Mr M Whalley v Graycon Hospitality Ltd: 2405472/2020

EMPLOYMENT TRIBUNALS

Case No 2405472/2020

Between

Mr M WhalleyClaimant

Graycon Hospitality LtdRespondent

Date 12 February 2021

JUDGMENT

The complaint that the claimant was unfairly dismissed is struck out.

REASONS

[2]Section 108 of the Employment Rights Act 1996 requires a claimant to have not less than two years service to make an unfair dismissal complaint.

[3]The claimant was employed by the respondent for less than two years.

[4]Therefore, the claimant is not entitled to bring such a complaint.

[5]The claimant has failed to give an acceptable reason, despite being given the opportunity to do so, why the complaint should not be struck out.

[6]Accordingly, the complaint of unfair dismissal is struck out. The claimant’s other complaints are not affected by this judgment.

[1]The claimant brings a claim of unlawful deduction of wages and breach of contract following his dismissal by the respondent on 28 April 2020. The respondent submits that the claimant as not an employee nor a worker but a consultant helping them establish their business. Unfortunately, their business opened on 18 March 2020, a few days prior to the first national lockdown. Obviously the circumstances were very different at that point in time.

[2]The claimant had begun work on 6 March 2020. The respondent submits that the claimant described himself as a consultant chef and provided invoices.

The Issues

[3]The issues for the Tribunal to determine are:(1) Was the claimant an employee for the purposes of a breach of contract claim in respect of notice pay?

(2) Was the claimant a worker for the purposes of the unlawful deductions of wages claims in respect of holiday pay and arrears of wages?

(3) If the claimant was an employee, was he entitled to notice pay, and if so, how much?

(4) If the claimant was a worker, what holiday pay was he entitled to and how many hours of work was he owed in arrears of wages? Witnesses

[4]The claimant gave evidence himself and Mr Adrian Troy Lee gave evidence for the respondent. The Bundle

[5]The claimant had provided a pdf bundle but this did not contain all the relevant documents and during the day there was a dribble of documents from mainly the respondent to the Tribunal which had to be taken into account as and when received. Obviously this was not an ideal state of affairs, however these things often happen in unlawful deduction of wages claims as no directions or orders for case management will usually have been given. Often in a contested case such orders will be made if brought to the attention of a Trust or the parties will agree them themselves. The respondent had representation in this case, however there had been no agreement over documents, etc.

[6]In addition, the claimant had not provided a witness statement and therefore he gave oral evidence on the day and was cross examined.

[7]The respondent’s main witness did have a witness statement.

Findings of Fact

[8]The Tribunal’s findings of fact are as follows.

[9]The respondents are entrepreneurs who took over a public house in Appleby, Cumbria, called The Royal Oak. It was their view that the claimant was employed as a consultant chef. They had found his details on Facebook. He was a fellow South African who had returned to live in England. He was in Kent at the time undertaking a pub manager’s job, often on a cover basis from time to time, travelling in his campervan to cover absences of normal management, for example.

[10]The respondent’s idea was that he would help them design menus and train staff, and dip in and out to get the business going. Unfortunately the business was due to open on 18 March 2020 and did so but soon had to close because of COVID 19 within days..

[11]The claimant began working for the respondent on 6 March 2019.

[12]The claimant agreed that he had made an agreement with the respondent to be paid £500 a week and in addition he initially shared accommodation with them and then lived in a bungalow attached to the grounds when another staff member left.

[13]The claimant was not furloughed when staff members at The Royal Oak were furloughed, and he spoke to the respondent’s accountant about the situation. The respondent relied on that conversation to establish that the claimant thought he was self-employed all along and his current argument that he was an employee is selfserving. However, it is often the case that parties consider the situation to be one thing but a Tribunal will decide on all the facts that that is not the correct description.

[14]The accountant provided a letter dated 1 September 2020 regarding Mr Whalley which stated that he had had a telephone call with him advising him that he would not be able to take advantage of the Self Employment Support Scheme the Government had introduced unless he had filed a self assessment tax return for the 5 April 2019, however the Government had extended the deadline to put in such a self assessment to 23 April 2020. However, if someone had recently started self employment i.e. after 6 April 2019, and not needed to deliver a self assessment form, they would be excluded from the scheme. They had a discussion about his status, the accountant saying that he had said to the claimant that he was not an employee, he was not on a payroll scheme and therefore would not qualify for furlough pay, and even if he had been employed he might not be eligible as he was not employed on 28 February. The accountant advised the claimant to look at the Universal Credit system and there was a discussion about the accountant assisting him with submitting his tax form for the previous year, although this never actually occurred.

[15]The claimant described himself on facebook as an entrepreneur now working as a roaming chef manager consultant, and that numerous descriptions of the work he had done stated that he was self employed.

[16]The claimant said that he worked for the respondent as a normal employee helping out in the kitchen working as a chef, although he had separately worked on redesigning the menus. He pointed to an example where the respondent asked him where he was when he had taken a couple of hours off on a Sunday and the kitchen had run out of roast potatoes, as an example of the respondent expecting him to work as a normal employee even if he had other responsibilities. The respondent had chosen him for his experience and there was no question whatsoever that he would have been able to send a substitute, although the respondent disputed this. I accept the claimant's evidence in respect of this. It was his particular skills that the respondent wanted.

[17]The claimant agreed that he did submit one invoice.

[18]The claimant was asked whether he was free to work for other people, which would bring him outside the definition of employee and worker, and he stated that was never discussed but he just assumed that he had to be there at that business and there would not have been enough time for him to consider taking on work for anyone else. The claimant believed that if he worked more than 40 hours a week he was entitled to overtime as this was the situation with all other members of staff. Following COVID the claimant stated he agreed to work for £12.50 an hour.

[19]After the first two weeks with the restrictions on public houses opening it was decided to go along with the claimant's suggestion of undertaking a takeaway service. At this time the claimant was undertaking this service by himself: all other members of staff were furloughed. Over a period of time the respondent reduced the amount of days they were open for takeaways, and by […date…] they decided that it was causing them a loss and that it could only continue if the claimant reduced what he was being paid. The respondent suggested £350 a week and the claimant responded with £400 a week, following which the respondent made the decision to close the business. The email of 28 April 2020 stated: “Good morning Mike We’ve taken the decision to stop takeaways so we will no longer require your assistance with this. When you came on board initially you were unsure whether you wanted to be a consultant or an employee. We were both in the trial period per se. No-one could foresee the outcome we would face with corona and lockdown. Unfortunately, as has happened with many people, as you had only started in March, even if we took you on as an employee you would not have been on payroll before the end of March and thus wouldn’t have qualified for furlough. This is out of our control. We will therefore pay you for your 7.5 weeks only, two weeks of this having already been paid. We have received your letter and had a long hard think about it. Thank you for your points raised, however we do not feel that your counterproposal meets with what we are prepared and able to offer. In light of the financial circumstances the continued length of coronavirus and social distancing we have made the decision to retract our offer. Your services with The Royal Oak are therefore no longer required. We feel that if you have received all these other amazing offers you will be in a better place financially if you were to pursue them. In light of lockdown currently still being in place we do not expect you to leave the premises immediately but could you advise how you would like to proceed from here as there is a cost involved in you being in the bungalow. We do appreciate and value everything you’ve done so far.”

[20]On 27 April the claimant sent the respondent an invoice for £3,406. This said: Wages in weeks from 5 September 2020 – 7.5 = £500.00 Overtime hours – 35 @ cost per unit £18.75 = £656.25

[21]The total was £4,406.25 and the respondent had paid the claimant at that point £1,000.

[22]The respondent also pointed out that the claimant had a unique tax reference number. He explained that to do agency work he had to have this unless he set himself up as a limited company, which he did not want to do. He was expecting a long-term position with the respondent.

[23]The claimant also said the respondent had offered him full-time employment which he had accepted, which is what is referred to in the email of 28 April, with a salary of £30,000 a year, and they were beginning negotiations about how that would work. The claimant said that the offer was on the basis of the claimant being an employee.

