S Kenwright v Secretary of State for Business and Trade: 3310387/2023
EMPLOYMENT TRIBUNALS
Case No 3310387/2023
Between
S KenwrightClaimantSecretary of State for Business and TradeRespondent
Before
Employment Judge Grahame AndersonIn person for claimantDate 18 February 2025
JUDGMENT
[1]The Claimant’s claim pursuant to s. 188 of the Employment Rights Act 1996 that the Respondent failed to make a payment under s. 182 of that Act was presented out of time. It was reasonably practicable to have presented the claim in time. Accordingly, the claim is dismissed.[2]On the Claimant’s reference under s. 170(1) of the Employment Rights Act 1996 it is determined that:a. The Respondent is liable to pay the employer’s payment;b. The amount of the sum payable is £6,461.56.
REASONS
[1]This is the Claimant’s:(i) Application for a reference pursuant to s. 170 of the Employment Rights Act 1996 (“the ERA”) to determine the question of the liability of the Secretary of State (“the SoS”) to pay what is termed in the section “the employer’s payment” and, if there is any liability, the amount (as provided for in ERA, s. 168); pursuant to ERA s. 166(2), the employer’s payment means, for present purposes, a redundancy payment under Part XI of the Act – (“the s. 170 Reference”); and(ii) Complaint pursuant to ERA, s. 188 that the SoS failed to make a payment to her under s. 182 of the same Act in respect of debts owed to her by her Page 1 of 12 insolvent employer (namely, arrears of pay up to 8 weeks (s. 184(1)(a)); notice pay (s. 184(1)(b)); and holiday pay (s. 184(1)(c)) (“the s. 188 Complaint”). This hearing[1]There has been some unfortunate but unavoidable delay in getting this hearing on. In particular, a hearing before EJ Robertson on 10 September 2024 had to be adjourned in circumstances where the SoS had not received notification of it.[2]Today, the Claimant represented herself. Ms. Munroe appeared for the SoS. She is a lay representative not a lawyer.[3]At the outset of the hearing, I went through the usual ground rules in relation to CVP hearings and reminded the parties that, if breaks were needed, they need only ask. No reasonable adjustments were requested.[4]I had a bundle of some 214 pages which included witness statements from the Claimant herself. The Claimant was cross-examined by Ms. Munroe and I asked questions too. Issues[5]The issues were set out by EJ Robertson at the hearing I have just mentioned. They were:[1]Employment status 1.1. Was the claimant an employee of SC Kenwright Limited within the meaning of section 230 of the Employment Rights Act 1996? 1.2. lf so, when did her employment start and what was the effective date of termination?[2]Time limits 2.1. Were the claimant's claims brought within the relevant time limits?[3]Statutory redundancy payment 3.1. Was the claimant dismissed by reason of redundancy? 3.2. lf so, was she entitled to a statutory redundancy payment? 3.3. lf so, what amount was she entitled to? 3.4. How much did she receive?[4]Notice pay 4.1. Was the claimant dismissed? Page 2 of 12 4.2. What was the claimant's statutory notice period under section 86(1) Employment Rights Act 1996? 4.3. Was the claimant paid tor that notice period?[5]Holiday Pay (Working Time Regulations 1998) 5.1. How much holiday pay had the claimant accrued but not taken when her employment ended? 5.2. During what period of time did she accrue that holiday?[6]Arrears of pay 6.1. Is the claimant due to be paid arrears of pay? 6.2. lf so, how much is she due?[7]Remedy 7.1. How much is the claimant entitled to be paid out of the National lnsurance Fund? Procedural points 6. There appears to have been a certain amount of procedural wrangling in 2024: as far as I can see – from a judgment given in the EAT by Sarah Crowther KC sitting as a Deputy Judge of the High Court on 26 February 2024 - the Claimant appears to have engaged with Acas Early Conciliation but misnamed the relevant respondent. The claim was rejected by the Tribunal for that reason: an appeal was lodged. The Judge stayed the appeal pending a reconsideration in the ET which succeeded. I need say no more about this. 7. An application for a s. 170 reference has at least two unusual features: the first is that there is no requirement for Acas Early Conciliation before lodging the application with the Employment Tribunal. The second is that the time limit for presenting the application is six months rather than the usual three (that is the effect of ERA, s. 164(1)(c)). Accordingly, no issues of this sort arise with regard to the s. 170 Reference.[8]Acas EC is also not mandatory in relation to the Claimant’s s. 188 Complaint. However, as set down in s. 188(2), the Employment Tribunal only has jurisdiction to deal with such a complaint if it was presented within three months of the date on which the SoS’s decision on her initial application was communicated to her or, if it was not reasonably practicable to present the complaint within that period, a further reasonable period.