Lloyd v IBM (UK) Ltd [1995] UKEAT 642_94_0302

EAT
Lloyd v IBM (UK) Ltd
[1995] UKEAT 642_94_0302 · 1995-02-03

JUDGE LEVY QC :

Dr Elizabeth Lloyd sought work from IBM (UK) Ltd ("the Company"). The Company was not willing to employ her directly but was prepared to give her work, that work being introduced through an Employment Agency, Gatton Computastaff ("Gatton"). Dr Lloyd chose to enter into relations with Gatton not directly but through a Company of her own Userdata Limited ("Userdata"). A time came when her services (provided as they were through Userdata through Gatton to the Company) were dispensed with. She then sought redress from the Industrial Tribunal, submitting a form which was received by the Tribunal on 4 August 1993. The Company's appearance was entered on 25 November 1993. In fact she sought two remedies, one for unfair dismissal and one for sex discrimination. There was a hearing before the Industrial Tribunal at Birmingham on 17 February 1994 and 29 April 1994. The result of the hearing was made known to the parties on 31 May 1994. The majority decision of the Tribunal was that Dr Lloyd was not an employee of the Company and that she was therefore unable to pursue a claim before the Industrial Tribunal.We must pay tribute to the way the Industrial Tribunal formulated the reasons which it gave for its decision both for the majority decision and for the minority opinion.Dr Lloyd was dissatisfied with the result and served a Notice of Appeal dated 26 May 1994. That Notice of Appeal has been supplemented in Skeleton Argument very recently delivered to the Employment Appeal Tribunal by Mr De Mello, who appeared before us today as he did below. We will, if we may, take the grounds of the appeal as they are set out in the Notice of Appeal, albeit with slightly different headings.First there were claims under the Employment Protection (Consolidation) Act 1978 ("the 1978 Act") and the Sex Discrimination Act 1975 ("the 1975 Act"). So far as the claim under the 1978 Act is concerned, Dr Lloyd says that the Industrial Tribunal erred because it placed reliance on two cases cited to them Winter v Western Television Ltd EAT 689/177 and Pertemps Group Plc v Nixon EAT 496/91. The Notice of Appeal says:"These cases had no bearing on the issue or facts of this case particularly with reference to the status of the Appellant as an employee".The Notice of Appeal on the 1978 Act also says:
"The Industrial Tribunal erred in law in holding that the fact that Userdata Ltd was brought in for the Appellant's own purposes was fatal to her claim...The approach adopted by the Industrial Tribunal... is not only inconsistent with the approach suggested in Hall v Lorimer but also excludes from consideration the view that Dr Lloyd may, notwithstanding her relationship with Userdata, have a contract of employment with the Respondent; the facts and substance of the case suggest very strongly that Dr Lloyd did in fact have a contract of employment with the Respondents and such a view is permissible within the construction of Section 153 of the 1978 Act. However the parties label the relationship is relevant but not a conclusive factor... The Tribunal took it as a conclusive factor. "
There is a further ground under the 1978 Act that no or insufficient reasons were given why they considered it fatal to her claim that Userdata was brought in by her. The Notice of Appeal reads:
"The facts of the case indicate that the chain between the parties had always remained intact and was unbroken by the presence of Userdata Limited.
The findings of fact by the Industrial Tribunal particularly that the Respondent insisted that the Appellant must go through a preferred agency and bill the Respondents through the agency indicates that the Appellant was truly an employee of the Respondent.The finding of the Majority of the Industrial Tribunal that the Appellant was not an employee of the Respondents is perverse and unsupported by evidence."In our view, the Tribunal correctly directed itself as to the law relevant to the question whether or not Dr Lloyd was an employee within the definition of section 153(1) of the 1978 Act. We refer to paragraphs 13 and 14 of the Decision and paragraphs 21 and 22 where the facts are set out in some detail. Paragraph 13 reads:
"We then heard from Mr Portsmouth who was the finance director of Gatton. He confirmed his company had an agreement with IBM for the purchase of an agreed quantity of man hours to do work for them. His company would supply the skills and had its Database of skilled people to supply. He confirmed 98% of the people who worked for them had a company similar to Userdata Ltd as used by Dr Lloyd. Some people would however be employed directly and in that situation Gatton would deduct PAYE. He confirmed his company would send the time sheet having received it from the contractor to IBM. IBM would then pay Gatton in 30 days although Gatton would pay the contractor in 7 days."
Pausing there for one moment, there was evidence that not only Dr Lloyd but also others used, as an intermediary, their own company but others did not when taking work from IBM through Gatton. That is important evidence which the Tribunal accepted.Paragraph 14 reads:
"He confirmed the hours required to be worked were those hours that the client wanted. He could not recall any occasion when he had been asked by a customer to get someone else to take over work when a contractor was ill. His company once had a sickness scheme but that was phased out when it was easier to get contractors. Although his company had a standard form of contract this was often varied for particular contractors. They wanted the exclusivity clause because their profit margin was based on the hours put in. He did not know whether Gatton had told IBM of the problem with the exclusivity clause and Dr Lloyd. As far as he was aware the rate paid by IBM would not necessarily vary exactly in line with the rate paid to the contractors."
Paragraphs 21 and 22 read:
"The factors which in our view would tend to indicated that there was not an employment of Dr Lloyd are:- that she was not paid directly by IBM; that she provided no equipment of her own and merely provided her skill; that she was employed under a contract with Gatton which said she was not an employee of Gatton but of Userdata Limited (the fact that she was a skilled and intelligent person and accepted this position gives it greater weight); that there was no pension; no sick pay; no holiday pay, that the badges worn by direct employees were different from those worn by contractors; that she did not attend all meetings that direct employees would attend that she was not entitled to participate in the full reward scheme for direct employees, that her company charged VAT on her services; that the payment was made to Userdata Limited which was a company set up by herself; that she was offered direct employment by IBM but for her purposes declined it and preferred to remain as a contractor; that she had refused to sign the exclusivity clause wishing to leave her options open (we accept that an employee of her level would have expected to have had to work exclusively for one employer); that she could not fill out her own expense sheets; that she was not subject to the appraisal scheme.
22. On the other side there are a number of factors which would indicate that she was employed by IBM. The most important of these is the fact that all of her work was controlled and given to her by IBM. IBM set the objectives by which she had to work and told her where to work, when to work and how to do it. The other indications of employment are that she was under an obligation under the contract with Gatton and through her company Userdata Limited to carry out work for IBM; that she was required to comply with all of the rules and regulations of IBM as if she had been a direct employee; that she had to agree her diary in the same way as other employees; that she was included in celebration awards in the same way as direct employees; that she went to other countries and met visitors as if she was directly employed by IBM; that if she was ill she told IBM and not Gatton and on one occasion arranged to work at home with IBM, Gatton not having been told; that her holidays were arranged with IBM; that IBM paid her expenses when she incurred any. Gatton were only brought into the position at the insistence of IBM who said they were not prepared to pay her in any other way. Overall she was part of the IBM organisation and part of the team and on a daily working basis her work was no different whether she had been self employed or directly employed . Finally when her employment terminated she was told it was terminated by her IBM manager and it was she who had to pass that information on to Gatton."The indication which is found in paragraph 24 that the contractual arrangements between IBM, Gatton, Userdata and Dr Lloyd were "fatal to Dr Lloyd's claim" does not indicate any error of law on the part of the Tribunal. The decision is consistent with the reasoning contained in Hall v Lorimer [1994] ICR 218 . The following provisions can be found in Hall and all but one of them was agreed by Mr De Mello. They are:(1) To determine whether or not there is a contract of employment between an Applicant and a Respondent. An Industrial Tribunal must consider all the aspects of the working relationship between the parties.(2) There is no single factor which will in every case be conclusive.(3) Although similar factors are likely to be relevant in many cases, in any particular case they may be accorded differently depending on the overall circumstances of the particular case.(4) However in any particular case there will be a fact or a combination of factors which in the circumstances of the case does conclude whether or not a contract of employment exists.(5) When deciding whether or not a contract of employment exists, a Tribunal should also stand back from the individual details of the relationship and consider whether taken as a whole that relationship is or is not a contract of employment.The fourth of these propositions is the one with which Mr De Mello was not inclined to agree but we are satisfied having looked at Hall v Lorimer that it is a proposition correctly derived from that decision and we are also satisfied that when the Tribunal, as they did, found a particular factor of paramount importance, it was one which they did having looked at all the factors which we have set out.One of the factors which a Tribunal can take into account is the way in which the parties themselves have chosen to structure their relationship. That emerges from the decision of Massey v Crown Life Insurance Company [1978] ICR 590. It follows that on the particular facts of a case this might be the factor which alone, or together with other points, tips the balance either for or against the contract of employment. This is particularly the case where the situation before a Tribunal is not merely the nature of an agreement made between two parties but a situation where there are linked agreements between several parties, one in which there is no direct contract, whether a contract of employment or otherwise, between the alleged employer and the alleged employee.In the present case we had four parties involved - Dr Lloyd, Userdata, Gatton and IBM and the Company. There was no contract or relationship at all between Dr Lloyd and the Company. In these circumstances we are satisfied that the Industrial Tribunal were entitled to rely on Winter v Western Television Ltd and Pertemps Group plc v Nixon and we are fortified in reaching this conclusion by the decision in Construction Industry Training Board & Labour Force Ltd [1970] 3 AllER 220.There the facts were different (there were three parties contracting with one or rather than the four here) but as Cooke J's judgment shows, the Court made an analysis there similar to the analysis made by the Industrial Tribunal here before reaching a decision on the facts. Cooke J's judgment supports Mr Swift's submission that the approach and the decision below were correct.We consider that where, as here, there was a four party contract as opposed to the three party contract in other cases, it was prima facie a fortiori for the Tribunal to conclude as they did, that there was a bona fide arrangement between the parties. There is, therefore, no jurisdiction for a tribunal to go further and create or imply contractual relations between the parties, as Mr De Mello invited us to do. In the present case the Tribunal was entitled to conclude, having considered all other relevant factors, that the way in which the parties structured their relationship indicated that there was no contract of employment.We therefore reject the ground of appeal which suggests otherwise.Mr De Mello complained that the Tribunal's reasons were not fully enough set out. We reject that submission. We find the reasons very fully set out and we are reminded of the decision in Meek v City of Birmingham District Council [1987] IRLR 250 , where there is a passage of Bingham LJ (well known to practitioners of this Tribunal) that there should not be nitpicking with the wordings of a decision. The decision in the present case is consistent with the duty of this Industrial Tribunal to set out relevant facts and law. If paragraphs 21 and 24 are read together it is put clear that the majority of the Tribunal thought that the structure of the relationship between Dr Lloyd and the Company was significant. That significance was in part because Dr Lloyd had chosen to provide her services to Gatton through Userdata for reasons of tax efficiency. In this case, in these circumstances, the reasoning of the Tribunal is self-evident.We should, for completeness, read part of paragraph 24 of the Tribunal's holding:
"We have however had to consider whether she is an employee for the purposes of the Acts [reference both to the 1978 Act and the Sex Discrimination Act under which the claims are brought] The 1978 Act in Section 153 defines employee as meaning "an individual who has entered into or works under a contract of employment". The Sex Discrimination Act similarly in Section 6 says that it "is unlawful for a person in relation to employment by him to discriminate against a woman". Both of these provisions therefore require that there is a contract of employment between the employer and the employee. In this case the majority of the tribunal take the view that there is no contract of employment between Dr Lloyd and IBM. Her contract was with Userdata Limited who in turn contracted with Gatton who in turn contracted with IBM. If the only intermediary had been Gatton, we may have been persuaded that as this was at the insistence of IBM it did not break the chain between the parties, but the fact that Userdata Limited was brought in for Dr Lloyd's own purposes, in our view is fatal to her claim. "
The majority go on to state their belief that the decision in Winter and Pertemps (supra) supported their view. In that we think they were correct. Mr De Mello valiantly attempts to support Ground 1(4) of the Grounds of Appeal, which allege the decision that Dr Lloyd was not an employee was perverse and unsupported by evidence. We did not have the Notes of Evidence; they were not requested. We have seen ample evidence to support the conclusion in the reasons of the majority that she was not such an employee.A further argument was raised in the Grounds of Appeal (under the Heading 2) that the Industrial Tribunal erred in law in holding, as they did in paragraph 26, that section 140 of the 1978 Act did not render void any provision preventing the Applicant bringing a claim under the 1978 Act.Section 140 of the 1978 Act, it will be remembered, contains restrictions on contracting out of the Act. In fact, there was no express provision in either the agreement between IBM and Gatton or the agreement between Gatton and Userdata or the agreement between Userdata and Dr Lloyd which excluded the provisions of the 1978 Act or which precluded Dr Lloyd from bringing a claim under the Act. The purpose of section 140 is to prevent employers from excluding those who are entitled to bring claims under the 1978 Act, for instance those who are employees and do have sufficient continuity of service. The operation of section 140 assumes that an employee who is subject to such an exclusion is otherwise entitled to bring a case.In the present case the question before the Tribunal was whether or not Dr Lloyd met one of the conditions of entitlement ie was she an employee? The reasoning of the Tribunal on this point which is found at paragraph 26, was correct. Paragraph 26 reads:
"Mr De Mello asked us to consider whether Section 140 rendered void any provision preventing Dr Lloyd from bringing a complaint and thus meant she was an employee. Although we consider that the contractual position does prevent her from bringing a claim, that is not because of a provision in the agreement, but because of the nature of the agreement itself."
We accept Mr Swift's submission that the argument advanced on behalf of Dr Lloyd is a non starter. It would require the conclusion that in every case where there was a contract between an Applicant and a Respondent, an Applicant would be entitled to bring a claim under the 1978 Act. This would be because the contract was in fact a contract of employment or, if the contract was not by its nature a contract of employment, it would be void by reason of section 140. Such a conclusion we agree is nonsensical.Furthermore, there was an inference in the Ground of Appeal that section 140 applied because IBM required at the outset that Dr Lloyd should operate through an agency. That was countered by the fact, as appeared from the passage in the full reasons, which we have already set out, that IBM had offered Dr Lloyd a contract of employment after the Userdata arrangement started which she had turned down.Paragraph 2.2 of the Grounds of Appeal states:
"The Industrial Tribunal erred in law in failing to consider adequately or at all the submissions made that Gatton was the de facto agent of the Respondents and that Userdata was the agent for the Appellant thereby preserving the relationship of employee/employer between the Appellant and the Respondent."
Mr De Mello did not address us on that here but we would reject that ground in any event because evidence accepted by the Tribunal and not contested by Dr Lloyd supported the conclusion that Gatton was not the agent of the Company. That appears from the Reasons given in paragraphs 14, and 2. Further, it was not disputed that Userdata was a bona fide company; Dr Lloyd was one of its two directors. Directors of a company usually act as an agent for the company rather than vice versa. There was no evidence in the present case to suggest that Userdata had contracted as the agent of Dr Lloyd, rather than as the employer of Dr Lloyd. The evidence of Dr Lloyd contradicted the existence of any agency. If Userdata had contracted as agent for Dr Lloyd, the contract would have been made between Dr Lloyd and Gatton and therefore not subject to VAT, since Dr Lloyd was not personally registered for VAT. The significance of that appears from paragraph 11 of the decision.That, we think, disposes of the Grounds of Appeal under the 1978 Act. We now turn to the claims made under the 1975 Act.We think it convenient first to set out the Grounds of Appeal as delivered to this Court:"3. The Industrial Tribunal (paragraph 27) erred in law in holding that under Section 9 of the Sex Discrimination Act 1975 did not apply to the Appellant in this case; the Tribunal was wrong in holding that this Section requires the individual to be employed by a supplier who contracts with the principal; in fact Section 9 does not require the supplier (Userdata Limited) to have a contract with the principal providing the supplier supplies the individual them under a contract made with the principal . (This condition is satisfied if there is a contract made between the principal and a supplier who is not the employer of the individual supplied). The crucial question to be asked by the Tribunal is this "did Userdata supply the Appellant to the Respondent under a contract made with the principal?". This Section will apply if there was a contract made with Gatton (an intermediary as stated by the Tribunal) and the Respondent even if there was no contract made with Userdata Limited and the Respondent. Userdata Limited had a contract with Gatton for such supply.3.1 The Industrial Tribunal failed to consider the effect of Section 82(1) of the 1975 Act - employment means under a contract of service or of... a contract personally to execute any work or labour - in this case (in the alternative) the Appellant was a person who was expected to personally execute work and as such the 1975 Act applied to her."Section 9(1) of the 1975 Act reads:
"This section applies to any work for a person ("the principal") which is available for doing by individuals ("contract workers") who are employed not by the principal himself but by another person, who supplies them under a contract made with the principal."
In our view the clear words of section 9 require that a person bringing a complaint under that section be employed as that is defined by section 82(1) of the 1975 Act by the supplier. In the present case, Gatton was the supplier since it was a person who had made a contract with IBM. Userdata does not fall within the definition of supplier as set out in section 9 because it had no contract made with IBM and there was consequently no contractual obligation on Userdata to supply Dr Lloyd to the Respondent.For those reasons the question posed in ground 3 is not the correct question to ask. The supply of the contract worker to the principal must be pursuant to an obligation between the supplier and the principal. The fact that the supply of services of a contract worker, here Dr Lloyd, to the principal (here IBM), results from an obligation in the contract between the supplier (here Gatton), and another person (in the present case Userdata), is not sufficient. The fact of supply is not enough. There must be an obligation to do so see Rice v Fon-a-Car [1980] ICR 133, where Slynn J giving the judgment of the Court said at page 136:
"It seems to us that the proper construction of section 9(1) is that the work referred to is work which is done by someone who is employed by another person who supplies the work "under a contract made with the principal" to supply the worker. It is not sufficient, in a case to which section 9(1) applies, merely that work shall be done by one person for the benefit of someone else unless there is an undertaking under the contract to supply the worker."
Here we have a four parties to a contract rather than three parties to a contract which was in consideration in Rice v Fon-a-Car and despite Mr De Mello's submissions to the contrary we feel a fortiori that the dicta in Rice v Fon-a-Car apply here.The correct question here would be to ask - "Was Userdata obliged to supply contract workers, (ie Dr Lloyd), to the principal, (that is IBM), pursuant to a contract which Userdata had made with IBM?". On the analysis which we have set out and on the basis of the facts found by the Tribunal the decision on this point by the Tribunal is correct.We have had further argument from Mr De Mello suggesting that insofar as the definition of employer and the provisions of section 180 are unfavourable to Dr Lloyd, regard should be had to Directive 76/207/EEC to which he referred us. We are not satisfied that there is anything in either of these sections which would assist Dr Lloyd in this part of the argument. In our judgment all that is set out in these sections are greater than the relief which would be given to persons in Dr Lloyd's position under Articles 1 and 3 of that Directive.Whilst we thank Mr De Mello for his full submissions, we have no hesitation in upholding the decision made below. Accordingly we dismiss this appeal.