith, who, at the time her employment with the Respondent ended in April 2019 was its Operational and Compliance Manager.[12]All witnesses gave evidence by way of written witness statements that were read by me in advance of them giving oral evidence. All witnesses were cross-examined Bundle[13]To assist me in determining the matter I have before me today an agreed bundle originally consisting of 133 numbered pages (but with additional pages 116A and B added). This bundle was prepared by the Respondent. Some other documents were added during the course of the hearing and these became pages 134-137. My attention was taken to a number of these documents as part of me hearing submissions and, as discussed with the parties at the outset of the hearing, before commencing their submissions, I have not considered any document or part of a document to which my attention was not drawn. I refer to this bundle by reference to the relevant page number. SUBMISSIONS Claimant[14]Mr. Williams provided a written closing submission and supporting authorities. Since the skeleton is in writing it is unnecessary to repeat them here and they are referred to as appropriate in the conclusions. Respondent[15]The Respondent made oral submissions which I have considered with care but do not rehearse here in full. In essence, in the course of the hearing, it was accepted that the Claimant had a contract with the Respondent and that, as a professional, the obligation of personal services was made out. The focus of Mr. Healey’s submissions was, however, that the Claimant was self-employed. MATERIAL FACTS General Points[16]From the evidence and submissions, I made the following finding of fact. I make my findings after considering all of the evidence before me, taking into account relevant documents where they exist, the accounts given by the Claimant, Mr. Hilling and Mrs. Smith in evidence, both in their respective statements and in oral testimony. Where it has been necessary to resolve disputes about what happened I have done so on the balance of probabilities taking into account my assessment of the credibility of the witnesses and the consistency of their accounts with the rest of the evidence including the documentary evidence. In this decision I do not address every episode covered by that evidence, or set out all of the evidence, even where it is disputed.[17]Matters on which I make no finding, or do not make a finding to the same level of detail as the evidence presented to me, in accordance with the overriding objective reflect the extent to which I consider that the particular matter assisted me in determining the identified issues. Rather, I have set out my principle findings of fact on the evidence before me that I consider to be necessary in order to fairly determine the claims and the issues to which the parties have asked me to decide.[18]The Claimant is a dentist. In 2013 he sold his practice to Main Dental Partners Limited (“MDPL”). He provided his services to MDPL through two contracts: a contract of employment as the managing Director and a service agreement (“the First Service Agreement”). The latter of these involved the Claimant providing his services to MDPL though J Main Limited, a limited company owned by the Claimant.[19]Throughout the period until he resigned the Claimant filled out self-employed tax returns and paid national insurance contributions as a self-employed individual. Indeed, in April 2017, as part of an IVA the Claimant stated he was self-employed [131 §2.17]. In July 2017 a bankruptcy order was made [132] against the Claimant on the petition of HM Revenue and Customs. In that Bankruptcy the Claimant stated he was self-employed at the date of the bankruptcy order [133].[20]On 3rd August 2017 the First Service Agreement was terminated, and a second Service Agreement was entered into on 31st August 2017 (“the Second Service Agreement”). This did not have the Claimant providing his services to MDPL though J Main Limited, he supplied them directly to MDPL.[21]Whenever there was a change in the contractual arrangements these did not affect how he performed his clinical tasks.[22]Throughout his engagement with MDPL, the patient would pay MDPL who, in turn would calculate how much they were to pay J Main Limited, and latterly the Claimant, and payment would be made. The Claimant received payments from J Main Limited in the form of the net profit and dividend payments. This changed in 2017 when payments were made to him directly [100] as J Main Limited “no longer existed”. In the letter Mr. Main offered to indemnify the Respondent for any claims brought by the creditors of J Main Limited.[23]In October 2018 MDPL was purchased by SpaDental Holdings Limited and subsequently changed its name to that of the Respondent.[24]I accept the Claimant’s evidence that when there were changes in his contractual arrangements in 2017 these had no impact on his clinical practices. He contends however there were changes in his non-clinical procedures in that he was nolonger the managing director of the company but would have to make decisions as “one of three”.[25]Looking at the practicalities of the Claimant’s engagement with the Respondent the claimant supplied a limited amount of equipment including a dental loop, a dental headlight and he used his iPhone to take photographs. He was also the only dentist to be provided with remote access to the Practises’ computer system.[26]The Claimant was obliged under the agreement to maintain his own indemnity insurance [49 §5.8; 73 §5.8] and was responsible for his payments to the General Dental Council [49 §5.9.2; 73 §5.9.2].[27]The hours had reduced under the second agreement from those in the first agreement. Under the first agreement the Respondent was open from 0845 until 1730 five days a week.[28]Under the second agreement the Respondent would provide the facilities to the Claimant between the hours of 0900 and 1730 Monday, Tuesday and Thursday and 0900 to 1500 on Wednesday and Friday [71 §4.2]. The Claimant would have to make himself available for those hours on the days he decided to work. It was a term of the Service Agreements that the Claimant would use all reasonable endeavors to utilize the facilities provided by the Respondent during the days and time that they are made available to him pursuant with that clause. The Claimant agreed not to practice elsewhere during such times without the consent of the Respondent [71-72 §5.2.1]. it was left to him to determine when he worked at the other two practices.[29]If the Claimant did not use the facilities, then he would be charged an “Absent Dentist Charge”. I am told and accept this is because the Respondent would have provided resources such as staffing and the like) and not receive any commission from the work the Claimant was going to do during that time.[30]The reduction in working hours came about at the Claimant’s request as he was to collect his children from school on Wednesday and Friday ad so needed to leave the premises early. I accept the Claimant’s evidence that the Respondent never refused the Claimant’s requests to leave early.