[9]The SoS communicated the decision to the Claimant on 11 May 2023. Acas EC has, as above, no relevance here and so the primary time limit expired on 10 August 2023. The Claimant presented the complaint to the Employment Tribunal on 17 August 2023. Accordingly, she was a week out of time. Page 3 of 12[10]I appreciate that she was not particularly alive to the time point, although it is listed among the issues EJ Robertson identified. I raised the point at the start of the hearing and gave the Claimant time over an extended break (between 12:30 and 14:00) an opportunity to see if she could find any documents / recall further anything which might assist. To that end she produced for the ET certain emails.[11]I noted above that there was an error in relation to Acas EC (which was not required). However, I can see from the file that the Claimant did not refer the matter to Acas until 15 August 2023, receiving a certificate on 16 August 2023. The erroneous EC certificate matches the number on the Claim Form presented on 17 August.[12]I was concerned that the Claimant’s delay might be explained by her mistaken apprehension that EC was taking place: if that had been the case I would not have hesitated to extend time. But in this case the Claimant did not go to Acas until 15 August.[13]I have considered whether it was reasonably practicable to have brought the complaint in time. With some reluctance, I have concluded that it was reasonably practicable.[14]The burden is on the Claimant to demonstrate that it was not reasonably practicable.[15]The Claimant is an articulate and assertive person who managed businesses for some years. I appreciate that Tribunal processes can be difficult and confusing but every potential litigant must grapple with them. Information is available.[16]The SoS’s rejection decision specifically referred the Claimant to(a) the possibility of bringing a complaint to the Employment Tribunal and(b) the existence of time limits for doing so (see [115] in the bundle). The same is true of subsequent communications. The SoS makes no secret of the recourse to the ET.[17]Pausing there, I note that, unfortunately, a member of the RPS staff appears to have told the Claimant in an email on 2 August that she needed to go to Acas prior to bringing a Tribunal claim. That was incorrect advice. However, it would appear that, subject to the points in the next paragraph, the Claimant still did not contact Acas until 15 August. The erroneous advice did not, therefore, cause her delay.[18]I asked the Claimant on a number of occasions if she had any evidence that she had contacted Acas earlier than 15 August. She thought it was likely that she had but was unsure. She could not say if it was on or before 10 August. That is not a very solid basis for me to conclude, and I would have been hesitant to conclude in any event, that Acas may have led her into error in relation to the time limits prior to 10 August. In fact, the Claimant says that Acas initially told her that it “could not help”, to use the Claimant’s paraphrase. If she did contact Acas prior to 10 August and was told this, then this ought to have prompted her to bring the complaint – she had had a number of reminders about the existence of time limits. The Claimant was unable to assist in why she did not accept Acas’s advice and later (if it was later) pressed for a certificate out of time. I appreciate that she was led astray Page 4 of 12 by the RPS but she knew of the time limits and either(i) failed to go to Acas before 10 August or(ii) failed to heed their advice that Acas could not help.[19]In all the circumstances, in my judgment, it was reasonably practicable to have brought the claim in time. The Employment Tribunal therefore has no jurisdiction to hear the s. 188 Complaint. It is dismissed.[20]I turn now to deal with the s. 177 Reference. Facts[21]The Claimant was the sole director and shareholder of a limited company, SC Kenwright Limited, which traded as Jak and Liza (“the Business”). She set up the Business initially as part of running a franchising arrangement with United Colours of Benetton with concessions in department stores.[22]By 2018, the Business was operating as an independent retail boutique in Beaconsfield although at some stage there was a pop-up shop in Liverpool. She said in evidence that, at the time she set up the Business in its current form, she took soundings from people in a similar position to her, and her accountant, who all said that it would be best to set up her affairs so as to be an employee of her company. That is what she set about to do.