Mr L Riley v Liverpool Brewing Company: 2401667/2022

EMPLOYMENT TRIBUNALS

Case No 2401667/2022

Between

Mr L RileyClaimant

Liverpool Brewing CompanyRespondent

Before

Employment Judge K M Ross

In person for claimant

Ms Warren (instructed by Solicitor) for respondent

Date 4 June 2024

JUDGMENT

[1]By reason of section 207B(3) and (4) Employment Rights Act 1996, the claimant's claim was presented to the Tribunal within time.

[2]The claimant was an employee within the meaning of section 230 Employment Rights Act 1996 during the period 1 October 2018 to 24 September 2021.

REASONS

JUDGMENT having been sent to the parties and oral reasons having been given on 11 October 2022 and written reasons having been requested in accordance with Rule 62(3) of the Employment Tribunals Rules of Procedure 2013, the following reasons are provided:

[1]The preliminary hearing was to determine:(1) Whether the claimant was an employee or a worker within the meaning of section 230 of the Employment Rights Act 1996; and

(2) Whether the claimant's claim was presented within time, and if not whether the Tribunal should exercise discretion to extend to extend time.

[2]I found the claimant was an employee within the meaning of s 230 ERA 1996 and that the claim was presented within time.

[3]I had a small bundle of documents prepared by the respondent. At the outset of the hearing the claimant said the bundle did not include documents he had sent to the Tribunal. Accordingly the documents attached to the claimant’s email to the Tribunal of 8 August 2022 at 16.56 were included in and referred to at the hearing.

[4]I had a witness statement for the claimant and for Mr Shea for the respondent and heard from them both. I found these facts.

[6]The claimant with a group of others set up the respondent company in 2018, having purchased assets from the Liverpool Organic Brewery.I find the respondent is a producer of craft and cask beers, based in Liverpool.

[7]It is not disputed that the claimant was a shareholder and director in the business.

[8]I find that the shareholders were the claimant, the A Davidson, Mr M Crump(for Mrs Crump), Mr French, Mr Mercer,Mr Shea and Mr Akshay.

[9]The claimant was not a controlling or majority shareholder. He held approximately 20% shareholding.

[10]I find the claimant worked as managing director of the respondent business from October 2018 until the working relationship ended on 24 September 2021.I find the claimant initially worked at other premises along with a member of administrative staff but from December 2018 worked at the respondent’s premises until 24 September 2021.

[11]I find the claimant’s duties included oversite of the day to day brewing operation, new beer planning, beer production planning and scheduling, purchase of raw materials, staff recruitment and management, company sales and development, sales forecasting, brand development and business development and planning.

[12]I find the claimant had management responsibility for all the staff employed by the business on the payroll: the brewer, the assistant brewer, the delivery driver and the administrative assistant. I find it was a small business.

[13]I find that although the claimant, as managing director, had a high degree of autonomy, he reported back to regular meetings of the other shareholders, which were held usually every 2 weeks, where his sales figures and budget forecasts and other plans where considered, discussed and were subject to approval. I accepted the claimant’s evidence on this point. I found the suggestion of Mr Shea, the finance director, that the spreadsheet forecasts produced by the claimant of the type adduced to the Tribunal, were not considered because the type was too small, to be implausible. I took into account that this was a new small business in which the shareholders had all invested personally and the fact that as Finance director Mr Shea had a responsibility to scrutinise financial plans. I find it unlikely he failed to do so because a document was in small type. Applying the law to the facts.

[14]I turn to s 230(3) Employment Rights Act 1996. Employee status can be a complex issue and it has exercised many Tribunals over very many years. It is a particular challenge in certain circumstances. I rely on my finding that the respondent there was a small start-up business, and the claimant was a director and a shareholder within the business.

[15]I reminded myself there are a number of cases dealing with situations such as this and providing guidance.

[16]The Tribunal will have regard to whether there is mutuality of obligation, whether there is control over the individual, whether there is personal performance, whether there is any written contractual documentation. The Tribunal will have regard to any other factors.

[17]In cases such as this involving a claimant who is also a director and shareholder the higher courts have suggested the Tribunal should consider these factors:- (1) is there (or has there been) a genuine contract between the company and the shareholder (i.e. one which is not a sham)? It will be relevant to consider how and for what reasons the contract came into existence and what each party actually did pursuant to the contract, and (2)if the contract is not a sham, does it actually give rise to an employer/employee relationship? In this regard, of the various factors usually considered to be relevant, the degree of control is always important. However, this is not simply a case of looking to see who has a controlling shareholding — a tribunal should consider where the real control lies, i.e. whether there are other directors, whether the articles of association give the individual the right to vote on matters in which he or she is personally interested, and whether the constitution of the company gives the individual rights such that he or she is in reality answerable only to him or herself and incapable of being dismissed.