[31]Subject to General Dental Council obligations the Claimant had free choice as to which patients he treated and which he did not. I am told, for instance, that he chose not to treat Tewkesbury implant patients of Dr May, when that doctor retired. Normally, patients would book in with the practice’s receptionist, but the Claimant could and would change these. I do not find this surprising as the Claimant is a professional and would likely know how long certain procedures would take and whether the appointment was appropriate in length. However, also, the Claimant would change appointments if he was not able to see that patient at the time booked.[32]Mr. Hilling explained that the Claimant would set the prices for work he undertook. This led to a substantial difference in prices charged within the Respondent: I am told, and accept that, for example, the Clamant charged £599 for whitening work, whilst other dentists in the practice charged £299.00.[33]If dental work carried out by the Claimant required correction, then it would be undertaken by the claimant at his own expense. He carried his own indemnity insurance.[34]He was responsible for the supervision of the support staff provided by the Respondent [50 §5.10.1; 74 §5.10.1] even though they we engaged by the Respondent. Again, I find this unsurprising given the Claimant’s position as a medical professional reliant upon support staff to assist him in furtherance of his clinical obligations. This may, for instance, require the Claimant to work though lunch if the Clamant and allocated support staff were sterile and working on a lengthy procedure.[35]The Claimant also specified how he wanted the support staff to be dressed when they worked with him, requiring them to wear gowns and face masks when other dentists did not require this.[36]The Claimant would have to provide a locum or cover for an emergency. Costs would be shared jointly by the Respondent and Claimant [53 §6.4.4; 76 6.4.4].[37]I accept the Claimant’s evidence that he would largely have to pay for his own training, although the Respondent would pay if there was a benefit to them or they required the training. The Claimant was able to choose when he undertook the training.[38]The Claimant had to agree his holidays with the Respondent. The Practice Manager (the Claimant’s wife until 2014; Mr. Russ Beaumont until 2016 and then Sarah Trout until the Claimant left) would attend and ask him when he was taking time off. The Claimant would usually take the same holidays each year: a week in August around the second Bank Holiday, so as not to impact his earning potential. He would call and arrange for Dr. Gilmore to cover his absences.[39]The Claimant was entitled to take an unlimited amount of holiday, but anything over 25 days would result in him having been deemed to authorise the Respondent to deduct from his fees an amount equal to an Absent Dentist Charge for each day in excess of his annual leave entitlement [50-51 §6.1.1] Throughout his time with the Respondent the Claimant’s requested holidays were never refused.[40]As would be expected the Respondent had a number of policies and procedures in place which the Claimant was subject to. Further they were required by the British Dental Association and NHS England to keep records of patients and their treatments. As the treating dentistry this obligation was passed onto the Claimant and was a term of the Service Agreements he entered into [90 and 91]. THE LAW Working Time Regulations 1998 (“the 1998 Regulations”)
THE LAW
[41]So far as is relevant reg 2, of the 1998 Regulations is as follows: “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 personally any work or services for 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;[42]A similar definition appears in the Employment Rights Act 1996 s230(3). Authorities and Texts[43]I was referred to the following authorities: Marshall v Southampton and SouthWest Hampshire Area Health Authority (No 2) [1993] ICR 893, ECJ; Revenue & Customs Comrs v Stringer [2009] ICR 985, HL; Hospital Medical Group Limited v Westwood [2013] ICR 415, CA; Sash Window Workshop Limited v King [2015] IRLR 348, EAT; Fenoll v Centred’Aide par le Travail ‘La Jouvenne’ C-316/13 [2016]IRLR 67; King v Sash Window Company [2018] ICR 693, ECJ Pimlico Plumbers v Smith [2018] ICR 1511 Stadt Wuppertal v Bauer; Willmeroth v Broßonn C-569/16, C-570- 16 [2019] IRLR 148 and Hashwani v Jivraj [2011] UKSC 40, [2011] IRLR 827 CONCLUSIONS ON THE ISSUES[44]Having regard to the findings of relevant fact, applying the appropriate law, and taking into account the submissions of the parties, I have reached the following conclusions on the issues the parties have asked me to determine.[45]There having been appropriate and correct concessions on contract and personal service, the one aspect I am left to determine is whether the [the Respondent’s] “status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the [Claimant]”[46]I did not consider the fact that the Claimant referred to himself as self-employed in the IVA or Bankruptcy as being of much assistance in determining this matter, albeit is an accurate reflection of what I have found. His payment of tax on a selfemployed basis is indicative of a man who, as he told me, was at the time under the impression he was self-employed and was cognisant of his liabilities to pay tax. It was only later that he considered himself to be a worker after his wife, who is an HR professional, raised this matter with him.[47]As is probably usual in cases where there are professionals, those they work with or for may not have their skill set or experience and so the professional is given autonomy to undertake their profession. The autonomy for the claimant went beyond clinical autonomy however, as I find he set fees and discounts, decided when he would work, determined his hours and location of work and made demands of the Respondent’s staff that other dentists did not (for instance working over lunch or clothing requirements). He was also responsible for his work and to correct any errors.[48]I also do not consider that the levels of control purportedly exercised by the Respondent were of a level that showed some degree of authority over the Claimant inconsistent with a self-employed professional. In a regulated profession such as dentistry it is obvious records of treatments would be required to be kept. The fact that the Respondent required the Claimant to keep records of his procedures in order for them to comply with their obligations does not, it appears to me, show a degree of control over the Claimant that is inconstant with being self-employed, after all, who better to ensure the record was accurate and complete than the treating dentist.[49]Against this, however, I weighed the holiday pay provision in the Service Agreements that referred to leave “entitlement” and set a maximum period on this of 25 days per annum before a charge would be made against the Claimant by the Respondent. although this is inconsistent with being self-employed, when I weighted it against the other factors identified above I consider that the Claimant at the time his engagement with the Respondent ended the Claimant was a selfemployed dentist receiving, effectively, support services (e.g. support staff and premises) from the Respondent who was a customer of his, or previously of J Main Limited. The Respondent did not exercise tight control over the claimant.[50]I do not consider therefore, that the Claimant has proven, on the balance of probabilities, that he was a worker within the meaning of the 1998 Regulations.