[23]As the Claimant sets out in her witness statement, supported by the evidence of Ms. Upward, the Business suffered badly the effects of Brexit and then the Covid19 pandemic. The Claimant was furloughed for part of the latter. It was not until 2022 that the Business was able to trade “normally”.[24]The Claimant has provided a list of the sorts of tasks she did for the Business [206]. They are: HR and payroll or holiday queries Disciplinary procedures Stock taking Stock management and promotional price pointing Returns and refunds Events and marketing Health and Safety staff training Customer Liability responsibility and staff training[25]The Claimant invested a large sum of money into the Business and guaranteed certain business loans. Page 5 of 12[26]The Claimant says that she paid herself a modest £12,000 salary, working 18 hours a week as General Manager. Ms Upward covered the days the Claimant did not work.[27]As in any small business, the Claimant says that she and the staff were flexible about matters: although generally the Claimant worked her 18 hours, they might be spread across 4 or 5 days in a week. She told me in evidence that, although she could not remember a specific instance in which this was necessary, if she was “under the weather”, someone else might cover her (short) shift and she would make up the time covering theirs.[28]Prior to Covid she did take holidays (she had a 30-day entitlement in her contract): naturally she did not need “permission” from anyone to take those holidays – there would have been no one to get that permission from – but she discussed with her staff about when the sensible time to take it would be, and cover was arranged.[29]The overall impression I have is of a small business doing its best to get by, with the Claimant leading it and taking the strain as much as other employees: broadly speaking, until matters got particularly bad, she worked according to the written contract of employment.[30]In January 2023 it became clear that, sadly, the Business was not viable. The Claimant met with an organisation called Insolve Plus, an insolvency practitioner, on 28 February 2023 to discuss what she calls the “inevitable closure of the shop”.[31]The Claimant says, and I accept, that she was very stressed. To her credit she helped her staff make their applications to the SoS before turning to her own. When she did turn to it, she said she found the questions on the form generic and difficult to answer.[32]The SoS rejected the application on 11 May 2023. In essence, the SoS’s position is that the Claimant was not an employee of the Business; in her stead as director and shareholder she was not under the control of the Business. Further, it makes the following points arising out of the Claimant’s application: 1) She said in her application that she did not have a contract with the Business; 2) She worked a 30-hr week with a weekly wage of £230.14 – it says that that low figure is confirmed in documentary evidence the Claimant submitted. It significance is that it shows that the Claimant was not receiving the national minimum wage; 3) In a questionnaire, the Claimant said that she worked 37-hrs (thus compounding the point about NMW), had no dismissal or disciplinary terms and had taken no leave in two years. 4) P60s in the previous few taxable years showed her receiving £7,679.93 (2020/21); £7,545.31 (2021/22) and £11,279.20 (2022/23). 5) Although the Claimant says she agreed to take a pay cut, there was no one else with whom to make that agreement. Page 6 of 12[33]As to point (1), there is a curiosity in the evidence. It is true that the Claimant said in her application that she did not have a contract. Thus on page [104] I can see that she wrote “I was the sole director and did not put a contract in place for myself”. I note moreover that the Claimant has said in her witness statement that she made a mistake in suggesting that her employment began in 2003 when it in fact began in 2006.[34]However, there is in the bundle a document which is indeed a formal employment contract for the Claimant. It is dated 27 March 2018 (which is about the time that the Business opened the boutique in Beaconsfield). It says that her employment with the Business did indeed begin in 2003. Further, it says that the Claimant would work 18-hrs a week with an annual salary of £12,000.[35]It is worth noting that in the questionnaire document at [106] the Claimant says that, in order to save the business, she took a pay cut from 2019-2022 (to £750 a month).[36]In evidence the Claimant said that, in effect, she had not got a grip on the detail when she was filling in the forms. She could not understand how she had said 37 hours in the questionnaire document because that was entirely wrong. The 30 hours reflected voluntary unpaid overtime she was doing in the latter stages of the business to attempt to salvage it. Her core hours were in fact 18 hours. The confusion about the years relates to the fact that she had been in business earlier than 2006.[37]I find as a matter of fact that, in 2018, at the point the Claimant set out up the Beaconsfield boutique, she put in place new contracts for herself and the staff having taken the soundings mentioned above. She had forgotten that the contract was in place for herself as a written document when she came to make her application to the SoS. There is nothing untoward in all of this. There is nothing ungenuine about the contract.[38]As to point (2) and (3), again it is true that the Claimant told the SoS that she worked 30 hours a week at a gross income of £1,000 per month. Certainly, the salary is reflected in the contract. The hours, however, are greater than in the contract. However, as above, the discrepancies in hours reflect the overtime the Claimant was doing unpaid towards the end of the business.[39]As to (4), this only corroborates the Claimant’s evidence that, prior to 2022, she took a 25% pay cut for the sake of the Business. Ms. Munroe pointed me to the Business’s bank statements which appeared at some stages to demonstrate that what the Claimant was being paid was labelled “director’s loan” rather than wages. It is true that that was the label applied. However, it is evident from the documents – in particular the P60s – that the Claimant was in fact paid a salary on which she paid (or was at least assessed for) tax and national insurance. She was not paid through, for example, directors’ fees or dividends. When asked, the Claimant said, and I accept, that she was never paid anything in excess of the figures that featured in her P60s. Accordingly, I find that she was only paid wages rather than anything else.[40]As to (5) it is correct that the Claimant was able herself to set rates of pay. Indeed she said in evidence that she simply did what was best for the Business. She had Page 7 of 12 a vague notion from her accountant that, where she sacrificed part of her salary, it might later be claimed back as a director’s loan but this did not manifest in reality and no one was keeping a running tally.[41]In cross-examination, Ms. Munroe put to the Claimant that, although her contract provides for a grievance and a disciplinary process, these would be meaningless in her case. The Claimant accepted that there would have been no one else to raise the grievance with or to instigate a disciplinary. I noted that both of those procedures were expressly non-contractual in any event. Law[42]The core issue in the matter is the Claimant’s employment status or otherwise. The ground in relation to employment status per se is well trodden.[43]Under the Employment Rights Act 1996 (ERA 1996): Section 230(1): An employee is defined as “an individual who has entered into or works under... a contract of employment.” Section 230(3): A worker is defined as an individual who works under: o(a) a contract of employment, or o(b) any other contract whereby the individual undertakes to do or perform personally any work or services for another party who is not a client or customer of any business undertaking carried on by the individual.[44]The following definitions flow from the above: a) Employee: An individual is an employee if they work under a contract of service (employment contract). The key factors to determine this are discussed below. b) Worker: A worker is a broader category than an employee. It includes those who perform work personally but do not operate a business of their own and do not have a client/customer relationship with the engager. c) Self-Employed/Independent Contractor: A self-employed person operates under a contract for services and is genuinely in business on their own account.[45]As established in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, a Tribunal must consider all relevant circumstances, including: Whether there is mutuality of obligation; Whether there is sufficient control; and Whether the other provisions of the contract are consistent with an employment relationship. Page 8 of 12[46]In addition, in Autoclenz Ltd v Belcher [2011] UKSC 41, the Supreme Court confirmed that Tribunals should look at the reality of the working relationship, not just the written terms.[47]In Uber BV v Aslam [2021] UKSC 5, the Supreme Court reiterated the importance of examining the practical reality of the relationship, particularly the level of control and personal service. That case is particularly important in reminding Tribunals that, in fact, the question is not one of contractual construction per se but one of statutory interpretation. Thus, at para. 69 of the speech of Lord Leggatt says: “69. Critical to understanding the Autoclenz case, as I see it, is that the rights asserted by the claimants were not contractual rights but were created by legislation. Thus, the task for the tribunals and the courts was not, unless the legislation required it, to identify whether, under the terms of their contracts, Autoclenz had agreed that the claimants should be paid at least the national minimum wage or receive paid annual leave. It was to determine whether the claimants fell within the definition of a “worker” in the relevant statutory provisions so as to qualify for these rights irrespective of what had been contractually agreed. In short, the primary question was one of statutory interpretation, not contractual interpretation.”