[24]The respondent had advised the claimant that they had a proposal for his fulltime employment commencing when lockdown was over on a salary of £30,000 a year and that they were sorry they could not offer him a partnership at this point in time. The claimant said he would accept on the basis that he would only work as Head Chef and would not be responsible for other management duties. He would be eligible for 10% of any increase in food sales over £325,000 net, and that if food sales increased to that much per annum his salary would increase to £35,000; that he would receive a share of all tips; that his work week would be 40 hours and any hours worked above this would be paid at 1½ x the hourly rate. Public holidays would be double pay, he would have one weekend off per month, discounted bar prices would apply and that accommodation, food, electric, council tax etc. would be included and that the cottage would be modernised within a reasonable suitable living standard.

[25]The respondent responded saying that accommodation, food, electricity etc. would be included and once lockdown had lifted they would look at improving the cottage. There was some discussion about this. The respondent then said they would offer a 10% bonus on food sales. If dry sales were increased by £100,000 then he would be looking at a bonus of £10,000. They then put forward some further requirements and they discussed the fact that there would be three other chefs involved. The claimant would need to be a hands-on chef, especially over the weekends, doing some of the cooking himself. The claimant agreed with that. The respondent ended up by saying: “We appreciate this is not ideally what you were looking for but at this stage it’s the best we can offer. We look forward to your response, especially regarding the takeaway element, as otherwise we will look to possibly shutting this down from next week.” (That was a reference to the £350 a week)

[26]The claimant agreed that it was not ideal and said, “I think my above requests are feasible”. It is not clear whether he was expecting more discussion about that or whether he was accepting the terms and conditions the respondent offered in respect of permanent job, but he was also expecting the respondent to accept his offer of £400 a week.

[27]The respondent also raised issues in evidence regarding the claimant's conduct in that they said he left ovens on and did not look after the premises very well when he was the only person there, and that he would drink and smoke in front of the respondent’s staff and spoke to them in a rude manner. However, although the respondent referred to these matters they appeared to be matters which arose after 4 July and pertain to them asking the claimant to leave the bungalow, not the public house. As such they had no relevance to the issues to eb decided.

[28]Following the termination of his employment the claimant wrote to the respondent. Again there is no specific date but he does say: “The agreement was I would work for a reduced wage of £500 per week for the first couple of weeks for you to verify I was capable. Thereafter as discussed I requested a salary of approximately £45,000 per annum. If you check the correspondence I did say I would bill you for my time not work for free. This was also confirmed verbally over time. You will have noted that I said if you were unhappy after the first couple of weeks I would refund your money. Well obviously you were happy cos you asked me to stay. I arrived here on 5 March to have a look around and began work on 6 March. You were obviously unhappy with the job the kitchen was doing and instructed me to get on with upgrading the nine menus, consolidating them into one, training the staff, improving the quality of the food and functionality of the kitchen. This was no easy feat and took many hours of work as well as supply of equipment that the kitchen was not equipped with at my cost. This saved you a few thousand pounds extra outlay and was a pleasure from my side. You pressurised me to accomplish this by Friday 13 March and the deadline was achieved successfully. Week one I spent nearly 50 hours over four days in the kitchen and week two just under 80, which you were aware of and deemed necessary in order to get the job done in the shortest timeframe possible. Your expectation of accomplishing these tasks is deemed by law to be an instruction to work the necessary hours, which I did gladly, loving the challenge. It was evident you were happy with my performance as stated by yourself and at this point my salary should have kicked in at the higher rate. However we were all stunned by the total lockdown of all businesses due to coronavirus and I agreed to stay on at the reduced rate of £500 while you furloughed all of your staff. Discussions took place about furloughing me as well but you stated you wanted to keep the business running primarily for the purpose of branding, continuing with meals on wheels and takeout, so I was happy to work and did not pursue being furloughed despite this being an option had you registered me with HMRC. At this point and soon after you furloughed all staff as well as yourselves despite continuing to work in the business. The only way the business could have stayed open even with a hugely reduced income was having myself or another capable chef in the kitchen. I believed I have performed above and beyond expectations, achieving the deadlines you expected from me, working seven days a week for almost two months without complaint, sometimes very long hours without a break. On this basis and with the advice of all Government departments and my labour lawyer I have confirmed I am owed the below, bearing in mind I have previously sent you a …..breakdown of what was owed as a gesture of goodwill to help you out financially and that my employment would continue. You are not happy with the amount and on this basis you terminated my employment with immediate effect with no notice. This is a breach of contract and possibly grounds for a case of unfair dismissal. You asked me to take a further cut in pay which I agreed to a further 20% reduction in pay yet still chose to terminate my employment because you wanted me to accept even less, that was a further breach of contract. To date you have only paid me £1,000 on 30 March for the month of March which equates to £4 per hour, certainly below the legal National Minimum Wage, and this in itself is deemed as a criminal offence as well as another breach of contract. You have failed to register me with HMRC, again not legal. The fact that you have both underpaid me as well as refused to pay me what I am owed is considered an unlawful deduction of wages, and again a breach of contract. The fact that you are now demanding a rental for inferior lodgings despite me having no money due to a lack of payment will not be seen kindly by any court of law. Please also note despite the fact that I have worked as self-employed in the past does not apply to this situation, as you have agreed to pay me a salary of £500 per week until negotiating a full-time wage at a higher rate. Had you agreed to contract me on a self-employed basis you would notify in writing my rate of £16-£18 an hour for every hour worked. Instead I agreed to work at a rate of £500 per week or £12.50 an hour. You had also included me in meetings with HMRC consultants where it was discussed that all staff members’ contracts were set at 40 hours, so you have no excuse to think that any staff member would work ridiculous hours above that free of charge and would be a huge problem for HMRC.”