[18]I must look at all these various different factors and then weigh them up.

[19]I am satisfied that the claimant has told me truthfully in his statement of the day-to-day tasks and strategic responsibilities he was responsible for in his role in the business as a Managing Director. Mr Shea did not dispute that evidence. I find his role as Managing Director was a position with a high degree of autonomy, as it is in most organisations. I am satisfied that there was mutuality of obligation: there was a wage/work bargain. It is not disputed the claimant was not paid a salary. The claimant was in a start-up business in which he invested, and I find he agreed at the outset that he would not draw a salary, but that he would be remunerated in the future by way of a salary when the business could afford it. I find that once the period of May to August 2021 was reached the claimant could no longer afford this arrangement and he put a proposal to the respondent as set out in his spreadsheet, that he should be paid a salary and I am satisfied from his evidence that his proposal was discussed with the shareholders present at the meeting in May 2021 and agreed.

[20]Mr Shea disputed there was any agreement to pay the claimant salary MayAug 2021.I did not find Mr Shea’s evidence convincing in relation to the payments that were indisputably made to the claimant in this period. First of all, Mr Shea said he could not recall what was said at the shareholders meeting in May 2021 and then he said that he did not think that the agreement had been reached that the claimant should receive wages. He said that the spreadsheet provided to him at the meeting by the claimant dealing with this issue was too small to see. However Mr Shea told me he was the Finance Director and he was responsible for processing financial arrangements. I am not satisfied that that it is plausible with that financial responsibility, he would fail to scrutinise a document because it was in a in small font.

[21]I turn to the way the claimant received remuneration in that period MayAugust 2021. There is no dispute that the claimant was not put on the payroll and he was not paid PAYE, unlike other more junior employees, such as the brewer or the brewer’s assistant. I find the respondent chose how to process the payments they made to the claimant, and I am satisfied that however the company chose to process them, and in the way that they did, was as salary. I find the way the claimant was paid was the way the company chose to do it, not the claimant. I am satisfied that there was no agreement that at that stage the claimant was repaying his business loan despite the fact that part of the remuneration was recorded that way.

[22]I find there was mutuality of obligation because even though the claimant was a shareholder and he had invested in this business, there was an unwritten agreement that in exchange for devoting his personal time and energy full time to the business as managing director, he would in the future draw a salary and there was an agreement to remunerate him between May and August 2021.

[23]The next issue is control. Who had the control? I find the claimant as a Managing Director had a very high degree of control like many senior individuals in businesses do. He was not subject to supervision in the way somebody in a very large company may be, but he was subject to what the other shareholders said he could and could not do, and I am satisfied that at the regular shareholders’ meetings the claimant informed them of what his plans were and they informed him whether or not that was appropriate or whether they were in agreement or not, and he was therefore subject to the control of the respondent company through the shareholders.

[24]A further critical piece of evidence in relation to control is how the claimant's working relationship came to an end. In September 2021 (page 52) Mr Davidson, a director and shareholder, informed the claimant he was to cease his activities as director, and he did so. I find this was despite the fact that the claimant was also a shareholder. He was not a controlling shareholder, and that is a critical distinction in many of the cases. It is possible to be an employee and a controlling shareholder, but that is unusual. I find on the facts here that the power lay with the other shareholders together, and when they told the claimant, the managing director, to leave the business he had no alternative but to do so. I therefore find the respondent company had control over the claimant.

[25]I turn now to the contract. There was no written contract of any type, but I find that there was a verbal agreement for the claimant to work as managing director in this small business from the beginning, and I am satisfied that it was agreed at the outset that in due course he would be remunerated when the business became successful. I find there was and agreement to remunerate him May -August 2021.

[26]I heard evidence about the furlough scheme . The respondent argued that as the claimant was not placed on furlough in accordance with the Government’s Coronavirus Job Retention Scheme during the Covid 19 lockdown in 2020, he was not an employee. I find this is something of a red herring.

[27]I find the brewer and assistant brewer (and possibly the one or two other junior employees who were answerable to the claimant) were placed on furlough as they were on payroll at the relevant date in February 2020. I find the claimant was not drawing a salary or any kind of remuneration from the company at that point so he was not on the payroll. Thus he was not eligible for furlough because he was not on the payroll at the date identified by the government. I find it is not a factor which points against employee status.

[28]In summary, I am satisfied that the claimant did not work for any other organisation, that he worked on the company premises from January 2019, that he had a company email address, that his role was to progress the business of the company as set out in his witness statement, and for all those reasons he is an employee. Some of the more conventional factors in employment relationships were not there, but I find that is largely because of the claimant's senior position. For example, he did not have to agree his holidays with anybody but I find that is because he was the Managing Director and had a high degree of autonomy. The claimant has not been subject to a formal disciplinary procedure and had no written contract of employment or copy of any disciplinary procedure although the reality was the respondent did remove him from his position as managing director. (I find this was a different process to removing the claimant as a company director which occurred in October 2021.)

[29]For these reasons outlined above I find the claimant was an employee within the meaning of section 230 of the Employment Rights Act 1996, and having found that I do not need to determine worker status because any rights the claimant is seeking to rely upon are covered as an employee

[30]I turn to the issue of time limits. At the outset of the hearing I indicated to the respondent’s representative that once the provisions of section 207B(3) and (4) Employment Rights Act are taken into account having regard to the dates on the ACAS EC Certificate, the date the employment ended and the date the claim was presented, the claim appeared to be in time. The respondent’s representative did not indicate agreement and accordingly I heard submissions on the time limits issue (although neither party specifically addressed sections 207B(3) and (4) ERA 1996). I found as follows.

[31]The claimant relies on 24 September 2021 as the date his employment ended, his effective date of termination. The respondent did not dispute this date (although the response also refers to a later date when the claimant was removed as a director in October 2021)

[32]Normally a claim to the Employment Tribunal must be presented within three months of that date, so that would be 23 December 2021. The claimant did not present his claim until some weeks later i.e., until 1 March 2022. On the face of it, it looks like the claimant’s claim is significantly out of time. But I reminded myself of the extension to time limits under ACAS early conciliation rules found in the Employment Rights Act 1996 at section 207B(3) and (4). There are two provisions. S207B(3) ERA 1996 is sometimes referred to as the “stop the clock” provision. The reason for that provision is so that claimants are not disadvantaged by the time limit clock running down whilst they are in contact with ACAS.

[33]When determining whether a time limit has been complied with, the period beginning the day after the early conciliation request is received by ACAS up to and including the day when the early conciliation certificate is deemed to have been received by the claimant is not counted. In other words the clock is stopped.

[34]The clock in this case was stopped from 21 December 2021 through to 31 January 2022, so that gives the claimant ten days at the end of December and a further 31 days in January. It stops the clock for 41 days.

[35]I must consider the primary time limit which I find expires on 23 December 2021 and I must then add on 41 days when the clock was stopped. That takes me to 2nd February 2022 but I must add on another day because time starts to run again the day after the claimant receives the early conciliation certificate, so 3rd February 2022.

[36]I now turn to section 207B(4) ERA 1996 . If the time limit is due to expire during the period beginning with the day ACAS receives the request and one month after the claimant receives the certificate, the time limit expires instead at the end of that period. This effectively gives the claimant one month from when he receives the certificate to present the claim. This section applies here because the claimant went to ACAS on 21 December 2021 and the original time limit was due to expire on 23 December 2021, ie during the relevant period.

[37]I remind myself that case law from the Employment Appeal Tribunal has determined that these 2 provisions apply cumulatively not in the alternative. See Luton Borough Council v Haque

2018 ICR 1388

,EAT.

[38]In other words, the limitation date should first be extended by 207B(3) which in this case takes the date to 3 February 2022 and then should be extended by 207B(4) which is another calendar month, in this case to 3 March 2022. The claimant presented his claim to Tribunal on 1 March 2022. Accordingly, the claim was presented within the time limit.

[39]Therefore there is no need to go on to consider s111(2)(b) ERA 1996 namely whether it was reasonably practicable to present within time and if not, whether the claimant presented within such further time as was reasonable because the claim was presented within time.

[40]I apologise for the delay in producing these reasons which is due to the pressure of other judicial business. The respondent’s application fails.

[2]The claimant’s claim was presented within time for the reasons set out below.

[1]In the Judgement sent to the parties on 24 October 2022, for the reasons at the hearing), I found that the claimant’s claim had been presented within time.

[2]In a carefully reasoned application the respondent submitted that I had erred in my calculation of the time limit extension under section 207B (4) Employment Rights Act 1996.

[3]I invited the claimant to respond to their application. When he did so he reiterated that the ACAS early conciliation certificate was sent to him by email on 1 February 2022, although the certificate was dated 31 January 2022. This information was critical to the determination and calculation of the time limits.

[4]Therefore, a reconsideration hearing was listed with both parties attending on 10 February 2023. The claimant Mr Riley gave brief evidence (which was not disputed) that he received the ACAS early conciliation certificate by email on 1 February 2022. This detailed information was not available at the original hearing because a copy of the full email sending the certificate to the claimant on 1 February 2022 was not included and neither party or the Judge raised this matter.

[5]There was no bundle of documents for this reconsideration hearing which took place by videolink, Cloud Video Platform, CVP. All parties had the respondent’s application for reconsideration dated 30 November 2022, further submission from the respondent dated 3 February 2023 and a copy of the email from ACAS sending the EC certificate to the respondent on 31 January 2022. From the claimant I had his submission of the 21 December 2022 and further submission of 29 January 2023 including his timeline together with a copy of the email he received from ACAS (attaching the EC certificate) dated 1 February 2022.

[6]I therefore revisited the calculation of time limits.

[7]There is no dispute in this case that the claimant’s effective date of termination “EDT” was 24 September 2021. There was no dispute that the ordinary limitation expired on 23 December 2021. There was no dispute that the claim was presented on 1 March 2022.

[8]The relevant law for calculating extension of time in accordance with the Early Conciliation Rules can be found in the Early Conciliation Scheme which is set out at s18A and18B Employment Tribunals Act 1996 and in the Early Conciliation Rules of Procedure “EC Rules” contained in the schedule to the Employment Tribunals (Early Conciliation Exemptions and Rules of Procedure) Regulations 2014 and at s207B(2),(3) and (4) Employment Rights Act 1996.

[9]As the respondent helpfully identified in their application, I must first identify Day A. S207B 2(a) Employment Rights Act 1996 states “Day A is the day on which the complainant or applicant concerned complies with the requirement in subsection (1) of section 18 A of the Employment Tribunals Act 1996(requirement to contact ACAS before instituting proceedings) in relation to the matter of which the proceedings are brought”

[10]There is no dispute in this case that Day A is the date the EC certificate states early conciliation commenced, on 21 December 2021. I must now identify Day B.

[12]S207B 2(b) Employment Rights Act 1996 states “Day B is the day on which the complainant or applicant receives or, if earlier, is treated as receiving (by virtue of regulations made under subsection (11) of that section) the certificate issued under subsection 4 of that section.”

[13]The respondent identified Day B in their application for reconsideration as 31 January 2022: that was the date on the ACAS early conciliation certificate. I find it was also the date the respondent received the certificate by email.

[14]However, as a result of the respondent’s application for reconsideration and the resulting submission from the claimant it became clear that there was a dispute about the date of Day B.

[15]At the reconsideration hearing having heard the claimant’s evidence I find as a fact that the claimant received the ACAS early conciliation certificate on 1 February 2022 and accordingly that is Day B.

[16]I find that the claimant received an email from ACAS dated 1 February 2022 at 00:00 hours. I find the email was sent from an ACAS email address: case@acas.org.uk. I find attached to the email was the EC certificate sent by Mr Whiteman of ACAS, certificate number R204895/21/06.

[17]I find that the respondent had received an email from ACAS immediately prior, on 31 January 2022 at 23:59:59 from the same email address with an attachment of an EC certificate also with certificate number R204895/21/06, also from Mr Whiteman of ACAS.

[18]I have no doubt that the email to the claimant was genuine and the respondent did not challenge the veracity of the email. I therefore turned to the rules which determine when the claimant is treated as receiving the certificate in accordance with s207B(2)(b) ERA 1996.

[19]I remind myself that these provisions are contained within the Early Conciliation Rules of Procedure described above. The rules state that so far as the issuing of the certificate is concerned, it must show the date on which it was issued and the means by which it was sent to the prospective claimant and respondent i.e. email or post. See Rule 8.

[20]There is no dispute that the claimant received the certificate by email. Rule 9(3) of the EC Rules states “an early conciliation certificate will be deemed received (a) if sent by email, on the day it is sent.”

[21]I am satisfied that although the EC certificate is dated 31 January 2022 and was sent to the respondent attached to an email of 31 January 2022, just before midnight on that date, I must consider when the claimant was sent the certificate. The evidence shows that the claimant received the email on 1 February 2022 at 00:00 hours.In accordance with rule 9(3) EC Rules, I am satisfied that is the date he is treated as receiving the certificate for the purposes of s207B(2)(b) ERA 1996.

[22]The respondent sought to argue that the email the claimant received on 1 February at 00:00 hours must have been sent on 31 Jan 2022. There is no documentary evidence to suggest the time when the email left the ACAS email address. In addition when looking at the spirit of the rules, I have taken into account that when a certificate is sent by post it is deemed received on the day it would be delivered in the ordinary course of the post, Rule 9(3) (b) EC Rules.