Introduction
[51]These are my reasons for the judgment set out above. I have arrived at these after hearing
FINDINGS
[52]The Claimant was front and centre of the Respondent’s marketing campaign and even had business cards printed that intrinsically linked him with the Respondent’s business. Mr Hart agreed in cross examination that an advert for a seminar given by the Claimant did not include any reference to the Claimant’s status. The Respondent’s business model was based upon the continued use of the trading name James Main Dental Partnership with the Claimant continuing to offer his dental services from the same premises.[53]The Claimant did not market himself independently of the business and although the service agreements potentially permitted him to work elsewhere with the prior consent of the Respondent, the Claimant worked for it exclusively throughout.[54]For the most part, the Claimant was the only dentist working at the Glastonbury practice. He oversaw the staff, he was integral in setting the price levels for treatments and it appears to me that the practice operated around his preferred working pattern. In my view, rather than indicating that the Claimant was a self-employed independent contractor, these facts point towards a high level of integration into the business. In my view, the Claimant was integrated into the Respondent’s business to a high degree.[55]I have taken account of the factors pointing the other way, including particularly the contractual provisions agreed by the parties, the manner in which the Claimant was paid and that he was responsible for his own tax and national insurance, but these factors do not change my overall view on this point. Control[56]I accept that the Claimant had autonomy as to whether he treated a patient, whether he treated patients in the other practices and the treatments offered to those patients. I also note that he was responsible for his own professional indemnity insurance, GDC membership and remedying clinical mistakes.[57]However, I do not consider that these factors tip the balance in my overall consideration of the control over the Claimant’s working environment and practices enjoyed by the Respondent. In other instances, the Claimant required the Respondent’s consent to change working practices. For example, whilst SA1 sets out the practice hours, the Claimant sought and obtained the Respondent’s permission to a shorter day on a Wednesday. Another example is that the Claimant sought and obtained the Respondent’s agreement that the clinical staff wear surgical gowns.[58]More generally, the Respondent monitored compliance with the policies and procedures with which the Claimant was contractual required to comply, which again points to a large degree of control over the Claimant’s work within the business. Dominant Purpose[59]The service agreements were designed to obtain the specialist dental services of the Claimant for the Respondent’s business ‘the James Main Dental Partnership’ and on that basis, the dominant feature of the service agreements was the obligation on the Claimant personally to perform work. I do not accept the Respondent’s submission that the dominant purpose the service agreements was to generate income as set out, although that was clearly an important factor. The wider background to these agreements is relevant: the Claimant had originally sold the business to the Respondent, initally been appointed as MD of the Respondent and held a shareholding in the latter. The Respondent’s evidence was that the intention was to keep the dentists incentivised. Further, by keeping the same dentist owner in the business whilst retaining the same premises, name and livery, the Respondent clearly intended to embed fully the dentist in the business going forward.[60]The service agreements themselves were structured to ensure that the Claimant worked for the benefit of the Respondent’s business and included concepts such as the parties working together to further the practices’ best interests. This clearly went beyond the provision of a service to a client or customer.[61]I also consider that the nature and extent of the restrictive covenants included in the service agreement indicate a significant degree of control in restraint of the Claimant’s ability to trade post termination that suggests a relationship where the Respondent continued to exercise control. In my view, this strongly points away from the relationship of client or customer and can only be seen as reasonable if this relationship is adjudged to go beyond that of the independent contractor and their client or customer: see Pimlico Plumbers v Smith (CA) [2017] ICR 657, at 682 (para 115). Profession or Business Undertaking[62]Both parties agree that the Claimant was not an employee. Under SA1, the Claimant was initially not the primary contractor but the principal and the agreement was structured so that JML submitted a statement of services and the fees due were paid to JML who in turn paid the Claimant. Throughout, the Claimant has filed self-employed tax returns and been responsible for his own national insurance payments. Although some of the contractual provisions were reorganised under SA2, I do not consider that this changed the underlying arrangements in any effective way.