[48]The burden of proving employment status generally rests on the individual asserting it, but the tribunal must examine all evidence carefully to reach a conclusion consistent with the law and facts.[49]In the context of a s. 177 reference, the status of a sole director / shareholder is arguably more nuanced.[50]The issue of control is more problematic in circumstances where the employer is a limited company subject to the control of the “employee” as a shareholder and director as in this case. That issue was addressed in Secretary of State for Business, Enterprise and Regulatory Reform v Neufeld [2009] IRLR 475 where two separate cases concerning directors of companies who also held a controlling shareholding were considered by the Court of Appeal. In both cases the directors were seeking payments from the Secretary of State under the ERA when their businesses went into liquidation. The Court of Appeal held that there was no reason in principle why someone whose shareholding in the company gives him control, even total control, cannot be an employee.[51]In arriving at its decision the Court of Appeal reviewed a number of earlier authorities on the question of whether or not a controlling shareholder and director (or indeed a sole shareholder and director) in a company could also be an employee. In particular the Court of Appeal reviewed the guidance provided by Elias J, as then, in Clark v Clark Construction Initiatives Ltd [2008] IRLR 364 and added some observations of their own (see in particular paras. 78-90 of the Neufeld decision).[52]At paras. 85 and 86 of the Neufeld decision the Court of Appeal further addressed the issue of identifying whether or not there was a contract of employment as follows (emphasis added): Page 9 of 12 “85. In deciding whether a valid contract of employment was in existence, consideration will have to be given to the requisite conditions for the creation of such a contract and the court or tribunal will want to be satisfied that the contract meets them. In Lee's case the position was ostensibly clear on the documents, with the only contentious issue being in relation to the control condition of a contract of employment. In some cases there will be a formal service agreement. Failing that, there may be a minute of a board meeting or a memorandum dealing with the matter. But in many cases involving small companies, with their control being in the hands of perhaps just one or two director/shareholders, the handling of such matters may have been dealt with informally and it may be a difficult question as to whether or not the correct inference from the facts is that the putative employee was, as claimed, truly an employee. In particular, a director of a company is the holder of an office and will not, merely by virtue of such office, be an employee: the putative employee will have to prove more than his appointment as a director. It will be relevant to consider how he has been paid. Has he been paid a salary, which points towards employment? Or merely by way of director's fees, which points away from it? In considering what the putative employee was actually doing, it will also be relevant to consider whether he was acting merely in his capacity as a director of the company; or whether he was acting as an employee.” “[86] We have referred in the previous paragraph to matters which will typically be directly relevant to the inquiry whether or not (there being no question of a sham) the claimed contract amounts to a contract of employment. What we have not included as a relevant consideration for the purposes of that inquiry is the fact that the putative employee's shareholding in the company gave him control of the company, even total control. The fact of his control will obviously form a part of the backdrop against which the assessment will be made of what has been done under the putative written or oral employment contract that is being asserted. But it will not ordinarily be of any special relevance in deciding whether or not he has a valid such contract. Nor will the fact that he will have share capital invested in the company; or that he may have made loans to it; or that he has personally guaranteed its obligations; or that his personal investment in the company will stand to prosper in line with the company's prosperity; or that he has done any of the other things that the 'owner' of a business will commonly do on its behalf. These considerations are usual features of the sort of companies giving rise to the type of issue with which these appeals are concerned but they will ordinarily be irrelevant to whether or not a valid contract of employment has been created and so they can and should be ignored. They show an 'owner' acting qua 'owner', which is inevitable in such a company. However, they do not show that the “owner'” cannot also be an employee."