[23]I therefore find that the email was sent to the claimant on 1 February 2022.

[24]I now turn to section 207B(3) ERA 1996. This provision states “in working out when the time limit set by a relevant provision expires the period beginning with the day after Day A and ending with Day B is not to be counted”. As the respondent correctly identified in their application this is the period when the claimant was engaged in early conciliation. Day A was 21 December 2021. The day after is 22 December 2021 and I have found day B is 1 February 2022. I find 22 December to 1 February inclusive is a period of 42 days. I must therefore add 42 days to the original limitation expiry date of 23 December 2021. The new limitation date is therefore 4 February 2022.

[25]Finally I must turn to section 207B(4) ERA 1996 which states “if a time limit set by a relevant provision would(if not extended by this subsection) expire during the period beginning with Day A and ending one month after Day B, the time limit expires instead at the end of that period”. I agree with the analysis in the respondent’s application for reconsideration but I do not agree with the date they have used for day B.

[26]There is no doubt that the period beginning one day after Day A (21 December 2021) is 22 December 2021 and the period ends one month after Day B (1 February 2022) so 1 March 2022. The new limitation date falls within that period.

[27]Therefore, this section applies to further extend the time limit to one month after Day B. Day B is 1 February 2022. One month after that date is 1 March 2022. The claimant presented his claim on 1 March 2022 I therefore find that the claim was presented within time.

[28]This application for reconsideration was made by the respondent on the basis that I had made an error in applying the extension of time provisions in relation to early conciliation.

[29]The respondent did not dispute my reasoning that the claimant is entitled in these circumstances to both the extension in 207B(3) and (4) ERA 1996 and that they are applied cumulatively. However, I accept that my reasons were insufficiently detailed and I had not applied the methodology set out by the respondent in their application and as indicated at section 207B.

[30]In the course of this reconsideration my implicit assumption about day B which is not clearly expressed in my original judgement see paragraph 35, was called into question by the respondent because my analysis was incomplete.

[31]On further scrutiny of the email actually sent to the claimant (the full detail showing the time the email was received was not clear in the original bundle) I have found as a fact that the email was sent on 1 February 2022 for the purposes of the date the claimant received the certificate-Day B. That information affects both the calculation of the number of days the clock was stopped for the purposes of s207B (3) and also affects the extension of time permitted under 207B(4).

[32]So far as reconsideration is concerned. I must consider whether it is in the interests of justice for the original decision to be reconsidered.

[33]I am satisfied that the respondent had a legitimate concern about the method and reasoning adopted in my earlier Judgement when applying the early conciliation extension of time. On further scrutiny of the evidence, I am satisfied that the claimant’s claim was within time for the reasons given above.

[34]Therefore, the respondent’s application that the claimant’s claim was out of time because in their view, Day B was 31 January 2022 and time expired 1 month later on 28 February rendering the claimant’s claim out of time, fails.

[1]The respondent failed to pay the claimant’s holiday pay on the termination of his employment and is ordered to pay him the gross sum of £3,064.80.

[2]The respondent breached the claimant’s contract of employment by failing to give notice of termination and is ordered to pay damages in the gross sum of £21,472.10.

[3]The respondent made an unauthorised deduction from the claimant’s wages by failing to pay his deferred salary for the period 1 October 2018 to 30 April 2021 and is ordered to pay the claimant the gross sum of £31,000.00.

[4]The respondent made an unauthorised deduction from the claimant’s wages for the period 1 to 24 September 2021 and is ordered to pay the claimant the gross sum of £3,656.00. 1 of 5

[5]The respondent failed to provide the claimant with a statutory statement of particulars of employment and is ordered under section 38 of the Employment Act 2002 to pay the claimant the gross sum of £1,088.00. The claimant was unfairly dismissed.

[7]By way of remedy for unfair dismissal, the respondent is ordered to pay the claimant:a. a basic award of £1,632.00; and

b. a compensatory award of £54,808.00.

[8]The total amount payable to the claimant under this award is £116,720.90.

[9]The claim to which the proceedings relate did not concern any matter to which the ACAS Code of Practice 1 (Disciplinary and Grievance Procedures) applied. The tribunal therefore has no jurisdiction to increase the claimant’s award under section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992.

[10]The tribunal is satisfied that the claimant did not receive relevant benefits during the period to which the prescribed element of the award is attributable. The provisions of the Employment Protection (Recoupment of Benefits) Regulations 1996 therefore do not apply.