[63]I have weighed those matters against the facts that the dominant purpose of the service agreements was obtaining the Claimant’s personal services, that the Claimant worked exclusively for the Respondent, that he was integral to and integrated into the business during his contractual engagement. In my consideration of which side of the line the Claimant falls, I bear in mind the assistance provided by Langstaff J at para 53 of Cotswold Developments and Elias J in his discussion in James v Redcats. I therefore find that the Claimant was a self-employed worker and not carrying out a separate profession or business undertaking. Client or Customer[64]In my view, the Respondent was neither a client nor customer of the Claimant. As noted in Hospital Medical Group v Westwood (supra), it was not just another purchaser of the Claimant’s dentistry skills. The Claimant contracted specifically and exclusively to provide dental services to the Respondent’s patients from the locations agreed during the working week. To the outside world, the Respondent presented the Claimant as the practice dentist and integrated as such – it bore his name and was marketed in that way.[65]I also consider that a number of the factors I have already set out in relation to consideration of the level of integration, such as the requirement to bear branded uniform, business cards and contractual obligations to further the practice’s best interest also militate against the Respondent being a client or customer of the Claimant’s. The risk largely lay with the Respondent. Although I accept the Respondent’s point that it is possible for a business to enter into an agreement with a client which includes commercial obligations without that automatically creating worker status, I do not find that this is the position in this case. The service contract and the reality of the working relationship meant that the Claimant was integral to the Respondent’s business and it looked for, and in fact did exercise, a considerable degree of control over the Claimant’s working environment.[66]Given the above findings, it has not been necessary to address the Claimant’s additional argument that the Claimant was a worker under Article 7 of the Working Time Directive.[67]In conclusion, applying the principles in accordance with the case law identified and particularly the guidance set out by the Supreme Court in both Bates van Winkelhof and Uber BV v Aslam, I find that the Claimant was a worker under Regulation 2(1)(b) of the WTR.
FINDINGS
[1]Timothy Alexander Close, in his capacity as the Claimant’s trustee in bankruptcy, is added to these proceedings as an interested party.[2]The Claimant’s claim for unpaid holiday pay under Regulation 16(1) of the Working Time Regulations 1998 (“WTR”) is well founded and succeeds.[3]Under Regulation 30 of the WTR the Respondent is ordered to pay the gross sum of £83,573.78.[4]The Respondent is ordered to pay this sum to the Trustee.
Introduction
[1]The Claimant issued proceedings dated 27 March 2019 in which he claimed for unlawful deduction of wages / holiday pay pursuant to the Employment Rights Act 1996 (“ERA 1996”) and Regulation 16(1) of the Working Time Regulations 1998 (“the WTR”). It was common ground that throughout the period that the Claimant had worked for the Respondent, he had not been paid holiday pay.[2]In a judgment dated 17 May 2022 (“The Liability Judgment”) the Tribunal found that the Claimant was a worker for the period which he had worked for the Respondent as a dentist. Since handing down the Liability Judgment, the Claimant’s Trustee in Bankruptcy (“Trustee”) indicated that he wished to be joined to these proceedings.[3]The case was listed for a remedy hearing on 23 March 2023. The Tribunal was provided with the following additional material:a. A remedy hearing bundle which was agreed between the parties.b. Skeleton arguments from the Claimant and Respondent and an agreed bundle of authorities.c. A skeleton argument and bundle of authorities on behalf of the Trustee.d. Two schedules of loss and counter schedules of loss.[4]The issues between the parties were legal issues not factual issues and therefore no further witness evidence was required. The Tribunal heard submissions from counsel for the Claimant, the Respondent, and the Trustee.[5]At the end of the hearing, the Tribunal asked counsel to agree a list of issues. Although not entirely agreed, this list was sent to the Tribunal on behalf of the parties on 27 March 2023 and has been incorporated into the issues as set out below.[6]Following a discussion in correspondence, at the start of the hearing, the Trustee applied to be joined to these proceedings as an interested party in accordance with rules 34 & 35 of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 (“the Rules of Procedure”). The grounds for this were that the Claimant was made bankrupt on the petition of HMRC on 21 June 2017, which was discharged on 21 June 2018. The period of the bankruptcy fell within the Claimant’s period of claim. Any sums found due to the Claimant might therefore vest in the Trustee. The Claimant objected to the Trustee’s application and the Respondent remained neutral on the point.[7]Having heard the submissions from the Trustee and the Claimant regarding his being joined, the Tribunal ordered that the Trustee be joined as an interested party. The Trustee clearly has a legitimate interest in the outcome of this claim.
