Ms J Burnett v Confevex Ltd and Others: 3212806/2020
EMPLOYMENT TRIBUNALS
Case No 3212806/2020
Between
Ms J BurnettClaimantConfevex Ltd and OthersRespondent
Before
Employment Judge O’BrienMs S Sullivan for claimantDate 19 February 2021
JUDGMENT
[1]The claimant was a worker for the first and second respondents.[2]The claimant suffered an unauthorised deduction from wages comprising a failure to pay her final month’s salary and a payment in lieu of accrued but untaken holiday, for which (by agreement) the first and second respondents are jointly and severally liable.[3]The first and second respondents shall by 18 March 2021 pay to the claimant the sum of £4,112.50 (gross of tax and National Insurance). JUDGMENT having been sent to the parties on 23 February 2021 and reasons having been requested in accordance with Rule 62(2) of the Rules of Procedure 2013.
REASONS
[1]In an ET1 presented on 13 October 2020 the claimant complained of a failure to pay wages and a failure to pay in lieu of holiday accrued but undertaken at the time of termination and also for expenses of £17.64 for returning equipment that she had borrowed/hired.[2]Her detailed claim was set out in a document attached to her ET1 claim form, and was sent to the various respondents on 30 October 2020. For reasons which are set out in a recent email from Mr Nesbitt, the respondents did not respond to that claim. Nevertheless I was invited today are allow the respondents to participate in the hearing.[3]There was very little in the way of additional or unforeseeable evidence given by the respondents. The claimant would still have had to prove her case even without the participation of the respondents. Whilst I had sympathy for the claimant having to face such a late change, it appeared that she would suffer no true prejudice as a result of my permitting the respondents to defend the claim, whereas the respondents clearly would have been prejudiced by being unable to at least challenge the claimant on her version of events, especially given the documentary evidence for which she would have to give an explanation. For these reasons, I allowed the respondent to play a full part in proceedings and effectively advance a positive defence that the claimant was neither an employee of nor a worker for any of the respondents.[4]I had the benefit of witness statement and exhibits from both the claimant and Mr Nesbitt, and oral evidence from both, followed by brief summary of the case from all parties. I considered my decision before giving a full reasoned decision. Issues[5]The issues were in effect:5.1 Was the claimant an employee of any of the respondents?5.2 In the alternative, was the claimant a worker of any of the respondents?5.3 If the claimant was a worker or an employee, did she suffer unauthorised deductions from wages and, if so, in what amount?5.4 If the claimant was a worker or an employee, what entitlement to paid leave had she accrued by her date of termination?5.5 How much paid leave had she taken by then?5.6 Was there a contractual agreement between the parties that the claimant would be reimbursed for the expenses contended?
Findings of Fact
[6]On 10 April 2020, the claimant agreed with the third respondent to act as a senior conference producer for the first from 14 April to 13 July 2020.[7]She had at the time of the negotiations to commence that engagement the prospect of work in Berlin from July for approximately three months with organisation called Tech Open Air (TOA). She had previously worked as a freelance consultant and had already created template invoices for use where necessary. She readily accepts that she could not be an employee of the respondents if she truly was a freelance consultant.[8]At the time that the claimant began providing her services to the first respondent, she had no paid work from other sources, but was doing some voluntary work (for instance, for Black Lives Matter). It was the parties' intention that after the claimant had finished with TOA, she would become a co-founder at DTRT Events (a trading name of the first respondent) in October 2020, all things being equal, and would at that stage become a member of the board.[9]Before then, the respondents did not wish the claimant to be contracting for any other individual at the same time. That is clear from the fact that the contract entered into was, if TOA went ahead, to cease at that point, and that the claimant would return as a full employee afterwards. An email of 6 April 2020 sent to the claimant by the third respondent (from his chris@somuchfront.com email address) contains the following relevant passage: ‘To help with your cash flow and the fact that you will switch employers with the Berlin tech contract, if you invoice as a freelancer for the months up to when you go to Berlin, you can simply invoice 1/12 of £42K each month. You can get paid gross and be responsible for your own tax. Once you return from Berlin, we would then expect you to be directly employed. Should Berlin not be offered to you again by September we would expect you to become directly employed from October. If Berlin is offered the following year, I think it would be such a great experience for you and benefit both yourself and DTRT Events that we would look to freeze your contract for you to take this role on a temporary contract basis with a view to returning straight afterwards.[10]The contract which was subsequently agreed between the parties provided a fee structure which allowed billing of £3,500 every month and also provided for a holiday provision of seven days over the three-month duration plus any bank holidays that fell within it. There was an expectation that the claimant would work full time for the respondent. The claimant was provided with a laptop by the respondent for carrying out her duties. The claimant dealt with either Mr Nesbitt himself, or other representatives of the respondents, on a regular basis.[11]On 13 May 2020, an email was sent by Mr Nesbitt again from his chris@somuchfront.com email account (‘somuchfront.com’ being a trading name of the first respondent), saying the following: ‘Jade, As you know, I have been in very interesting and detailed discussions with Mandy Clusky about becoming DTRT’s Events’ Chief Exec, with a view to starting part time next month and moving up towards 4 days a week around September time. With every conversation (we were on the phone until gone 10:00 PM last night!) we both get more excited about working together and DTRT’s potential. Mandy, Jade already knows how much potential I think she has. I have told both her, and yourself, that within 3 years she will be running a division of DTRT, when we spin out one of these major communities, whether Mental Health In, Homelessness/Food Waste or another we set up between now and the future. Both, I have explained my vision and business model to you. I firmly believe the pair of you will be cornerstones of DTRT and would love to have you both fully employed, as co-founders, with equity, by October at the latest. I want you both to be as happy with each other as I am with you, so can I ask you to message between each other and arrange a call to chat between yourselves and talk freely about how you both like to work, your own visions for DTRT etc with a particular focus on a headline road map for Jade over the next four months until Mandy is in around four days a week. All the best, Chris’[12]It was suggested during the hearing that at this time the respondents had become dissatisfied with the claimant's performance and had moved to supporting her to reach the standard desired. It is unnecessary to make full findings on whether the claimant was performing well enough; certainly, this email does not bear that version of events out at all. In any event, the email does suggest the intention that somebody who was to be the chief executive of the party receiving the claimant’s services was going to be working closely thereon in with her.[13]Indeed, I find that the claimant had been working regularly with Mr Nesbitt to that point and then worked closely with Mandy Clusky closely thereafter. It is uncontentious that parties’ intention was for the claimant to become employed by DTRT Events after October, all things being equal, of course. If that happened, she would continue to have conference production responsibilities personally, as well as supervising other conference producers, but also would have a seat at the board and would undertake strategic planning, along with the rest of the board.[14]As it was, on 13 July 2020, the claimant was told that her performance was inadequate and that her contract would not be renewed in its current form. She was offered a different contract on a lesser level of remuneration, but that was not taken up.[15]The claimant through out her period of engagement had invoiced the second respondent, it having been agreed between her and Mr Nesbitt acting on behalf of the respondents that she should do so and that that entity would pay her invoices.[16]The invoices did expressly indicate that she was invoicing for independent freelance services and that payment for the first invoice on 12 May be paid on receipt and the subsequent invoices with 14 days. That is entirely consistent with the contract. The first two invoices were paid but the final invoice was not paid.[17]There is evidence in the bundle of the claimant having taken at least two days holiday and having notified Mr Nesbitt on behalf of the corporate respondents that she was going to do so. She says in her claim form that she took 3 1/2 days holiday; I have no reason to doubt that that is accurate.
The Law
[18]Pursuant to section 13 of the Employment Rights Act 1996 (ERA), a worker has the right not to suffer unauthorised deductions from his wages. The definition of ‘wages’ includes ‘any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise’ (section 27(1)(a) ERA). However, any payment by way of a loan or advance of wages, and any payment to the worker otherwise than in his capacity as a worker, are excluded from the definition of wages pursuant to ss27(2)(a)&(e) ERA respectively.[19]An employee may bring a claim in the Employment Tribunal for damages for breach of contract arising from or outstanding on termination of his employment under article 3 of the Employment Tribunals Extension of Jurisdiction Order (England and Wales) Order 1994.[20]Unless the relevant contract provides for a more generous entitlement an employee/worker is entitled to 5.6 weeks’ paid leave every year (regulations 13, 13A and 16 of the Working Time Regulations 1998). The employee/worker is entitled on termination of engagement to payment in lieu of accrued and untaken holiday (regulation 14).[21]The terms ‘employee’ and ‘worker’ are defined in s230 ERA as follows:(1) 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.(2) In this Act 'contract of employment' means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.(3) In this Act 'worker' (except in the phrases 'shop worker' and 'betting 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]In Cotswold Development Construction Ltd v Williams [2006] IRLR 181, at paragraph 16 Langstaff J cited the well-known dicta of MacKenna J in Ready Mixed Concrete (SE) Ltd v Minister of Pension and National Insurance [1968] 2 QB 497 regarding the existence of a contract of service: ‘A contract of service exists if these three conditions are fulfilled.(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master.(iii) The other provisions of the contract are consistent with its being a contract of service.’[23]At paragraph 53, Langstaff J considered further the definition of ‘worker’: ‘It is clear that the statute recognises that there will be workers who are not employees, but who do undertake to do work personally for another in circumstances in which that 'other' is neither a client nor customer of theirs – and thus that the definition of who is a 'client' or 'customer' cannot depend upon the fact that the contract is being made with someone who provides personal services but not as an employee. The distinction is not that between employee and independent contractor. The paradigm case falling within the proviso to 2(b) is that of a person working within one of the established professions: solicitor and client, barrister and client, accountant, architect etc. The paradigm case of a customer and someone working in a business undertaking of his own will perhaps be that of the customer of a shop and the shop owner, or of the customer of a tradesman such as a domestic plumber, cabinet maker or portrait painter who commercially markets services as such. Thus viewed, it seems plain that a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations, will in most cases demonstrate on which side of the line a given person falls.’[24]Whether someone is the employee of another requires a multifactorial approach taking into account all of the relevant circumstances, including not only the degree of control exercised by respondent over claimant or the extent of the claimant’s integration into the respondent organisation, but also the tax arrangements and the basis of the relationship as expressed in the contract. However, in the context of employment, where, taking into account the relative bargaining power of the parties, the written documentation might not reflect the reality of their relationship, it is necessary to determine the parties' actual agreement by examining all the circumstances, of which the written agreement was only a part, and identifying the parties' actual legal obligations (Autoclenz Ltd v Belcher and others [2011] ICR 1157).[25]In Stack v Ajar-Tec Ltd [2015] IRLR 475 at paragraph 16, Tomlinson LJ approved the Employment Judge’s observation that ‘directors of companies are not, ipso facto, employees but may become so by entering into a contract of employment, express or implied, or again they may be workers by way of an agreement.’[26]An employee who has been employed for more than one month but less than two years is contractually entitled to a minimum of a week’s notice of termination of employment (s86 ERA).
Conclusions
[27]The claimant made absolutely clear in evidence she was not suggesting that she was in fact an employee of the respondents because she did recognise that there would be that distinction between the period of time she did in fact work for the respondents, and the relationship after October 2020. She maintained, however, that she always believed she was a worker.[28]It is clear that the claimant provided her services to the respondents personally. She was not allowed to substitute another's efforts for her own. It was expected that she would work full time for the respondents. There was close supervision and support given to her by representatives of the respondents. She was paid by the time she spent on the task rather than by the output or result of the task. She was expected throughout the period of the contract to work solely (in terms of paid work) for the respondent. The claimant was also provided with the tools to do her job. The arrangements for any participation by the claimant in TOA in 2021 (after the claimant unambiguously became an employee) was exactly the same as in the year in question: in each case she would cease to be contracted to the respondents for the period of time she was undertaking TOA.[29]Despite the description in both the contract and the invoices that the claimant was acting as a freelance contractor, I do not accept that that was the reality of the agreed arrangements between the parties. She was not providing her services to the respondents as a contractor to a client. Instead, the factors above lead me to the conclusion that the claimant was a worker.[30]As for the identity of the entity for whom she worked, I accept that the third respondent dealt with the claimant at all times in his capacity as representative of his companies. It is unclear however which corporate entity was the beneficiary of her work. It would appear on first blush to have been the first respondent; however, at all times it was the second respondent paid her. Moreover, they are both companies of whom the third respondent is a director. Consequently, I find that she was a worker for both the first and second respondent and that they are jointly and severally liable for the damages I quantify below.[31]The claimant continued to work for those respondents until her contract was terminated on 13 July and so was entitled to be paid to that date. However, she was paid for her final month. The agreed rate of pay was £3500 gross of tax and national insurance and so I find that she suffered unauthorised deductions from wages in that amount.[32]In addition, the claimant was also entitled throughout that three month period to 7 days’ leave plus bank holidays. The claimant has not sought to recover more than the untaken balance of seven days. She tells me, and I accept that she took 3 ½ days’ holiday, within the duration of the contract. Her entitlement under that contract coincides with her entitlement under the Working Time Regulations 1998. Consequently, she had at the date of termination 3 ½ days’ accrued but untaken holiday for which she is entitled to be paid in lieu.[33]The claimant’s gross monthly pay of £3,500 equates to daily pay of £175 gross, and so she suffered a further unauthorised deduction of wages in the sum of £612.50.