[29]The claimant then set out the total hours worked: Week 1: Total hours: 47.5 hours Overtime: 7.5 hours Week 2: Total hours: 75.5 hours Overtime: 35.5 hours Week 3: Total hours: 63 hours Overtime: 23 hours Week 4: Total hours: 63.5 hours Overtime: 23.5 hours Week 5: Total hours: 63 hours Overtime: 23 hours Week 6: Total hours: 57.5 hours Overtime: 17.5 hours Week 7: Total hours: 57 hours Overtime: 13 hours Week 8: Total hours: 37 hours The claimant said the hours were reduced in week 8 because the takeaway service was circumscribed.

[30]The claimant then set out eight weeks’ wages would be £4,000; one week’s notice pay would be £500; four days; leave pay would be £400; less the March payment of £1,000, therefore the total owed was £5,687.

[31]The claimant’s case is that he accepted the offer of employment on £45,000 after lockdown. Whilst the claimant did provide an invoice, this was fairly late on in his employment and in any event the respondent did not pay it, therefore it is not established that the claimant was going to invoice the respondent. It appears from the email correspondence that the respondent expected to pay the claimant £500 a week when he started the takeaway service as they had been doing beforehand.

[32]The respondent also said the claimant wore his own uniform and came along with his own knives, magimix and other utensils. The claimant said this was standard for any chef, whether employed or not employed. The claimant described himself as self-employed chef, and they also relied on the discussion with the accountant and the claimant’s facebook information. The Law Wrongful Dismissal

The Law

[33]Any dismissal by the employer in breach of contract, whether constructive or express, will give rise to an action for wrongful dismissal at common law in circumstances where the dismissal was with no notice or inadequate notice, where summary dismissal was not justifiable i.e. the employee was not guilty of gross misconduct: dismissal in breach of a contractual disciplinary procedure There are other examples but these are the two most relevant here.

[34]A claim for wrongful dismissal is a breach of contract claim under the jurisdiction of the Tribunal by virtue of section 3 of the Employment Tribunal’s Act 1996 and the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994. The claim has to arise or is outstanding on the termination of the employee’s employment and relates to one of the following:(1) A claim for damages for breach of contract of employment or other contract connected with employment;

(2) A claim for a sum due under such contract;

(3) A claim for recovery of a sum in pursuance of any enactment relating to the terms and performance of such a contract.

[35]Certain contractual claims are expressly exempt from the Tribunal’s jurisdiction:(1) A claim for the recovery of damages in respect of personal injury;

(2) A claim for breach of a contractual term regarding living accommodation;

(3) A claim for breach of a contractual term regarding intellectual property;

(4) A claim for beach of a contractual term imposing an obligation of confidence or breach of a covenant in restraint of trade.

[36]Damages for a breach of contract in this situation is the period of notice that should have been given by the employer. It will be either be the contractual notice period or, in the absence of that, the statutory period set out in section 86(1) of the Employment Rights Act 1996. Unlawful Deduction of Wages

[37]Part 2 of the Employment Rights Act 1996 sets out the statutory requirements for an unlawful deduction of wages claim. Section 27(1) defines wages as “any sum payable to the worker in connection with his employment”. Wages includes commission payments. Expenses, however are excluded but these can be recovered as a breach of contract.

[38]Under section 13(1) of the 1996 Act, “A worker has the right not to suffer unauthorised deductions”. A deduction is defined in the following terms: “Where the total amount of wages payable on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated…as a deduction made by the employer from the worker’s wages on that occasion.”

[39]The deduction referred to in “after deductions” refers to the statutory deductions such as tax and national insurance.

[40]The question of what is properly payable has to be determined by the Tribunal on normal contractual principles.

[41]In addition, the payment in question must be capable of quantification in order to constitute wages properly payable under section 13(3).

[42]A counterclaim cannot be made against an unlawful deductions claim: it can only be made in the Tribunal against a breach of contract claim.

[43]An authorised deduction is as follows:(1) The deductions required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract.

(2) The worker has previously signified in writing his or her agreement to the deduction.

[44]In respect of the contractual authorisation point (section 13(2) of the 1996 Act), these must be written contractual terms of which the employer has given the worker a copy before the deduction is made, or whose existence and effect the employer has notified to the worker in writing before the deduction is made. A penalty clause cannot be a lawful deduction as the deduction must be lawful at common law. Employment Status Employment Rights Act 1996

[45]Section 230 of the Employment Rights Act 1996 defines an employee as follows:- “in this Act “employee” means an individual who has entered into or works under (or where the employment has ceased worked under) a contract of In this Act a contract of employment means a contract of service or apprenticeship, whether express or implied, and if it is express whether oral or in writing. In this Act, worker means an individual who has entered into or works under or (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 professional business undertaking carried on by the individual”.

[46]In Ready Mix Concrete vs Minister for Pensions and National insurance (HC) 1968 three questions were set out to be answered in defining a contract of(a) Did the worker undertake to provide his own work and skill in return for remuneration;

(b) Was there a sufficient degree of control to enable the worker fairly to be called an employee;

[47]In Cotswold Development Construction Limited -v- Williams 2006 it was suggested there should be a four-fold approach.(i) Was there one contract or a succession of shorter ones;

(ii) If one contract did the claimant agree to undertake some minimum amount of work for the company in return for pay;

(iii) If so, was there sufficient degree of control to make it a contract of employment;

(iv) If there was insufficient control or other factors negating employment was the claimant nevertheless obliged to do some minimal work or a reasonable amount of work personally thus qualifying him as a worker.

[48]The right to control rather than day to day control is what is required, White and Todd -v- Trentback SA 2013 EAT.

[49]An individual may choose not to exercise their right to draw a salary, this does not automatically lead to the conclusion that they are not an employee, SOS for Business, Innovation and Skills -v- Knight 2014 EAT. Neither, does the failure to agree a salary or wages indicate a contract of employment is yet to be formed. Stack -v- Ajar-Tech Limited 2015 Tribunal. It was found there was an express agreement, the claimant would work for the respondent with an implied term that he would be paid a reasonable amount for his services and hence he was an employee. This was upheld eventually by the Court of Appeal. In Euro Panel Processing Co Limited -v- Nimo EAT 91 a company manager did not draw a salary for ten months despite working full time, the EAT held that the other advantage that he enjoyed, payment of expenses, pension contributions, use of the company car was sufficient to preserve the employment relationship during the ten month period. 50. Worker under 1996 Act

[51]Section 233B of the Employment Rights Act 1996 requires the tribunal to distinguish between a situation where an individual is not an employee but neither are they truly self employed by being in business on their own account.

[52]The Supreme Court in Bates van Winklehof v Clyde & Co LLP [2014] SC stated: “Generally there are three tests to establish if a person is a worker or selfemployed:(a) Is there an express or implied contract to perform work or services?

(b) Is there an express or implied obligation to perform the work or services personally?

(c) Is the worker performing the work or services in the context of running a business where the other party is a client or customer?”

[53]In Byrne Brothers (Formwork) Ltd v Baird [2002] EAT it was held the intention was clearly to create an intermediate class of protected worker made up from individuals who were not employees but equally were not carrying on a business in their own name.

[54]In the recent cases of Uber v Aslam [2017] EAT and Pimlico Plumbers Limited v Smith [2018] the main test remains the obligation of personal performance: the obligation “personally to do the work” may be an implied one (Manku v British School of Motoring Limited [1982] ET). However, the fact that the individual does not actually perform all of the work personally will not necessarily mean that the contract is not a contract personally to do work. So long as the contracting party performs the essential part of the work he or she is free to assign or delegate other aspects to another person. For example, a solicitor may delegate some of the legal work in a case to an assistant and rely on a secretary to carry out ancillary tasks like typing and posting letters and other documents (Kelly & Anor v Northern Ireland Housing Executive [1998]). Conclusions Worker

Conclusions

[55]I find that the claimant was a worker for the purposes of any unlawful deduction of wages claim.

[56]It seems clear from the correspondence that the claimant entered into an agreement that he would assist the respondent on a consultancy basis for two weeks at least £500 per week however whilst he did this he was also working supervising the kitchen as a hands on manager. He was under some control as the respondent expected him to be there if things went wrong (the roast potatoes incident) and he could not come and go simply as he wishes. However I consider t was not sufficient to elevate this initial period to employment.

[57]He was not free to work for anyone else, the respondent was well aware that working for them launching the business was a more than full time job. There was no discussion about this and if it was intended to be part of the arrangement there would be some evidence of it as it would not, certainly in the beginning, be at all in the respondent’s interest. In addition the fact that the respondent intended to offer him an employment contract in my view is some corroboration of the original situation.

[58]In respect of whether the claimant could provide a substitute: clearly he could not provide a substitute and it was absurd to suggest that he could. He had been chosen for his specific skills. He could not send somebody else along to assist in the first two weeks he had been chosen for his particular skills. He was required to do the work personally.

[59]Accordingly, in respect of the claimant's unlawful deduction of wages claims, he does have the necessary status to bring such claims from the beginning of his Employee

[60]I find that the claimant, after the first two weeks, once the takeaway service was launched, was an employee of the respondent. The respondent provided the work, the claimant undertook it, he could not provide a substitute. He was under the respondent’s control as to what work was required and when it had to be done.

[61]The respondent set up the takeaway service because they understood they could not furlough the claimant for whatever reason and ofcourse as with many other businesses it was the only way they could continue to operate, it was job specifically for the claimant so obviously he was required to undertake it personally.

[62]The fact that the claimant provided some of his own tools in the context of a chef is not determinative as this is a norm for the industry.

[63]Whilst there had been no agreement as to what he would be paid the respondent was under the impression that they would have to carry on paying him £500, hence the discussion about paying him less. Accordingly there was a fixed rate at that point as one would expect in an employee situation (even though the caselaw states that is not determinative).

Remedy

[64]Accordingly, the claimant is entitled to his notice pay under his breach of contract claim and for holiday pay under his unlawful deductions claim for his 5½ weeks working for the respondent.

[65]In respect of arrears of pay, whilst there may have been an agreement to £500 the parties cannot agree to oust the National minimum wage and the claimant is entitled to be paid for the hours worked at national minimum wage at least. I have not determined whether there was any agreement to pay the claimant for hours worked at £12.50 an hour or at a higher rate for overtime over 40 hours. I will determine that at any remedy hearing.

[66]There is no independent record of how many hours the claimant worked, although it may be possible to reconstruct this from the hours the business was open; again I will consider this at a remedy hearing.

[67]Accordingly, I am affording the parties an opportunity to agree the hours and the rate as I consider the evidence given and the way in which documentation was provided was not helpful in establishing these more specific points

[68]The matter will be listed for remedy subject to any settlement and orders will be made for witness statements and documents relevant to the remedy points being provided in advance of any hearing. Employment Judge Feeney Date 12 February 2021