Issues
[8]The following issues were before the Tribunal: Issues relating to Holiday Paya. Is the Claimant entitled to be paid for leave not taken and can it be carried over?b. Is the claim one for payment in lieu?c. Is there a two-year backstop in relation to the claim under s23(4A) of the Employment Rights Act 1996?d. Is there any contractual reason why the Claimant cannot carry over his leave entitlement from year to year?e. Can the Respondent rely on the “absent dentist charge” to offset any sums due, ether as a contractual claim or as part of a “just and equitable” assessment of compensation?f. Can the Claimant interest at 8%? If so, for what period? Effect of Transfer from the First Services Agreement to the Second Services Agreementg. As regards the end of the First Services Agreement in August 2017 and the start of the Second Services Agreement later that month: i. Is it now open to the Tribunal, in light of the original judgment dated 14 November 2019 (“the First Judgment”) and the Liability Judgment, to find that during the period of the First Services Agreement, the Claimant was employed by J Main Limited not the Respondent? ii. If the Respondent’s employer under the First Services Agreement was J Main Limited, does the Claimant’s claim for holiday pay as against the Respondent fail for the period covered by that agreement? iii. Is it open to the Tribunal, in light of the First Judgment and the Liability Judgment, to consider whether there was a termination of the Claimant’s employment in August 2017? iv. If so, was there a termination of employment on August 2017 and what were the consequences of that? Effect of the Bankruptcyh. Is the Claimant’s claim a personal, proprietary or hybrid claim?i. If hybrid, what proportion of the claim is personal and what proportion is proprietary (or from what point in time should the claim be treated as personal)?j. If the claim is proprietary or hybrid, should the Tribunal order it to be paid to the trustee and if so, on what terms? The Law The Application of the Working Time Regulations
The Law
[9]Regulation 13(1) of the WTR provides the right to four weeks paid annual leave each year. It cannot be replaced by a payment in lieu unless the worker’s employment is terminated: Regulation 13(9). Regulation 14 provides for compensation in relation to leave entitlement in the year of termination. Regulation 16(1) confers an entitlement to payment in respect of periods of holiday leave to which the worker is entitled under Regulation 13.[10]The WTR distinguishes between claims. Regulation 16 is a non-payment claim, which is for payment in respect of holiday which has been taken but for which the worker has not been paid. Claims under Regulation 16 have been held to be "wages" claims within the meaning of section 23 of the ERA 1996 (HM Revenue & Customs Commissioners v Stringer [2009] UKHL 31, [2009] ICR 985 (HL)). Can the Claimant Carry Over Leave Not Taken?[11]In Smith v Pimlico Plumbers Ltd [2022] EWCA Civ 70, the Court of Appeal referred to the well-established principal relied on by the CJEU in the case of King v Sash Window Workshop (Case C-214/16), that the rights to paid annual leave cannot be lost unless the worker has had the opportunity to exercise that right before the termination of the employment relationship. Giving the lead judgment Simler LJ stated: “It seems to me that there is a clear analogy between workers who do not take leave, and those who take unpaid leave, where in both cases, their contracts do not recognise the right to paid leave and their employers refuse to remunerate leave. In both cases, like the worker who is prevented by illness from taking annual leave, they are prevented by reasons beyond their control from exercising the single, composite right. The worker who takes leave in these circumstances, knowing it is unpaid leave, will not derive the necessary rest and relaxation from it, because it is unpaid. Although the CJEU did not expressly address this case, there is nothing to suggest that the CJEU regarded the taking of unpaid leave as the exercise of the composite right to paid annual leave. On the contrary, the strong inference from the passages I have cited is that a worker whose employer disputes the right and refuses to remunerate annual leave would, even if he or she takes unpaid leave, also be seen as having been prevented, by reasons beyond his or her control, from exercising the composite right.” (paragraph 77) She further noted: “An employer who does not allow a worker to exercise the right to paid annual leave must bear the consequences. An arrangement or system where the worker's entitlement to paid annual leave could be extinguished in these circumstances would, in effect, validate conduct by the employer which unjustly enriched the employer at the expense of the worker's health. The fundamental principle which followed from these considerations is that where paid annual leave rights are not exercised over a number of consecutive reference periods because the employer disputed the right and refused to remunerate leave, rules or practices preventing the worker from carrying over and accumulating the leave until termination are precluded by the WTD.” (paragraph 79) The case therefore confirms an extension to the King v Sash Window (supra) principle which applies not only to workers who had taken no holiday at all, but also to workers who had taken unpaid holiday. Payment in Lieu of Notice?[12]Regs 13(9)(b) and 13A(6) of the WTR provide that statutory leave cannot be replaced by a payment in lieu of notice. The main exception to this rule, discussed below, arises where the worker is owed outstanding holiday on the termination of their contract. In these circumstances, a payment in lieu is permitted by Article 7(2) of the WTR, which provides: ‘The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.’[13]In the case of NHS Leeds v Larner [2012] ICR 1389, cited with approval by the Court of Appeal in Pimlico Plumbers (supra), Mummery LJ summarized the applicable principles in Stringer (supra) including: “37(7) After termination of the employment relationship, it is, of course, no longer possible for a worker to take paid annual leave for which that employer is liable: he has ceased to work for that employer. Provision is made in article 7(2) for entitlement to an allowance in lieu, but the article does not expressly lay down the way in which the allowance must be calculated: paras 56–57. (8) "[W]ith regard to a worker who has not been able, for reasons beyond his control, to exercise his right to paid annual leave before termination of the employment relationship, the allowance in lieu to which he is entitled must be calculated so that the worker is put in a position comparable to that he would have been in had he exercised that right during his employment relationship": para 61, ie the worker's normal remuneration."