[53]The SoS has not suggested that there is any question of sham in this case. In any event, no such question was put to the claimant in giving evidence. As above, I had some questions about the provenance of the written contract but they are dealt with above. The key issue here is whether the claimed contract amounts to a contract of employment. On its face, there is no question that it is a contract of employment. The real question is whether that reflects the reality of the situation. Page 10 of 12[54]I have concluded that it does:(1) I have borne in mind the dicta in Neufeld about director/shareholders. In our system of law, there is nothing problematic about the artifice of the so-called “corporate veil”. Neufeld makes clear that even if the potential for control by a company is theoretical, it is nevertheless sufficient for present purposes. As the Court of Appeal noted in that case, it was perfectly possible for the Claimant to have lost the de facto control of the business she enjoyed (for example, if liquidators were appointed, or the shareholding was sold).(2) The SoS is right to point out that, in one sense, the Claimant had overall control of the Business. She cannot have received instructions from or sought permission from anyone else. They say that, accordingly, there can have been no control which is a pre-requisite. That may be right in a purely factual sense, but Neufeld makes clear that that is of limited significance. The lack of factual control by a different natural person is (a) commonplace and (b) not of much significance to the legal position. The separate legal person could well, if the Claimant was an employee, have a legal right to exercise control even if, in dayto-day reality, it would not have done so.(3) As to mutuality of obligation, I consider it important that the Claimant had set contractual hours – 18 – which she broadly stuck to, making flexible arrangements to have them covered here and there, and covering here and there herself should the need arise. She had a fixed salary which she was paid at regular intervals. Although there was the labelling issue I set out above, the Claimant was paid a salary, usually labelled “wages” in the bank slips, which figured in the payroll that then constituted the basis of her P60s. She was assessed for and sometimes paid income tax. There were no dividends or directors’ fees. Legally speaking, the Claimant would not have been entitled to that pay if she had not in fact done the work and so I consider there to have been mutuality of obligation. Ms. Munroe said that payments were inconsistent and that the Claimant was able to make ad hoc judgments about her pay. But this does not reckon with the fact that, at least in her mind and her accountants’, she would be accruing some sort of debt within the company (i.e., it was not an ad hoc decision about her pay entitlement, it was an ad hoc decision about how much of her entitlement she was going to take at that moment). Moreover, in the P60s it is clear that, in a given financial year, the Claimant’s wages were consistent with her evidence: she took around £7,500 for two years (having taken the pay cut) and then almost £12,000 in the most recent year. Moreover, the Claimant rightly makes the point that the financial information before the ET is incomplete.(4) The sort of work the Claimant was doing for the Business was classically that of a general shop manager which, I find, she was doing pursuant to a contract of employment.(5) The Claimant received furlough pay as an employee during the pandemic.(6) Generally, the terms of the contract are, in my judgment, consistent with an employment relationship. Page 11 of 12[55]In light of all of those factors, and notwithstanding the submission made by Ms. Munroe I find that there was a contract and that it was a contract of employment. Accordingly, the Claimant was entitled to payment of “the employer’s payment” pursuant to ERA s. 170.
Remedy
[56]As above, I have found that the Claimant’s entitlement was to an annual gross salary of £12,000 for 18-hrs’ work per week. That amounts to a weekly wage of £230.77. As at the EDT in March 2023, the Claimant was 59 years old.[57]As above, the Claimant’s continuous employment began on 18 March 2003 [132].[58]Applying ERA s. 168(1)(a) and the statutory formula in s. 162 of that Act, the appropriate award is £6,461.56. Approved by: