Ms AJ Angless v Secretary of State for Business & Trade and One Button Ltd (in Creditor’s Voluntary Liquidation): 2600569/2024
EMPLOYMENT TRIBUNALS
Case No 2600569/2024
Between
Ms AJ AnglessClaimantSecretary of State for Business & Trade (1) One Button Ltd (in Creditor’s Voluntary Liquidation) (2)Respondent
Before
Employment Judge Adkinson sitting aloneIn person for claimantDate 18 February 2025
JUDGMENT
UPON hearing from the claimant and from the first respondent UPON the second respondent being barred from taking part because it has not presented a response UPON concluding that the Secretary of State made a decision on the claimant’s application to him on 14 February 2024 for a payment from the redundancy payments service, in response to which the claimant commenced early conciliation and presented this claim. UPON considering the Employment Rights Act 1996 section 188, and concluding the claim is therefore in time because the date on which the claim was presented was within 3 months of the said decision. IT IS THE TRIBUNAL’S JUDGMENT THAT the claim was presented in time, that the Tribunal therefore has jurisdiction to hear and determine the claim, and so it can Page 1 of 2 Case No 2600569/2024 proceed to be heard and determined in the usual way. Directions will be provided separately. RESERVED JUDGMENT[1]All complaints against the Second Respondent are struck out for want of jurisdiction on the basis that the Claimant was not an employee or worker of the Second Respondent to that claim and so she does not have the standing to advance the complaints brought under it.[2]All complaints against the First Respondent are struck out for want of jurisdiction on the basis that the Claimant was not an employee of the Second Respondent and so has no entitlement to be paid sums from the National Insurance Fund.
REASONS
[1]This Preliminary hearing was listed at the direction of Employment Judge Adkinson at an earlier Preliminary hearing which took place on 22nd October 2024. At that hearing Employment Judge Adkinson determined that the claim made by the Claimant had been presented within the relevant statutory time limits and therefore that, on that basis at least, the Tribunal had jurisdiction to entertain the claim. However, the First Respondent also defended the claim against them on the basis that the Claimant was not an employee of the Second Respondent and therefore was not entitled to make a claim for payment from the National Insurance Fund. Page 1 of 11[2]Employment Judge Adkinson therefore listed this hearing to consider if the Claimant was either an employee or worker of the Second Respondent.
THE HEARING
[3]During the course of the hearing, I heard evidence from the Claimant. It is not necessary to deal with issues of credibility in any significant detail because many of the facts are not in dispute and it is the application of the law which is disputed. However, I should observe that I did not find the Claimant to be an entirely satisfactory witness. She was often somewhat argumentative in cross examination by Mr. Soni. She did not always answer the question that she was asked, preferring instead to answer in a way that more suited the point that she wanted to make and so seeing question having to be repeated. She would also on occasion not engage with the question asked and in some cases such as in relation to sick pay and notice pay arrangements backtracked from answers given in information to the First Respondent to maintain that she would have been entitled to statutory sick pay and notice although there was no factual basis for that.[4]No evidence was led by the First Respondent and that is not unusual given their involvement is not as a purported employer but because of a claim that the Claimant has made from the National Insurance Fund.[5]Whilst evidence and submissions were able to be concluded within the hearing time, there was insufficient time for me to deal with deliberations and deliver Judgment. Accordingly, my decision was reserved.[6]The hearing took place via Cloud Video Platform with only myself being physically present in the hearing centre. There were no issues which arose which were problematic in terms of the hearing taking place via that medium and I am satisfied that we were able to have a fair and effective hearing.