[14]Citing the case of Kreuziger v Land Berlin (Case C-619/16), Simler LJ noted that where employment is terminated, the corresponding absence of payment of an allowance in lieu of annual leave was a breach of article 7. She noted: “Moreover, I disagree with Mr Jeans and the EAT that article 7(2) cannot be invoked to confer an allowance in lieu of leave taken but unpaid in the circumstances described. Such an allowance is an allowance in lieu of paid annual leave. First, it reflects the fact that the worker took the leave but was not paid for it (and so suffered uncertainty which reduced the benefit of the rest which the leave should have brought). Secondly, it reflects the employer's failure to establish and maintain a system to ensure that the worker's right to paid leave is recognised and the worker is actually in a position to take the paid annual leave to which he is entitled and which gives him the required rest and relaxation.” [paragraph 85] Does the Two-Year Backstop Apply?[15]In King (supra), the ECJ considered that the Working Time Directive does not allow for national legislation to restrict a claim by a worker for carrying forward untaken holiday entitlement from one leave year to the next if the employer has prevented the worker from taking paid holiday leave in the first place. There is no time limit on this right to carry forward holiday or on the right to be paid for it on termination of employment.[16]This also means that time limits on a claim for holiday pay going back a number of years do not apply to claims based on an accumulation of unpaid holiday entitlement where an employer has prevented the worker from taking that leave. In particular, the two-year limit in section 23(4A) of the ERA 1996 does not apply. As was made clear in Pimlico Plumbers (supra), the right crystalises on termination of employment. The Nature of the Claim[17]Pursuant to section 306 of the Insolvency Act 1986 (“IA 86”) the estate of the bankrupt vests in his trustee in bankruptcy immediately on his appointment taking effect. By section 283(1), subject to exceptions, a bankrupt’s estate encompasses “all property belonging to, or vested in the bankrupt at the commencement of the bankruptcy.” Section 436(1) states that: “" 'property' includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property".[18]In the case of Gwinnutt v George (CA) [2019] EWCA Civ 656, Newey J giving the leading judgment distilled down a number of principles from the case law and the relevant ones are as follows: “The following can, I think, be derived from the case law in respect of the 1986 Act and its predecessors: i) it is "legitimate and necessary to bear in mind the statutory objective" when interpreting the 1986 Act, albeit that "however desirable it may be to construe the Act in a way calculated to carry out the parliamentary purpose, it is not legitimate to distort the meaning of the words Parliament has chosen to use in order to achieve that result" (see Bristol Airport plc v Powdrill [1990] Ch 744 , at 758-759, per Browne-Wilkinson V-C); ii) "[T]he statutory objective of the provisions of the 1986 Act" is that, "subject to certain specific exceptions, all a debtor's property capable of realisation should be vested in the trustee for him to realise and distribute the proceeds among the creditors" (Patel v Jones [2001] EWCA Civ 779, [2001] Pens LR 217 , at paragraph 39, per Mummery LJ). In a similar vein, Mummery LJ had noted in Dear v Reeves [2001] EWCA Civ 277, [2002] Ch 1 a couple of months earlier (at paragraph 39): "The purpose of divesting the bankrupt of his property, with certain express statutory exclusions, and vesting the bankrupt's title to it in the trustee is to enable the trustee to realise the bankrupt's estate for the benefit of the creditors and to distribute it among the bankrupt's creditors in accordance with the statutory scheme contained in Chapter IV of Part IX of the 1986 Act"; iii) That approach accords with the "principle of public policy" that: "in bankruptcy the entire property of the bankrupt, of whatever kind or nature it be, whether alienable or inalienable, subject to be taken in execution, legal or equitable, or not so subject, shall, with the exception of some compassionate allowances for his maintenance, be appropriated and made available for the payment of his creditors" (Hollinshead v Hazleton [1915] AC 428 , at 436, per Lord Atkinson); iv) In keeping with that policy, "in successive statutes dealing with bankruptcy and insolvency the definition of 'property' has been progressively extended" (In re Celtic Extraction Ltd [2001] Ch 475 , at 486, per Morritt LJ); v) The word "property" "is not a term of art but takes its meaning from its context" (In re Celtic Extraction Ltd , at 486, per Morritt LJ); vi) The explanation of "property" given in section 436 "is not in truth a definition of the word 'property'" since the section "only sets out what is included" (Ord v Upton [2000] Ch 352 , at 360, per Aldous LJ); vii) Section 436 is very wide in its scope. In the Bristol Airport case, Browne-Wilkinson V-C observed (at 759), "It is hard to think of a wider definition of property";[19]Notwithstanding the above principles, Newey J also notes that just because the definition of property in section 436 is wide, not every asset will fall within the definition.[20]Most claims made to the employment tribunal are proprietary claims and these automatically vest. Claims which do not vest, and which will not fall within the bankruptcy estate, are those which are ‘personal’ to the bankrupt and have been described as those cases where: “…the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property.” (Heath v Tang [1993] 1 WLR 1421 at 1423)[21]It is well-established law that claims for unfair dismissal, injury to feelings in discrimination claims and the right to a declaration in a discrimination claim are all personal in nature.[22]The third category of claims is those which are hybrid. They are claims which are part personal and part proprietary. In the case of Ord v Upton [2000] Ch 352 (CA), Aldous LJ called them ‘hybrid claims’ and held that these vest in the trustee in bankruptcy. The case is also authority for the principle that hybrid claims are treated as a single cause of action which vests in the trustee: “In modern parlance Mr Ord's claim is a single cause of action. However I cannot accept Mr Doyle's submission that the cause of action is personal. It is a claim for damages for injury to his body and mind and also his capacity to earn and can therefore be considered as a “hybrid” claim, in part personal and in part relating to property. I have come to the conclusion that such an action vested in the trustee. It would only have remained with Mr Ord if it fell within an exception established by the authorities to be excluded from the definition of property now found in section 436 of the 1986 Act. To do so it must relate only to a cause of action personal to the bankrupt. All causes of action which seek to recover property vest in the trustee whether or not they contain other heads of damage to which the bankrupt is entitled. The authorities to which I now turn lead to that conclusion.” (Page 7)[23]In Santos Gomes v Higher Level Care Ltd [2018] EWCA Civ 418, the Court of Appeal held that a claim under Regulation 30(4) of the WTR could not include a claim for injury to feelings. Giving the lead judgment, Singh LJ noted at paragraph 68: “In my view, in the present type of complaint, the wrong committed by an employer is in substance the failure to give a paid break during the day. The net effect of that is that the worker is required to do work for a longer period of time than they are in substance being paid for. The natural remedy for that wrong is to make a payment of compensation for that time based on their rate of pay. That is what the employment tribunal decided to do in the present case, the parties having agreed the quantum. 69. Furthermore, I do not accept Mr Barnett's submission that this is the sort of contractual claim which exceptionally can attract an award of damages for injury to feelings, for example the “spoiled holiday” cases. The rationale for that exception in breach of contract cases is that there are certain types of contract where their underlying purpose is to provide enjoyment and pleasure for a person and, if such a contract is breached, the purchaser will have been denied the very thing they contracted to buy, something for which compensation should be given. That is not the present type of case. In the present context, as I have indicated, the mischief is that an employee is in effect required to work for no pay for the period of time which she does not have a paid break.” Conclusions (a) Is the Claimant entitled to be paid for leave not taken and can it be carried over?
Conclusions
[24]I agree with the Claimant’s analysis which accords with the case law set out above. The Respondent failed to allow the Claimant to exercise the right to paid annual leave. Simler LJ made it very clear at paragraph 79 of Pimlico Plumbers (supra) that where the right to paid leave is not exercised over a number of consecutive years because the employer refused to give paid leave, they are entitled to carry the untaken leave over. For the avoidance of doubt, the case law also makes it clear that this carry over continues until the right to paid leave crystalises on termination of the relationship. I am satisfied that the Claimant is entitled to be paid for leave not taken and that this right carries over year to year until his employment terminated in February 2019. (b) Is the claim one for payment in lieu?[25]Again, I agree with the Claimant’s submissions on this point that this is properly characterized as a claim for a payment in lieu. This case is not a claim for unlawful deduction of wages, as emphasized in Stringer (supra), but is a claim for unpaid holiday pay which has crystalised upon the termination of the employment relationship. It is a claim arising out of the WTD brought under the WTR and the principles established by the CJEU in Kreuziger (supra) and King (supra) apply. Article 7(2) of the WTD and 13(9) of the WTR permit such a payment. (c) Is there a two-year backstop in relation to the claim under s23(4A) of the Employment Rights Act 1996?[26]As already noted, this claim arises out of the application of the WTR and not under the ERA 1996. In the circumstances, the case law makes it clear that the two-year backstop in section 23(4A) of the ERA 1996 does not apply to this type of claim and the Claimant is entitled to claim for the entire working period. (d) Is there any contractual reason why the Claimant cannot carry over his leave entitlement from year to year? (e) Can the Respondent rely on the “absent dentist charge” to offset any sums due, ether as a contractual claim or as part of a “just and equitable” assessment of compensation?[27]I have considered these issues together, as they essentially represent different strands of the same argument. Can the Respondent rely upon any contractual provision to prevent carry over and whether the Respondent is entitled to rely upon the absent dentist charge (“ADC”) to offset sums due.[28]The service agreements mirror each other closely and both provided(i) that leave could not be carried over to the following year and(ii) where the Claimant took leave in excess of his entitlement, he was liable to pay the ADC, which was calculated according to the cost of providing locum cover. During the hearing, Mr Gidney conceded that there was no contractual offset available but argued that the cost of the ADC should be considered as part of the just and equitable assessment.[29]For completeness, the Respondent could not seek to prevent, by operation of the contract, the Claimant carrying over leave. This is made clear by the WTD and was reiterated by the Court of Appeal in Pimlico Plumbers at paragraph 79. Nor do I consider that it would be correct to seek to offset any sums found due to the Claimant under the WTR by operation of the just and equitable rules. The caselaw makes it quite clear that an employer who does not allow workers exercise the right to paid annual leave must bear the consequences. (f) Can the Claimant claim interest?[30]Both parties acknowledged that there is no express jurisdiction under the applicable statutory framework to award interest on the claims before me. The Claimant argued that the Respondent appeared to have conceded the issue in the counter schedule, but this was not accepted by the Respondent, who argued against the award of interest at the hearing.[31]The Claimant argued that the wording of Regulation 30 of the WTR was sufficiently broad to permit the Tribunal to make an award of interest. I see no reason in principle why this provision precludes the making of an award of interest on any remedy awarded under Regulation 30.[32]Accordingly, I rely on the following relevant factors:a. Throughout the relationship, both parties proceed on the basis that the Claimant was self-employed. This is not a case where the employer actively sought to prevent the worker exercising rights that the employer was aware of and the Claimant had not raised it as an issue. There was no suggested by the Claimant that the Respondent had acted in bad faith.b. The Claimant paid tax on the basis that he was a self-employed person. Any issue regarding his status as a worker arose after his employment had terminated.c. There was no evidence lead as to any loss sustained by the Claimant over and above the loss of his paid leave.d. The Respondent’s case is that there are sums outstanding due to it from the Claimant arising out of the application of the ADC.[33]In all the circumstances, having carefully considered what is just and equitable and with regard to the two specific limbs set out at Regulation 30(4)(a) and (b), I decline to make an award of interest. Given my findings in this regard it is not necessary for me to consider the Claimant’s alternative argument in relation to the requirements of EU law which were set out in Mr Williams’ skeleton argument. (g) As regards the end of the First Services Agreement in August 2017 and the start of the Second Services Agreement later that month: 1. Is it now open to the Tribunal, in light of the First Judgment and the Liability Judgment, to find that during the period of the First Services Agreement, the Claimant was employed by J Main Limited not the Respondent? 2. If the Respondent’s employer under the First Services Agreement was J Main Limited, does the Claimant’s claim for holiday pay as against the Respondent fail for the period covered by that agreement? 3. Is it open to the Tribunal, in light of the original judgment dated ** and the Liability Judgment, to consider whether there was a termination of the Claimant’s employment in August 2017? 4. If so, was there a termination of employment on August 2017 and what were the consequences of that?[34]The first question which must be addressed is whether I am precluded from considering these arguments by reason of findings made in previous judgments. In my view this can be answered very shortly. The Liability Judgment made findings that the Claimant was a worker for the duration of the period that he worked for the Respondent: paragraphs 62 & 63. Those findings are binding on the parties and the Respondent is therefore precluded from raising further arguments regarding status, particularly as those were not raised at the previous hearing. (h) Is the Claimant’s claim personal, proprietary or hybrid?[35]The Claimant’s claim is brought pursuant to Regulation 16(1) of the WTR and Regulation 30 provides him with the route to his remedy. The wrong committed is the failure by the Respondent to provide paid holiday. As a result, the Claimant took unpaid holiday and the compensation for that wrong is to make payment of recompense for the unpaid holiday taken based upon the Claimant’s rate of pay. There is no element of compensation which falls within the categories set out in Heath v Tang (supra), which are by reference to pain felt by the bankrupt in relation to ‘body, mind or character’. Damages awarded under the WTR are different to those awarded for slander, for example. In Santos Gomes v Higher Level Care Ltd (supra) the Court of Appeal concluded that a complaint under Regulation 30(4) was akin to a breach of contract claim and I have come to same conclusion in this instance.[36]As is made clear in the case law, the definition of ‘property’ in section 436 of the IA 86 is drafted widely. In my view, based upon my analysis of the Claimant’s claim as being akin to a contractual claim, this is to be treated as being proprietary in nature and therefore automatically vests in the Trustee. Quantification of the Sums Due[37]Given my findings above that this claim is properly categorized as a payment in lieu claim and not an unlawful deduction from wages, the appropriate schedule of loss is the Claimant’s which is calculated on the standard percentage basis of 12.07% dated 11 February 2022. For reasons already given in this judgment, I do not accept the Respondent’s arguments which seek to reduce this figure. In the circumstances, I award the sum of £83,573.78 If the claim is proprietary should the Tribunal order it to be paid to the Trustee and if so, on what terms?[38]The Trustee raised a number of further issues which he says justify the Tribunal ordering that any sums due should be paid directly to him rather than to the Claimant:a. The Claimant lacked locus to commence proceedings.b. The Claimant had not cooperated with the Trustee in relation to these proceedings or kept him up to date with progress.c. There was a concern that if any sums awarded were paid to the Claimant, those sums would be dissipated not paid to the bankruptcy estate.d. The employment tribunal was not the appropriate forum to resolve any apportionment arguments. The Claimant did not agree that these concerns were accurate.[39]I have considered all the circumstances, including the Claimant’s own interest in the outcome. I note that the Claimant did commence proceedings without the requisite locus to do so and the allegations made by the Trustee, who is an officer of the court.[40]Rule 35 of the Rules of Procedure permits a tribunal to allow a party to participate in proceedings on such terms as may be specified, which accords the tribunal broad powers. Given that the Trustee is an officer of the court with a legitimate interest in these proceedings as found, and the concerns raised by him as set out above, I will order that the Respondent pays the sums awarded directly to the Trustee. It is not necessary for this Tribunal to make any further directions in relation to those monies as the Trustee is subject to the applicable provisions of the Insolvency Act 1986 in this regard. K Gibb