Allied Medicare Ltd v Westwood [1996] UKEAT 122_96_0711

EAT
Allied Medicare Ltd v Westwood
[1996] UKEAT 122_96_0711 · 1996-11-07

JUDGE PETER CLARK :

Allied Medicare Ltd ["Allied"] is a licensed employment agency in respect of both qualified nurses and unqualified auxiliaries. Mr Westwood whom we shall refer to as the applicant, is a qualified nurse.As a nursing agency Allied have some 10,000 individuals on their books, referred to as members, and a client base made up of NHS and private hospitals (16%), Social Services Departments (33%) Residential Homes (33%) and private individuals (16%). They provided nursing staff from within their membership when required by the client.The applicant applied for and was accepted for membership by Allied. There were written conditions of membership to which the parties agreed to be bound. Paragraph 7 of the conditions provided as follows:
"7. MEMBERS EMPLOYMENT STATUS - Members are not deemed employees of the company. Members working on private engagements are self-employed. In institutions PAYE tax deductions will be made from the Member's pay and National Insurance Contributions will be collected by the company from both the client and the member. Because the Members' 'contract' exists only for the period of the duty and does not exist should the Member be unavailable for work for any reason or if there is no suitable work available, the Member has no entitlement to Statutory Sick Pay. Members should make enquiries at their local DHSS office with regard sickness benefit."
The tax regime applied under section 134 of the Income and Corporation Taxes Act 1988 required Allied to make deductions in respect of Income Tax and National Insurance payments from fees earned by members at NHS establishments, Social Service Departments, private nursing and residential homes, that is 84% of their business.In January 1995 the applicant was engaged in work at a nursing home, so that under paragraph 7 of the conditions and section 134 of the 1988 Act PAYE deductions were required to be made. We have seen an example of the sort of payslips which were issued to the applicant. Allied's client in an appropriate case pays the fee for the nurse; Allied pays to that nurse at the agreed rate and takes an agency commission and VAT to give a gross pay figure, from which tax and National Insurance is deducted to leave a net "take-home" pay figure. The standard form of payslip contains a box marked "other deductions".On 23rd January 1995 Allied sent a circular letter to their members, including the applicant, in the following terms:

"Dear Nurse

The cost of operating a Nursing Agency continues to escalate in order to maintain competitive terms with clients and to secure volume business. Over the years the company has endeavoured to administer an efficient payroll service and has reduced the delay between assignment and payment from 28 days to 12 days. Whilst we are pleased to have supported this improvement it has been decided to charge a nominal fee per payslip to assist with expenditure. With effect from Friday 17 February 1995 a small levy of 40p per payslip will be collected."The applicant was unhappy with this idea. He replied on 7th February 1995, contending that the levy proposed was unlawful, in that under the then Wages Act 1986 his written permission was required to make deductions from wages and far from agreeing to such deduction, he took objection to it.In a reply dated 8th February 1995 Allied did not accept the applicant's contention and proceeded to deduct 40p from his gross pay for the week dated 17th February 1995 and again on 3rd March 1995.As a result the applicant presented a complaint of unlawful deductions from wages to an Industrial Tribunal on 4th April 1995.Allied indicated their intention to resist the claim in a notice of appearance dated 2nd May 1995. In the grounds for resistance they contended that the applicant was not an employee of Allied, and that the 40p levy was lawfully deducted under Clause 4 of the conditions of membership.The complaint came for hearing before a full Industrial Tribunal sitting at Birmingham (Chairman: Mr J G Haslam) on 23rd November 1995. That hearing concerned itself with determining a single preliminary issue, namely whether the applicant was a "worker" within the meaning of section 8 of the Wages Act , since re-enacted in the Employment Rights Act 1996 . We shall refer to the provisions in the Wages Act .The tribunal concluded that the applicant was a "worker" as defined and was therefore not debarred from pursuing his complaint on the ground that the Act did not apply to him. Extended reasons for that decision are dated 18th December 1995. The tribunal's conclusions are effectively expressed in paragraph 13 of those reasons in this way:
"13. The respondents are a commercial organisation. They are interested in finding clients who want nursing services and in recruiting as "members" those with the necessary qualifications to carry out the nursing work they are able to procure. The respondents appear in the documents to be acting as an agent on behalf of the Member. We find that the reality of the situation is that Members like Mr Westwood when they accept a particular assignment do so using their skills to nurse those who are client/patients of the respondents. Mr Westwood undertakes personally to do work for the respondents. He may or may not be an employee of the respondents. We do not have to decide that. He undertakes to do work for the respondent every time he accepts an assignment from the respondent. The respondents are not a client or customer of a profession or business undertaking carried on by the applicant. Accordingly we find that he is a "worker" within the provisions of Section 8(1) & (2) of the Wages Act 1986."
It is against that decision that Allied now appeal.

The Legislation

Section 8 provides for the general interpretation of Part 1 of the Wages Act .By sub-section (1):""Worker" means an individual who has entered into or work under (or, where the employment has ceased, worked under) on of the contracts referred to in subsection (2) and any reference to a worker's contract shall be construed accordingly.

(2) Those contracts are-

(a) a contract of service;(b) a contract of apprenticeship; and(c) any other contract 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,

. .."

It follows that the Wages Act definition of "worker" extends beyond the definition of an employee for the purposes of protection under the former Employment Protection (Consolidation) Act 1978 , where, by section 153(1) of that Act, "employee" is defined as an individual who works under a contract of service, that is, the definition set out in section 8(2)(a) of the Wages Act .We have looked elsewhere in the legislation for assistance in construing section 8(2)(c) of the Wages Act . Mr Ashton referred us to the definition of "employment" in section 82 of the Sex Discrimination Act 1975 , and the construction placed on that provision by the Scottish Employment Appeal Tribunal in BP Chemicals Ltd v Gillick [1995] IRLR 128 . However, as Mr Ashton accepts, the above definition set out in the Sex Discrimination Act 1975 , and the issue of construction which arose on that definition for determination in Gillick provides no real assistance in the task facing us in relation to section 8(2)(c) of the Wages Act .We drew the attention of both advocates to the closely, but not precisely, analogous provisions of section 296 of the Trade Union Labour Relations (Consolidation) Act 1992 and the definition of "worker" there to be found. We invited further submissions after the short adjournment based on that definition and its predecessors in legislative history.As a result of those researches we were referred to a decision of the National Industrial Relations Court Broadbent v Crisp [1974] 1AER 1052 . That case was concerned with the definition of "worker" to be found in section 167(1) of the Industrial Relations Act 1971 which provided, so far as is material, that:
" "worker" ... means ... a person who works or normally works or seeks to work- (b) under any other contract ... whereby he undertakes to perform personally any work or services for another party to the contract who is not a professional client of his ..."
The case is not helpful on the issue which we have to decide, which focuses on the words "for another party to the contract". However, the case does highlight the need for the "worker" to provide his own services and not those of a substitute. That is emphatically the position in this case.

The Appeal

The principal thrust of Mr Ashton's argument was that the Industrial Tribunal erred in law in finding that the applicant undertook personally to do work for Allied under the contract of membership made between them. He submits that the applicant did such work for the nursing home or other institution at which he worked and/or for the patients. He did not do the work for Allied. He contended, as the contract between them made clear, and the commercial contract entered into between Allied and its client made clear, that Allied acted only as agent for the applicant.We are unable to accept this submission.Our attention was drawn to the provisions of the Nursing Agencies Act 1957 which, in section 8, provides so far as is material, the following definition:
""agency for the supply of nurses" means the business ... of supplying persons to act as nurses ..."
That is what Allied is. A nursing agency, carrying on the business of supplying nurses. Without the nurses, it has no business.That this is the nature of its business is also made clear by its standard form Conditions of Engagement which form part of its commercial contract with its clients or customers. That document refers to:
"Terms of business for the supply of temporary staff. These are the conditions on which you accept the services of AML Members supplied by AML as agent."
In return for payment, Clause 10 of those Conditions provides:

"10. Responsibilities

AML acts as agent of the AML Member. AML's responsibilities to the client are to verify the qualifications and references of AML Members and to select people suitable for introduction to clients. Any particular skills or experience required by AML Member must be clearly identified to AML at time of booking. All nurses and health care staff working through AML are covered by their own indemnity insurance."We draw a distinction between the expression "for another party to the contract" used in section 8(2)(c) and another expression which might have been used, namely "to another party to the contract". The latter expression imports that the other party to the contract is the end user of the work performed; we accept that the applicant did not provide his services direct to Allied. However, the word "for" is wider. It seems to us that, in different senses, the applicant personally performed work for three different parties; for Allied, who supplied his services to the nursing home, without which there would be no contract between Allied and the nursing home from which Allied's income is derived; secondly, for the nursing home in which he worked; and, thirdly, for the patients who came under his care in that nursing home.At a late stage in the argument Mr Ashton resiled from an earlier concession that the proviso to section 8(2)(c) could not apply in this case. Having considered the point we are satisfied that Allied was not a client or customer of the profession (nursing) carried on by applicant, as the Industrial Tribunal found in paragraph 13 of its reasons. As Clause 10 of Allied's Conditions of Engagements shows, Allied was the agent of the applicant for the purposes of its business, that is, the supply of temporary nursing staff to its client, the nursing home. Allied was not a professional client of the applicant. He did not provide nursing services to Allies, in the sense that a solicitor or accountant provides his professional services to his client.It follows in our judgment that the tribunal was entitled to find on the facts in this case that Mr Westwood undertook to perform personally work for Allied. He did not provide his services to Allied, but on its behalf to its clients. The proviso does not apply. Thus he fell within the definition of "worker" set out in section 8 (2)(c) of the Wages Act .In these circumstances this appeal must be dismissed. For the avoidance of doubt we make it clear that we are deliberately expressing no view as to whether or not Mr Westwood was employed by Allied under a contract of service within the meaning of section 8(2)(a) of the Wages Act . The Industrial Tribunal found it unnecessary to decide that question; so to do we.