THE LAW
[7]Before dealing with my findings of fact and conclusions in relation to the issues before me, I have had regard to the law which I am required to apply when considering the matters which Employment Judge Adkinson had set down for consideration.[8]The Respondent has referred to a number of authorities. I have considered all of those and all arguments advanced whether they are expressly referred to in this Judgment or not. The same applies to the arguments advanced on behalf of the Claimant and both parties can be assured that I have taken all evidence and representations into account and considered matters in the round before reaching my conclusions. Employee status – Section 230 Employment Rights Act 1996[9]An employee is defined by the provisions of Section 230(1) Employment Rights Act 1996 in respect of claims advanced under that Act. That section provides 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 employment.” Page 2 of 11[10]Common to all complaints for which employee status is required is the requirement for the Claimant to have a contractual relationship with the Respondent against whom the claim is advanced.[11]When considering the question of employee status it is necessary to consider firstly whether there is an express contract of employment. If not, then in order to find an employment relationship, the Tribunal must be persuaded that there is or was an implied contract. If a Claimant submits that there was an implied contract, then the onus is upon the Claimant to establish that that a contract should be implied (Tilson v Alstom Transport [2010] EWCA Civ 1308).[12]A contract can be implied only if it is necessary to do so (James v London Borough of Greenwich [2008] IRLR 358). In order for it to be necessary to do so, it must be needed to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which that business reality and enforceable obligations would be expected to exist.[13]Whether there is a “contract of service” (and thus a contract of employment) is to be determined against the whole picture of the relationship and will invariably include consideration of a variety of factors. However, the decision in Ready Mixed Concrete (South East) Limited v. the Ministry of Pensions and National Insurance [1968] 2QB 497 will be of fundamental assistance to a Tribunal tasked with consideration of employee status.[14]In short terms, the Ready Mixed Concrete decision provides that a contract of service exists if the following three conditions are fulfilled:(i) The “servant” agrees that, in consideration of a wage or other remuneration, he or she will provide his or her own work and skill in the performance of some service for his “master” – i.e. the requirement for so called personal service;(ii) He or she agrees, expressly or impliedly, that in the performance of that service that he or she will be subject to the other’s control in a sufficient degree to make that other “master” – the so called control factor;(iii) The other provisions of the contract are consistent with it being a contract of service.[15]A key ingredient of employment status is the degree of mutuality of obligation of the parties to the contract. Mutuality of obligation is often described as the obligation on the employer to provide work on the one hand and the obligation on the individual to accept that work on the other. Without a sufficient degree of mutuality of obligation, there can be no employment relationship.[16]A further essential factor is that of control and whether the purported employer has a sufficient degree of control to make that a so called “master and servant” relationship. There are other potentially relevant factors which may assist in determining whether there is a contract of service (and which go to the third strand of the Ready Mixed Concrete test) such as the degree of any financial risk taken by the “employee”; who is responsible for provision of the tools of the trade; the degree of integration into the business or organisation; Page 3 of 11 whether the individual is free to work elsewhere; the label placed on the relationship by the parties and the nature and length of the relationship.[17]The Tribunal must consider the whole picture to see whether a contract of employment emerges, although mutuality of obligation and control must nevertheless be identified to a sufficient extent in order for a contract of employment to exist.[18]Although each case will present a number of factors pointing in different directions, the test is not answered by a checklist. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail… Not all details are of equal weight or importance in any given situation.’ (see Hall (Inspector of Taxes) v Lorimer 1994 ICR 218 CA).[19]In the case of company directors and shareholders, the status does not need to include employment status but equally does not exclude it. Various cases have provided guidance on how to approach the task, typically in the context of majority shareholders who are not under control of others, or could outvote them on because of their majority shareholding. Key cases include Clark v Clark Construction Initiatives Ltd and anor 2008 ICR 635 EAT and Secretary of State for Trade and Industry v Bottrill, both of which were revisited in Secretary of State for Business, Enterprise and Regulatory Reform v Neufeld and Anor 2009 ICR 1183 CA.[20]Rights to claim sums from the National Insurance Fund under Part XII Employment Rights Act 1996 only apply to someone who was an employee of the insolvent employer. The question of employee status is to be determined as at the date of the insolvency (see Rajah v Secretary of State for Employment EAT/125/95). Worker status – Working Time Regulations 1998[21]The test for worker status in respect of a complaint of holiday pay is contained within Regulation 2 Working Time Regulations 1998 which provides 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.”[22]Therefore, in respect of any complaint advanced which requires a Claimant to be an employee or a worker, there is a requirement for there to be between them and the Respondent a contract. Page 4 of 11 RELEVANT FINDINGS OF FACT ON EMPLOYEE AND WORKER STATUS[23]The Claimant has an artistic background. The origins of the Second Respondent came about from the Claimant beginning to design and make jewellery at her kitchen table. With the commercial expertise of her now exhusband she began to make contacts within the industry and the Second Respondent was duly incorporated on 2nd June 2005 to deal with that. It was to be as the Claimant described in her evidence a family run business.[24]At the time of the incorporation of the Second Respondent in 2005 there were three statutory directors. They were the Claimant, Peter Angless (the Claimant’s now ex-husband) and Keith Jackson. The Claimant and Mr. Angless were the sole shareholders of the Second Respondent at the time of incorporation with the Claimant holding the majority of the voting shares of 50% and Mr. Angless 40%. The Claimant also held 10% non-voting shares.[25]Mr. Jackson resigned as a director on 27th May 2022 and before that Mr. Angless had resigned in March 2021. That left the Claimant as the sole director and also sole shareholder. Her shareholding with effect from March 2021 had been one hundred percent. That is shown at page 82 of the hearing bundle which described the Claimant as the Second Respondent’s controlling party. With effect from the resignation of Mr. Jackson, the Claimant was the board of directors.[26]Prior to those resignations the Claimant had responsibility for what might best be described as the creative side of the business and she worked hard at that and developing contacts to bring in business. A number of those were large clients such as John Lewis and the Claimant is rightly proud of what she achieved within the Second Respondent. Her evidence was that she worked 37.5 hours per week but akin to other working arrangements her evidence was that was as a result of agreement reached with the other directors at the inception of the Second Respondent. I have not seen, however, any minutes or memorandum evidencing such agreements.[27]In addition to her creative work, the Claimant undertook tasks required of a statutory director such as approving accounts and returns to Companies House (see for example pages 61, 74, 87, 90 and 103 of the Preliminary hearing bundle).[28]The Claimant was also a statutory director at the same time as she was for LLF Sourcing Ltd from which she also took a small income in return for input of approximately one hours work per month. LLF Sourcing Ltd was a customer of the Second Respondent which purchased stock from them to sell online.[29]The Second Respondent employed around four members of staff or so at various times and all had written contracts of employment. None of the statutory directors had any written contractual terms. All staff were paid regularly. Whatever the Claimant was paid either by way of remuneration or dividends as a shareholder depended upon the financial situation of the Respondent and what remained after her employees had been paid. The Claimant did not therefore receive a fixed salary and as I have already indicated what she received in any given month varied depending on the financial state of the Respondent at the relevant pay period. For example, what were described as the Claimant’s wages in June 2022 was in the sum of £2,162.00 whilst in August that was in the sum of £696.20 (see pages 167 and 175 of the Preliminary hearing bundle). Remuneration was also supplemented by dividends (again see page 175 of the Page 5 of 11 Preliminary hearing bundle). Those dividends were decided by all the directors prior to May 2022 depending upon the cashflow of the Second Respondent – albeit again I have not seen anything documenting such agreements. After May 2022 the Claimant was of course the sole director and shareholder and any decisions on dividends and remuneration would have been taken by her alone.[30]Payments to the Claimant were made via the Second Respondent’s Company Accountant who took the view that she was an employee and dealt with her pay via the PAYE scheme. I accept her evidence that HMRC did not question that at any stage but I do not of course know what HMRC were told about the circumstances of the Claimant’s purported employment by the company accountant.[31]What sums were drawn by the directors as directors remuneration was a matter that the three of them all agreed jointly up until May 2022 when the decision on the Claimant’s remuneration would have been a matter for her alone. That also applied to any decisions made in respect of the Second Respondent. Whilst the Claimant said that she was accountable to the board of directors, that is clearly not accountable in the sense that they would have been able to take any disciplinary or other action against her and they did not control the work that she did or how she did it. That was entirely autonomous with each director undertaking their own work in the area of their specialism and all decisions were made jointly including the targets that they would all seek to achieve. All worked closely and collaboratively as is often the case in a family run business and there were never any disagreements that could not be resolved. There was therefore no need for a grievance or any other formal procedures in respect of the directors and the Claimant confirmed that had there been any issues they would have been talked out and agreement reached between the directors with the best interests of the Second Respondent in mind.[32]The Claimant’s evidence was that again by agreement the directors had an allocation of 35 days annual leave although the Claimant did not necessarily take all of it and no minutes or memorandum demonstrating that agreement have been produced. No-one was required to authorise the Claimant’s annual leave although leave sheets would be signed by either the Claimant or the then Company Secretary. Leave was booked in the same way for everyone at a time when it was convenient to them and to ensure that there was still sufficient cover in the business. The Claimant did not always take all of the leave to which entitlement had been agreed within the leave year (see page 128 of the hearing bundle) and sometimes did not take approximately half of her entitlement. Although not determinative as some employees may not take their full leave entitlement, alongside other factors it is suggestive of someone seeking to put in maximum effort to grow their own business. Indeed, the Claimant’s evidence on this point was telling in that she said that she was “running a family owned business” which was something that she took seriously, that holiday was not her priority and that no one worked harder than she had. That is not unusual for someone who has a significant financial interest as a shareholder and was also the founding mind and force behind the creation of the Second Respondent. She clearly considered the Second Respondent as a family run business rather than, before the insolvency and application for payment from the National Insurance Fund, a company that she was an employee of.[33]The Claimant’s evidence was that working hours was also a matter of agreement and although that was said for the directors to be 37.5 hours per week the Claimant’s evidence was that those would be the hours or more if it was necessary to “get the job done”. Hours of work for the directors were not Page 6 of 11 recorded nor was any agreement that was reached at inception minuted or otherwise reflected. For employees a flexi time arrangements was in place so that they worked the hours that they were contractually required to work and met the needs of the business. There may also have been overtime payments but the Claimant was unsure about that as such matters were dealt with by the Company Secretary. However, the Claimant did not take flexi time and was not paid overtime.[34]The Claimant did not have any time off sick and there were no sick pay arrangements in place but her evidence was that her assumption was that it would have been a matter of statutory sick pay if that had arisen and the same in respect of notice which would have been statutory notice required on either side by Section 86 Employment Rights Act 1996. I do not understand that to have been the subject of any discussion and it was certainly not recorded anywhere and appears to be the Claimant’s assumption. I have already made an observation about that in terms of credibility above. Sick pay did not of course arise in practice and the Claimant’s further information submitted to the First Respondent in connection with her application for payment from the National Insurance Fund set out that there were no sick pay or notice pay arrangements (see page 128 of the hearing bundle). That same information also set out that there was no pension provision for the Claimant and that was also the position for Mr. Angless and Mr. Jackson when they were directors of the Second Respondent.[35]There was, however, some provision for the Claimant for permanent health insurance and life insurance which I understand was arranged by the Second Respondent’s financial adviser. Nothing is minuted or in the form of a memorandum about how those arrangements came about and board approval sought to implement them.[36]There was also the facility available for the Claimant and Mr. Angless and Mr. Jackson during their period as directors to take Directors loans. During the latter part of the Respondent trading the Claimant paid back quite significant sums in directors loans (see page 174 of the hearing bundle).[37]As a result of a downturn in work because of the Covid-19 pandemic the Claimant took the difficult decision to place the Second Respondent into liquidation. That was a decision that she alone took and she took the necessary steps to organise it in July 2023.[38]The Claimant subsequently made an application for various payments from the National Insurance Fund. The refusal of that application by the First Respondent on 25th October 2023 resulted in these proceedings. The Claimant is only entitled to redundancy and notice payments if she was an employee and to any payments in respect of holiday pay and wages from the Second Respondent if she was a worker. She is only entitled to any payment from the National Insurance Fund if she was an employee.
CONCLUSIONS
[39]The First Respondent’s position on the issue of employment status essentially flows from the Claimant’s position as a statutory director and shareholder. That is a potentially valid argument but a starting point only. A statutory director need not be an employee. Equally, being a statutory director does nothing to undermine the possibility of also being an employee if that reflects the reality of the relationship. No one thing will be determinative of the Page 7 of 11 nature of the relationship and it will be the overall picture that is important when standing back and considering everything in the round.[40]The essential elements of a contract of service (and thus a contract of employment) are set out in Ready Mixed Concrete. Those factors are the irreducible minimum of a contract of service.[41]There can be no question – nor does it appear to be argued – that the Claimant could not fulfil the first question of personal service. Indeed, the Claimant was the creative mind behind the Second Respondent such that her personal service was essential to the development of the company.[42]However, moving to the second strand of the test an essential factor is that of control and whether the purported employer has a sufficient degree of control to make that a so called “master and servant” relationship. There are a number of factors which when considered as a whole point firmly away from the Claimant being under the control of anyone else at the Second Respondent and absent control, she cannot be an employee. Those matters which are relevant – but not of themselves determinative - to control and also the third strand of Ready Mixed Concrete are as follows:a. The Claimant was instrumental in incorporating the Second Respondent and was one of the founding directors in a business born from her own concept and ideas;b. The fact that the Claimant did not work at the direction of anyone other than herself. Her evidence was that she had targets although I have not seen any document or minute evidencing those or how they came about but in all events any such targets those were agreed by her alongside the other directors as mutually agreed decisions. There is nothing to suggest that if she had not met them she would have been taken to task or disciplined. Whilst she referred to herself as being accountable to the board and that may have been her view, there was nothing that would bite if she had done anything wrong or not met any targets;c. The Claimant held the majority of voting shares – and post the exit of Mr. Angless held all voting shares – and at all times should there ever have been a voting dispute she would have been able to outvote the other directors. If any of the directors therefore had control either singularly or together, it was the Claimant. She was by May 2022 the sole person with total authority over how the Second Respondent operated and her own part within those operations;d. Like the other directors when they were in post the Claimant had complete autonomy in the way that she carried out her work. She was not at the direction of the board or anyone else;e. From May 2022 at the resignation of Mr. Jackson the Claimant cannot have possibly been accountable to anyone other than herself as the sole shareholder and director;f. From May 2022 onwards the Claimant was in effect the board of directors. To any degree before that that she was “accountable to the board” after that point she was only accountable to herself; Page 8 of 11g. The Claimant was at all material times the driving force behind the Second Respondent. She was responsible for its incorporation and was at all times a statutory director and majority shareholder;h. The Claimant worked hard for the good of developing the business often foregoing significant periods of her annual leave which chime with her evidence that her priority was running a “family owed business”;i. Similarly, the Claimant put in the hours over and above those agreed between the directors at inception of the Second Respondent that were necessary to “get the job done”. Any overtime or flexi-time arrangements applicable to the employees of the Second Respondent were not utilised by the Claimant;j. There is nothing to evidence that the directors ever turned their mind themselves to agreement as to their employment status (and even then that would not be determinative if it did not represent the reality of the situation) and that was a matter determined by the Company accountant seemingly on their own views. Certainly, I have not seen any board minute or memorandum to suggest that the directors ever turned their minds to the question of employment status other than in issuing contracts of employment for other employees;k. Similarly, no contract of employment was ever issued for the Claimant or the other directors as they were for employees – or “my staff” – as the Claimant referred to them in evidence;l. There was no agreement ever made about entitlement to sick pay and notice pay and the Claimant assumed – probably with the benefit of these proceedings now in mind – that her entitlement would be statutory payments;m. The Claimant was not just a statutory director in name. She exercised the function of that directorship including signing off on company accounts and taking major decisions such as the one that was taken alone to liquidate the Second Respondent;n. The Claimant had a degree of financial risk. Directors remuneration was decided after all other employees had been paid and was dependant upon the financial circumstances of the Second Respondent and remuneration fluctuated in ways that could be significant;o. The Claimant decided what she would be paid. Whilst at the beginning that was agreed between all three directors as at May 2022 to the liquidation the decision was that of the Claimant depending on the factors referred to above;p. The Claimant had the ability to take directors loans; andq. The Claimant was free to work elsewhere given that she was also a statutory director of LLF Sourcing Limited from which she derived a modest income for a modest amount of work. Page 9 of 11[43]Whilst the Claimant points to the fact that she was treated by the Second Respondent’s accountant as an employee, placed on PAYE which was not challenged by HMRC and was given certain fringe benefits which she says that she was told were only applicable to employees, none of that tilts the balance of the scales anywhere near close to employee status having regard to the factors set out above. I should also note that I have not seen any board minutes where determination was made about PAYE status or fringe benefits and whether to accept the advice that was being given by third parties about those matters.[44]All of the above factors when taken together and considered in the round point firmly away from the Claimant being under the control of the Second Respondent. The control was firmly at all times with the Claimant and absent control there can be no contract of service. I remind myself that the question of employee status is to be considered at the point of insolvency. By that stage the Claimant was the only guiding and deciding mind within the Second Respondent and indeed it was her decision to place the company into insolvency arrangements. The relationship by that stage was not one of master and servant (and indeed I do not accept that it was at any point from inception in 2005) but clearly one of the Claimant being entirely the master. Shareholding and director status are not of themselves determinative but standing back and looking at the entire picture of the factors referred to above I am not satisfied that there was any sufficient degree of control of the Claimant to meet the Ready Mixed Concrete test.[45]The Claimant accepts that she has no written contract of employment with the Second Respondent. In order to imply one I would need to be satisfied that it was necessary to do so in order to give reality to business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which that business reality and enforceable obligations would be expected to exist. There is no requirement to imply a contract of employment in these circumstances where the reality of the situation was that the Claimant owned and operated a business on her own account. The Claimant’s own account she was running a “family owned business”.[46]The Claimant did not therefore work under a contract of service and was not an employee such that she was not entitled to a redundancy or notice payments. Given that she was running a business for her own account she was also not a worker and so does not have the standing to advance complaints of unpaid wages and for holiday pay.[47]As a result of the conclusions that I have reached on employee and worker status both the First Claim and the Second Claim are therefore struck out in their entirety against all Respondents for want of jurisdiction.[48]All complaints are therefore at an end.[49]I should say that I have sympathy for the Claimant. She worked hard and employed great dedication to set up and grow the Second Respondent and is rightly proud of that which she created and the household names that she traded with. Page 10 of 11[50]But for the effects of the Covid-19 pandemic that would doubtless have continued and it is clear that she is understandably upset about how matters ended. However, whatever sympathy I have for the Claimant does not result in her having employee or worker status when she was plainly on the facts running a business on her own account. Approved by: