EAT/509/98 JOHNSON UNDERWOOD LTD v (1) MRS J L MONTGOMERY (2) O & K ORENSTEIN & KOPPLE LTD [2000] UKEAT 509_98_1804

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2000] UKEAT 509_98_1804Case No Appeal No. EAT/509/98 EAT/716/98Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
EAT/509/98 JOHNSON UNDERWOOD LTDAPPELLANT(1) MRS J L MONTGOMERY (2) O & K ORENSTEIN & KOPPLE LTDRESPONDENTSEAT/716/98 MRS J L MONTGOMERYAPPELLANT(1) O & K ORENSTEIN & KOPPLE LTD (2) JOHNSON UNDERWOOD LTDRESPONDENTS
Before
Mr Justice Charles Dr D GrievesDate 18 April 2000
[1]APPEARANCES EAT/509/98 For the Appellant: Johnson Underwood Ltd And EAT/716/98 For the Second Respondent: Johnson Underwood Ltd MR C SAMEK (of Counsel) Instructed By: Messrs Eyeton Morris Solicitors Eleanor House Queenswood Office Park Northampton NN4 7JJ EAT/716/98 For the Appellant: Mrs J L Montgomery And EAT/509/98 For the First Respondent: Mrs J L Montgomery EAT/716/98 For the First Respondent: O & K Orenstein & Kopple Ltd And EAT/509/98 For the Second Respondent: O & K Orenstein & Kopple Ltd MR R DE MELLO (of Counsel) Instructed By: MR G S KANG Messrs Murria Solicitors Court Chambers 180 Corporation Street Birmingham B4 6UD MR G HARBOTTLE (of Counsel) Instructed By: MR P W MARSH Messrs Peter W Marsh & Co 19 High Street Melton Mowbray Leicestershire LE13 0TZ MR JUSTICE CHARLES : The parties to this appeal are a Mrs Montgomery and two Companies(1) Johnson Underwood Ltd ("JU") and(2) O & K Orenstein & Kopple Ltd ("O & K"). Introduction, overall conclusion and general comment There are two appeals before us. They both relate to the decision of an Employment Tribunal sitting at Bedford, the Extended Reasons for which were sent to the parties on 5 March 1998. The Reserved Decision of that Employment Tribunal was that Mrs Montgomery was an employee of JU and was not an employee of O & K. The Employment Tribunal therefore dismissed the claim made by Mrs Montgomery against O & K but directed that Mrs Montgomery was entitled to pursue her complaint against JU and that claim was listed for a further hearing before the Employment Tribunal.[2]JU is an Employment Agency and O & K was one of its clients. In the standard term contract documentation produced by JU Mrs Montgomery is described as a "Temporary Worker".[3]The two appeals before us are:(a) JU's appeal against the finding of the Employment Tribunal that Mrs Montgomery was its employee; and(b) Mrs Montgomery's appeal against the finding of the Employment Tribunal that she was not the employee of O & K.[4]We have reached the following decisions on the appeals:(a) a unanimous decision that Mrs Montgomery's appeal should be dismissed, and(b) a majority decision that JU's decision should be dismissed. It follows that the decisions of the Employment Tribunal in each of the cases under appeal stand.[5]The reasons for these decisions and the minority view on JU's appeal are set out below.[6]These cases relate to an area of employment law that we believe is:(a) of increasing significance because the use of Employment Agencies and similar organisations is increasing, and(b) is complex and difficult to apply.[7]In determining that the decisions of the Employment Tribunal should stand it is recognised that this does not provide a firm basis on which those involved in this growing category can be best assisted to provide the means of regulating their relationship in a fair, practical and sensible manner.[8]This requires the urgent attention of Government Departments and legislators.[9]It follows that in line with the comment made by the Employment Tribunal in paragraph 39 of their Extended Reasons it seems to us that it would be sensible for the relevant Government Departments and Parliament to give further consideration to the position of employment agencies, their clients and the individuals who work for such clients on the introduction of the agency. We are of this view notwithstanding that in the Employment Relations Act 1999 an agency worker is defined and included within the definition of worker (see s. 13 of that Act). Indeed we comment that the power conferred by s. 23 of that Act on the Secretary of State for Trade and Industry to extend the protection of employment legislation to a specified description of individuals might be put to important use in this respect. Continued confusion about whether there exists any protection at all in certain cases against unfair dismissal assists nobody. The appeals[10]The parties agreed, in our judgment sensibly, that JU should open its appeal first.[11]Mrs Montgomery's stance, through her Counsel, was not that she was an employee of both JU and O & K. In contrast to her position before the Employment Tribunal her primary argument was that the Employment Tribunal was correct and that she was an employee of JU. Her alternative and secondary position was that if JU succeeded on its appeal the conclusion of the Employment Tribunal that Mrs Montgomery was not an employee of O & K was wrong. Her position was therefore that she was an employee of JU but if that was wrong she was an employee of O & K.[12]We were invited (particularly by Counsel for JU) to approach these two appeals without making any assumption that Mrs Montgomery was the employee of either JU or O & K. We agree that this is the correct approach. It follows that the correct conclusion could be that Mrs Montgomery was not an employee of either of the companies. We add that in our judgment in the circumstances of this case Counsel for Mrs Montgomery was correct not to argue as a further alternative that Mrs Montgomery was the employee of both companies. The basic facts[13]These appear from paragraphs 2 and 8 to 16 inclusive of the Extended Reasons, excluding the citation of extracts from the terms and conditions contained in paragraph 13 of the Extended Reasons, those paragraphs read as follows:
"2. The Applicant was born on 8 May 1964 and on 1 June 1995 began work as a receptionist for the second respondent, having been assigned there by the first respondent, an employment agency. On 12 November 1997, at the request of the second respondent, the first respondent gave the applicant oral notice terminating forthwith her assignment with the second respondent, due to her continual use of the telephone for personal calls. … 8. We heard evidence from the applicant and from Carol Johnson a director of the first respondent. The second respondent did not call any witnesses. We were referred to certain documentary evidence within bundles A1 and R1. 9. There was no serious conflict of evidence on the facts of this case. The conflict - a stark but familiar one - is as to what inferences should be drawn from the facts. 10. In brief, this was the applicant's first experience of employment agency work (and, she told us, would be her last). She made clear at the start her preference for a position of some permanence and the only job she took was this one offered by the first respondent as a permanent, ongoing, part-time position as receptionist with the second respondent at its premises in Watford Village, Northampton. The placement was arranged on the telephone on 30 May 1995, to commence 1 June, and confirmed in writing by the first respondent's pro-forma letter of 31 May 'subject to the terms and conditions as stated overleaf' (bundle R1 page 9). The situation no doubt was thoroughly typical of standard practice in the employment agency industry. 11. The applicant worked part time on weekday afternoons, initially 20 hours per week, but later increased by 2.5 hours overtime per week. Her pay was based on an hourly rate at first £4.50, but soon corrected - and backdated - to £5.10. She was entitled to be paid only for hours actually worked, save travelling expenses and 20 days holiday per year, later reduced to 10 days. All her day-to-day dealings were with the second respondent from whom she took directions as to her detailed working activities. All underlying contractual matters were between the applicant and the first respondent, by whom she was paid on a PAYE basis, albeit that fundamental elements such as the rate of pay, hours of work and holiday entitlement were largely determined under terms agreed between the first respondent and the second respondent. 12. The applicant readily accepted that she had no contract 'as such' with the second respondent and acknowledged that she was free to walk away from that job at any time she wanted to, although 'as a matter of decency' would have given one week's notice if she had ever decided to leave. 13. The applicant agreed that her contract was with the first respondent and did not quibble that this was governed by the first respondent's standard terms and conditions for temporary workers which she had read and understood as 'best I could'. … [There then followed extracts from the terms and conditions] 14. The one express variation was to clause 1 5(a), whereby the applicant did become entitled to take limited paid holiday. 15. The parties were both clear sighted in their apprehension of the tension between the formal 'legal' position and the practical realities. After over 2 years continuous part-time service the applicant 'felt' like an employee of the second respondent, yet was only too aware that so far as the second respondent was concerned, she was not and could not be an employee 'on the books'. Through the passage of time, she also regarded her job as effectively 'permanent', whilst understanding that it remained strictly 'temporary' under her agency contract. 16. For her part, Carol Johnson was unequivocal that 'temps' are not employed by the client nor by the agency. The business is predicated upon them being independent contractors under a contract for services. Conversely, tax legislation does not allow them to be treated as self-employed. 'I do not know what their status is. No one in the agency business knows the answer - they're in limbo'."
The Terms and Conditions[14]There are two sets of relevant terms and conditions. We propose to set them out in full. Both sets of terms and conditions were standard ones and were prepared by JU.[15]The terms and conditions of the contract between JU and O & K were as follows:
"TERMS AND CONDITIONS FOR THE INTRODUCTION OF TEMPORARY STAFF 1 Definitions: 'The Company' shall mean Johnson Underwood Limited. 'The Client' shall mean the person, firm or corporation being supplied with staff under the terms of this agreement. 'The Temporary Worker' shall mean any individual, firm or company whose technical and professional services are provided by the Company to the Client. 'The Rate' shall mean the rate at which fees are payable to the Company in respect of the provision of the services of the Temporary Worker being the daily or hourly charge advised at the time of booking the Temporary Worker. 2 These terms and conditions shall apply to and govern all contracts for the provision of the services of the Temporary Worker by the Company for the Client and are deemed to be accepted by the Client immediately upon and by virtue of an interview or engagement of the Temporary Worker, whichever shall be the sooner. 3 The Client agrees to pay the Company fees calculated at the Rate for all days or hours actually worked by the Temporary Worker together with travelling, hotel and other expenses in accordance with Clause 6. The Rate may be varied from time to time with immediate effect with the Client's agreement. Fees and expenses are invoiced weekly and payable within 7 days from the date of invoice. Any monies due under this agreement not paid by the Client under these terms will incur interest on such overdue sums at the rate from time to time equivalent to four per cent above the base rate of National Westminster Bank plc compounded on a monthly basis each month rest being calculated months from due date. 4 Every effort will be made by the Company to meet the Client's reasonable requirements by ensuring reasonable standards of skill, integrity and reliability from Temporary Workers, however, no warranty is given by the Company as to the technical or professional competence of each Temporary Worker. The Company will accept no liability for any claim for any loss expenses costs or damages of whatsoever nature arising in connection with any act omission or neglect on the part of the Temporary Worker provided. 5 (i) The payment of all fees and expenses due to the Temporary Worker will be the sole responsibility of the Company and for the avoidance of doubt the Company assumes responsibility for deduction and payment of all statutory contributions in respect of Schedule E income tax applicable to the Temporary Worker as required by law. (ii) The Company will submit invoices to the Client on a weekly basis, for fees calculated at the Rate and expenses payable by the Client. (iii) The Client will verify time or charge sheets submitted by the Temporary Worker indicating the hours worked and expenses claimed by the Temporary Worker and also confirming that any work carried out by the Temporary Worker is satisfactory. However failure by the Client to verify any such time or charge sheets shall not preclude the Company from charging in full for all time actually worked by the Temporary Worker in accordance with these conditions. The Client shall be deemed to be fully satisfied unless and until the Company is notified otherwise as provided for in Clause 9 of these conditions. 6 The Client will be responsible for payments to the Company of such additional fees and expenses incurred by the Temporary Worker as shall have been previously approved by the Client. 7 The Client is responsible for providing adequate insurance, including adequate employer's public liability insurance, whilst the Temporary Worker is under the Clients' direction and control to the extent that any Temporary Worker and the Company have full benefit of coverage for any liability which might arise. Temporary Workers are under the direction and control of the Client for the duration of their assignments. 8 The Client will in all respects comply with all statutes, bylaws and legal requirements to which the Client is ordinarily subject in respect of the health and safety and protection from injury of the person and property of the Company, the Temporary Worker and the Client will at all times indemnify the Company against any liability of whatever nature incurred by the Company or arising otherwise in connection with any breach of such duty. 9 The Client undertakes to provide sufficient supervision of the Temporary Worker assigned to it to enable the Temporary Worker to proceed with any allocated work to the reasonable satisfaction of the Client. If however the Temporary Worker shall fail to proceed satisfactorily the Company may reduce or cancel the charge for the time worked by that Temporary Worker provided that the Temporary Worker leaves that assignment immediately and that notification which must be confirmed in writing is received either: (a) Within four hours of the Temporary Worker commencing duties where the booking is for more than seven hours: or (b) Within two hours for bookings of seven hours or less. 10 (i) If within six months of introduction of the Temporary Worker or the completion of assignment by the Temporary Worker the Client agrees to employ or make use of the Temporary Worker in any capacity whatsoever otherwise than directly through the Company or in the event of the introduction of such Temporary Worker to other employers (including but not limited to any subsidiary or associated company of the Client) with a result in engagement the Client will be liable for an Introduction Fee in accordance with the scale of Introduction Fees for permanent staff of the Company current at the time of such employment or engagement but without entitlement to refund. Interest will run from the date of employment or engagement at the rate of four per cent above base rate from time to time of National Westminster Bank plc on the invoice sum without concession until payment. (ii) If a Temporary Worker has been assigned to a Client for more than four weeks and the Client engages that Temporary Worker under circumstances as described above, the Client is entitled to a reduction of 15% of the above mentioned permanent placement fee. No refund is available for such placements where the ability of the worker is already proven. TERMS AND CONDITIONS BETWEEN THE COMPANY AND THE TEMPORARY WORKER 1 Definitions: 'The Company' shall mean Johnson Underwood Limited. 'The Temporary Worker' shall mean the individual, firm or company whose technical and professional services are provided by the Company to the Client. 'The Client' shall mean any individual to whom or any firm or company to which the services of the Temporary Worker are supplied by the Company. 'The Rates' shall mean the rates at which fees will be payable to the Temporary Worker in respect of services supplied by the Temporary Worker being the daily or hourly fee advised at the time of the engagement. The Rates are calculated on the reasonable expectation that the Temporary Worker will complete the Works within the period for completion reasonably estimated by the Client. 'The Works' shall mean the work from time to time allocated to the Temporary Worker by the Client. 2 These terms and conditions shall apply to and govern all contracts under which the Temporary Worker agrees to render services for Clients of the Company and are deemed to be accepted on the acceptance of work by the Temporary Worker from the Client. 3 The Company shall not be entitled to nor responsible for supervision or control of the Temporary Worker in the execution of the Works. The Temporary Worker will carry out the Works to the best of his ability and in accordance with the Client's requirements and use its best endeavours to complete the Works within the time required by the Client. The Temporary Worker will be exclusively liable to the Client for any claim loss or damage or expense incurred by the Client or arising otherwise in connection with any act omission or neglect on the part of the Temporary Worker in or in connection with the execution of the Works. 4 (i) The payment of all fees and expenses due to the Temporary Worker will be the sole responsibility of the Company. (ii) The Temporary Worker will submit to the Company on a weekly basis time sheets and expense claims authorised by the Client together with such other written information as the Company may from time to time request in support of such time or charge sheets and expense claims. (iii) The Company will endeavour to pay the relevant amount in respect of such time sheets and expense claims on a weekly basis. In order to ensure prompt payment and the proper maintenance of the Temporary Workers records, the Temporary Worker will submit the necessary VAT, National Insurance, Tax or other Legal or Governmental documentation as required no later than the date of submission of the first time sheet. (iv) The Company reserves the right to deduct from the fees due to the Temporary Worker any sum the Temporary Worker may owe to the Company including, without limitation, losses suffered by the Company as a result of works not being carried out or not being carried out by the Temporary Worker with the decree of technical and professional skill as was anticipated by the Company and any outstanding loans. advances, expenses or other monies due to the Company. (v) The Company also reserves the right to make deductions from fees due to the Temporary Worker of any amounts owing by the Temporary Worker to the Company in respect of this or any previous contract between the Temporary Worker and the Company. 5 If the Works shall not be performed with the degree of technical and professional skill as was anticipated by the Company when agreeing the Rates the Company may give notice terminating the Temporary Workers service immediately. Upon such termination the Company shall be liable to the Temporary Worker only for any fees and expenses payable hereunder up to the expiry of the notice period and subject to the rights reserved in paragraph 4. 6 The Company accepts no responsibility for the health safety and protection from injury to the Temporary Worker or his or her respective property while engaged on the Works. 7 The Temporary Worker will treat all information relating to the Company the Client or the Works as confidential and will not disclose nor cause nor permit to be disclosed to any person any trade secrets or other information relating to the business of the Company or the Client unless such disclosure is made with the previous written authority of the Company or the Client. Any patent rights, copyrights or know how arising out of the Works shall be the property of the Client. 8 Nothing herein contained shall constitute the relationship of employer and employee or of any partnership between the Company and the Temporary Worker or between the Client and the Temporary Worker. 9 This contract will not be sub-contracted and the Works will be performed by the named Temporary Worker unless otherwise agreed in writing by the Company. 10 The Temporary Worker shall register for VAT purposes when required to do so by law and notify the Company of the VAT registration number issued. The Temporary Worker agrees to account to H.M. Customs and Excise for relevant VAT received in due course. 11 Any equipment supplied by the Company to the Temporary Worker shall remain the property of the Company and must be returned to the Company on completion of the Works. 12 The Client will solely be responsible for allocating work to the Temporary Worker and for supervising the execution of the Works. 13 Notwithstanding the fact that the Temporary Worker provides services as a self employed person the Company has been advised that: (a) It should pay weekly Class 1 (Employees) National Insurance contributions in respect of the Temporary Workers services in accordance with the provisions of the National Insurance (Classification) Regulations 1972 and (b) Under the Income and Corporation Taxes Act of 1988 all remuneration receivable under or in consequence of this contract will be treated for all purposes of the Income Taxes Act as the emoluments of an office of employment with the Company which you are assessable to tax under Schedule E and from which the Company is required to make deductions on account of tax under the Pay As You Earn system. 14 (a) The Company will be entitled to reduce the Temporary Workers fees (calculated at the Rates) by all payments and deductions as it shall make in accordance with the above advice and by all such other payments and deductions of or on account of any similar contribution tax or other governmental levy or impost as the Company may from time to time be required to make. The Temporary Worker will provide the Company on request with such information as it shall from time to time require to enable it to fulfil its statutory obligations in regard to any such contributions or aforesaid. (b) The Temporary Worker agrees to account in due course to the Inland Revenue or other governmental or statutory authority or department for all other contributions taxes levies or governmental imposts as may from time to time be properly payable by the Temporary Worker and will indemnify the Company against any such contributions taxes levies or imposts as aforesaid as shall from time to time be due from or assessed on him or her. 15 The Temporary Worker will be paid fees only in respect of work actually performed for the client. In particular the Temporary Worker will not be entitled to receive any fees in respect of. (a) Holiday periods (including bank and public holidays when no work is carried out) (b) Any period during which the Temporary Worker is prevented from working by reason of sickness or accident."
The approach of this Tribunal[16]It was asserted and accepted by the parties that this Tribunal is entitled to interfere with the decision of the Employment Tribunal that a contract of employment does, or does not, exist only if we are satisfied that the Employment Tribunal misdirected itself in law, or that no reasonable tribunal properly directing itself on the relevant questions of law could have reached the conclusion under appeal within the principles of Edwards v Bairstow [1956] AC 14 . In this respect we were referred to Clark v Oxfordshire HA [1998] IRLR 125 (in particular at 128 paragraphs 35 and 36). In those paragraphs Sir Christopher Slade refers only to the second part of that approach but also refers to the judgment of Sir John Donaldson MR in O'Kelly v Trusthouse Forte Plc [1983] IRLR 369 at 381-383 which he says gives an illuminating summary. In that case Sir John Donaldson MR was in the majority with Fox LJ on this issue of jurisdiction and in our view paragraphs 61 to 70 provide useful and illuminating guidance. Paragraph 70 sets out the test or approach. In the O'Kelly case Sir John Donaldson MR refers to a passage in the judgment of Stephenson LJ in Young & Woods Ltd v West [1980] IRLR 201 at paragraph 15. In Nethermere (St Neots) Ltd v Gardiner [1984] 612 at 621B to 622A Stephenson LJ comments on that reference, accepts that the O'Kelly case is correct and identifies the approach that this Tribunal must take in the following terms:
"This court therefore has to do what the appeal tribunal should have done: apply Edwards v Bairstow and to decide whether the industrial tribunal misdirected itself in law or reached a decision which was unreasonable to the point of perversity."
This accords with the conclusions of Kerr and Dillon LLJ at pages 628E to 629D and 631C. Further the decision in the O'Kelly case as to the approach to be adopted by an appeal tribunal was also approved by the Privy Council in Lee Ting Sang v Chung Chi-Keung [1990] ICR 409 and in Cheng v Royal Hong Kong Golf Club [1998] 131 (see in particular 136/7).[17]We agree that this is not a case where the decision turns only on the construction of documents and therefore Davies v Presbyterian Church of Wales [1986] IRLR 194, which is authority for the proposition that such a decision or question is one of law, and therefore that our approach has to be that set out in paragraph 10. The decisions under appeal are therefore not ones of law. But they are decisions that go to the judgmental issues at the heart of this case and it is wrong to treat them as ones of primary fact (see for example Nottingham City Council v Amin Times 2 December 1999).[18]Since this appeal was heard Carmichael v National Power Plc [1999] 1 WLR 2042 has been reported and we have received written submissions in respect of it. We agree that this case supports the above conclusion as to the approach we should adopt. We add that in our judgment this case does not raise any point as to the meaning or construction of a term of a contract (whether that term is included in a document or was agreed orally) and we therefore do not have to consider whether the determination of the meaning, and thus the construction, of the words used is a question of law of fact. Here we are concerned with the application and effect of the terms contained in the two sets of terms and conditions in the factual circumstances found by the Employment Tribunal.[19]We add that in our judgment there are two aspects to the consideration of whether there has been a misdirection of law. First there is the question whether the Employment Tribunal applied the correct overall approach or test to determine whether there was a contract of employment. Then there is the question whether they erred or misdirected themselves in law in applying that test by, for example, taking account of irrelevant considerations or misapplying the effect of authorities. Perversity or "Wednesbury unreasonableness" is assessed and therefore only arises for consideration if the Employment Tribunal (or other decision maker) has properly directed or instructed itself on the relevant questions of law. The reasoning of the Employment Tribunal[20]This is set out in paragraphs 17 to 40 of their Extended Reasons which are as follows:
"Law 17. On our understanding of a complex matter in an uncertain area, the law as to 'who is an employee?' has developed pragmatically according to the purpose in hand. Various concepts have been expounded and given variable weight at different times and in particular circumstances. These include a number of tests such as 'control', 'integration', 'economic reality' and 'mutuality of obligation'. We take from these certain underlying principles in our approach to the question. The first is that the issue must be judged in the context in which the question arises. The second is that to arrive at an answer will usually involve a balancing exercise after examining all the circumstances of the particular case to determine what are the relevant factors, evaluate the weight to be attached to each (since invariably there will be conflict between them) and finally judge when taken together and in context whether an employment relationship is or is not revealed. 18. We are assisted mainly by case law, since the statutory definition begs the question it seeks to answer. Section 230 reads: (1) In this Act 'employee' means an individual who has entered into or works under (or, where 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. 19. The latest authority to explain the law and direct the approach which the tribunal should take is the Court of Appeal decision in McMeechan v Secretary of State for Employment [ 1997] IRLR 353 CA. Although in that case the context was of a claim against the Secretary of State for unpaid earnings following a liquidation, we find nothing to distinguish an unfair dismissal situation on the question of defining who is an employee. Indeed, McMeechan has already been applied at least once by the EAT in the unfair dismissal case of Bailey v Fircroft Engineering Services Ltd 7.3.97 EAT 67/96. 20. In the leading judgment in McMeechan, Lord Justice Waite stated (at paragraph 9 of the IRLR report): 'This Appeal involves a familiar but elusive question – what marks the difference between a contract of service and a contract for services? Many attempts have been made to provide criteria which will simplify the task of the industrial tribunals as they wrestle with it in particular instances. The distinction of stating, in a concise form, the balanced approach which the law requires to be adopted in all these cases belongs to the chairman of the industrial tribunal whose direction was approved by the majority of this court in O'Kelly v Trusthouse Forte [ 1983] IRLR 369 at 382, 84. The direction was to: 'Consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seem appropriate, to determine whether the person was carrying on business on his own account'. 21. Having referred to the particular problem posed by temporary workers, Waite LJ analysed what appears previously to have passed largely unremarked, namely that in an employment agency relationship there will often be 2 engagements: the 'general engagement' under which the worker carries out 'sporadic tasks' at the behest of the agency and the 'specific engagement' governing a particular assignment. 22. In upholding the 'single engagement' distinction, at paragraph 35 Waite LJ goes on to say: '(2) There is nothing inherently repugnant, whether to good relations in the workplace or in law, about a state of affairs under which , in an employment agency case, the status of employee of the agency is allocated to a temporary worker in respect of each assignment actually worked – notwithstanding that the same worker may not be entitled to employee status under his general terms of engagement … . Whether or not employee status should, or should not, be so allocated in any particular case will of course need to be resolved as a question of fact according to the particular circumstances of the case. (3) The force of (2) is not lost in cases where – following what appears to be a common (though potentially confusing) practice – the agency and the temporary worker have committed themselves to standard terms and conditions which are intended to apply both to the general engagement and to the individual stints worked under it. The only result of that fusion is that the same conditions will have to be interpreted from a different perspective, according to whether they are being considered in the context of the general engagement or in the context of a single assignment. That does not make the task of the tribunals any easier, and is liable to lead to the unsatisfactory consequence that the same condition may need to be given a different significance in the one context from that accorded to it in the other. Those disadvantages do not, however, supply any valid reason for denying the temporary worker or the contractor the right to have the issue of contractual status judged separately in the two contexts'. 23. Emphasising that it remained essentially a matter of fact and degree, Waite LJ held that the question whether the worker carries out the specific engagement under a contract of service or a contract for services, where the parties had committed themselves to standard terms and conditions intended to apply to both the general and specific engagement, was to be determined largely on the interpretation of those terms and conditions construed in the context of the specific rather than the general engagement. 24. From that perspective in the particular case, after balancing the various indicia in the 'factual matrix' Waite LJ concluded (paragraph 43): '(4) When those indications are set against each other, and the specific engagement is looked at as a whole in all its terms, the general impression which emerges is that the engagement involved in this single assignment gave rise – despite the label put on it by the parties – to a contract of service between the temporary worker and the contractor'. 25. In the case of Knights v Anglian Industrial Services EAT, 4.10.96 (640/96), on broadly comparable facts to the instant case, the EAT upheld a tribunals finding on an unfair dismissal claim that the applicant was not an employee. This decision however, although referring to the EAT decision in McMeechan , pre-dated the report of the Court of Appeal judgment in that case. In the Bailey case, on likewise not dissimilar facts on an unfair dismissal complaint, but post-dating the Court of Appeal's judgment in McMeechan , the EAT allowed the applicant's appeal against the tribunals finding that she was not an employee. This ruling adopted the distinction between the general and specific engagement. Submissions 26. If we may say so , an almost impeccable method by which the tribunal should approach the matter was suggested by Mrs Summers in her closing address for the first respondent. Although she relied mainly on the cases of Wickens v Champion Employment [1984] ICR 365 EAT and O'Kelly , she adverted to the general and specific engagement dichotomy explained in McMeechan . She submitted that we should draw a list of features from the relationship which the evidence here established (being essentially the standard terms and conditions), setting those inconsistent with a contract of employment against those consistent with one. She urged that on balance the scales fell emphatically against there being a contract of service. 27. Without rehearsing all the factors which Mrs Summers weighed out, she considered it a crucial distinction in the instant case, as drawn in both Kelly and McMeechan , that the first respondent's terms and conditions did not incorporate any common law duties. She pointed also to other features familiar from the cases, such as no sick pay, no disciplinary or grievance procedures and, as a pervasive characteristic, the effective lack of any practical control or supervision or any of the care and contact associated with an employer/employee relationship. 28. The applicant's case was summarised, with respect, succinctly and persuasively by her husband acting as her representative at this hearing. The burden of his submissions was that anyone who has been in the same job for nearly two and a half years must be working under some employment contract, express or implied. The way in which the applicant carried out her day to day duties as well as the underlying practicalities of control and supervision, and indeed the manner of termination, bore all the appearance of the applicant being employed by the second respondent. 29. Accordingly, Mr Montgomery requested the tribunal to find that the applicant did have a contract of employment with the second respondent. Conclusions 30. If we were to look at the situation as a whole form the point of view of the average lay observer, then we have no doubt that the 'general impression' would vindicate the applicant's submission that she was employed by the second respondent. Although there is room to argue on ordinary agency principles that this is the legal position, the first respondent in effect becoming little more than an extended arm of the second respondent, providing an independent payroll service, it seems to us on the law as it stands that to apply these principles to the special rules of employment contracts would be a leap too far. We conclude that there is no basis upon which we could hold the applicant to have been an employee of the second respondent. 31. Analysing the applicant's relationship wit the first respondent, it is incontrovertible that most of the factors which Mrs Summers puts forward as inconsistent wit a contract of service are indeed so. But unquestionably there are as many others which are consistent with employment. We find that the answer is mainly determined by the standard terms and conditions which underpinned the specific engagement assigning the applicant to work for the second respondent. 32. We must interpret these terms however in the context of the specific engagement. Part of that perspective is the applicant's length of service with the second respondent which imports an inference of permanence notwithstanding the original temporary status. 33. The onus of proof is upon the applicant to satisfy us that she was an employee. This is partly a question of pure primary or inferred fact, partly of pure law and partly a mixture of both. Labels have limited probative value, as also the interpretation which the parties themselves may have placed upon the facts. 34. We are satisfied that the applicant was an employee of the first respondent. We find that factors pointing to a contract of service outweigh those more consistent with a contract for services. The latter include: (i) Little or no control, direction and supervision. (ii) The absence of any importation of 'common law duties'. (iii) Save for the subsequently agreed holiday pay, the applicant was entitled to be paid only for work actually done (iv) The express exclusion of any employer / employee relationship. (vi) The express limitation of liability on termination to amounts due up to expiry of the notice. 35. The absence of mutuality of obligation appears to us largely irrelevant to the specific engagement. We take that view respectfully following the reasoning in McMeechan (paragraph 41) 36. Factors favouring the former construction – of a contract of employment – include (in no particular order of importance): (i) The first respondent's express power to terminate with 'notice.. immediately' on grounds effectively relating to the applicant's capacity and/or performance, and the right reserved to deduct from payments due any losses which the first respondent might incur as a result of the applicant not carrying out her work properly. (ii) The term of engagement providing for an hourly rate of pay calculated by the first respondent. (iii) The applicant's length of service. (iv) The first respondent's treatment of the applicant as an employee for national insurance and tax purposes. We accept of course that it is very well established that this common feature in compliance with statutory requirements is far from decisive. Nonetheless, it remains a factual characteristic of the relationship in keeping with that invariably found under an express employment contract. (v) Notwithstanding the label 'temporary' in its terms and conditions, the respondent first offered the position as permanent part-time, meeting the applicant's previously stated preference. 37. In our determination, giving the balance as seems to us appropriate to these and other factors and all aspects of the relationship, it is clear to us that the applicant could not possibly be said to have been carrying on business on her own account. The tribunal's unanimous decision is that in this long term, specific assignment the applicant was an employee of the first respondent. 38. Accordingly the applicant is able to pursue her complaint of unfair dismissal against the first respondent and that is listed for hearing before this tribunal on Monday 6 April 1998 or such other date as may be fixed. 39. Finally, we take the liberty of endorsing the observation of the industrial tribunal at first instance in the McMeechan case (recited at paragraph 18 of the report of the Court of Appeal decision): 'It seems to us that it would simplify the law greatly if temporary employees, casual workers and any people who were not self-employed and who were not carrying business on their own account in a true sense were treated as employees under a contract of employment'. 40. That tribunal considered itself bound by the Wickens case to find that the applicants were not employed. We consider ourselves bound by the Court of Appeal judgment to come to the opposite decision. It is a difficult balancing exercise with which we wrestle to answer a question so fundamental to the whole panoply of employment rights, but the authority whose guidance we have sought to follow also enables us to say, unlike the tribunal in McMeechan , that we reach this conclusion at first instance in this case without regret."
Contract of Employment with O & K – Mrs Montgomery's Appeal[21]We deal with this first. In doing so we repeat that we accept that the question whether Mrs Montgomery was an employee of O & K should not be considered in isolation, and should be considered without making an assumption that she was employed by either JU or O & K. However as a matter of reasoning a sensible and practical course is to deal with each company separately when reaching conclusions as to whether Mrs Montgomery was an employee.[22]As set out in paragraph 18 of the Extended Reasons the relevant statutory definition is in s. 230 Employment Rights Act. An essential element of that definition is that there must be a contract between the employee and the employer. If confirmation for that was needed it is found in the judgment of Kerr LJ in the Nethermere case ([1984] ICR at 629B).[23]In view of(i) the last sentence of paragraph 11, paragraph 12 and the introduction to paragraph 13 of the Extended Reasons, and(ii) the reference to agency principles in paragraph 30 thereof, we consider that a fair reading and interpretation of the finding in paragraph 30 that: " --- there is no basis upon which we could hold the applicant to have been an employee of the second respondent (O & K)" is that there was no basis upon which the Employment Tribunal could hold that there was a contract between them. In our judgment on their findings of fact this conclusion was correct.[24]We add that we considered whether a contract could be inferred, or implied, from the fact that O & K agreed to engage Mrs Montgomery to carry out certain work and paid her indirectly. But there was evidence before the Employment Tribunal from Mrs Montgomery that she was told and understood that O & K did not regard her as an employee. It is also clear that she was aware that she was entering into a contractual relationship with JU which all the parties intended should govern the legal relationships, and that the documents and the working arrangements set out therein and performed by the parties were not a sham. These matters support the conclusion that Mrs Montgomery and O & K did not intend to enter into a contractual relationship. Further they support the above conclusion that there was no contract between O & K and Mrs Montgomery, as does the approach taken by the House of Lords in Carmichael v National Power Plc [1999] 1 WLR 2042 when regard is had to them.[25]We therefore dismiss Mrs Montgomery's appeal against the decision of the Employment Tribunal that she was not an employee of O & K. Contract of employment with JU – JU's appea l[26]In our judgment this issue and appeal raises much more difficult questions. This is demonstrated by the fact that we have not been able to reach a unanimous view. The majority view[27]No court has been able to give precise and final guidance on the question of distinguishing between contracts of service and contracts for services. For this reason Employment Tribunals have a heavy and burdensome duty to take all factors into account and reach a decision "in the round".[28]The principles upon which they are required to operate are well known. The status of an employee "implies an obligation to serve and it comprises some degree of control by the master". This, as is equally well known was expanded by McKenna J in Ready Mixed Concrete (South East) Ltd. v Minister of Pensions and National Insurance [1968] QB 497 at 515, as follows: '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'.[29]In this particular case, common sense might judge that since the worker, Mrs Montgomery, worked for two years at the client company (O & K) and lost her job following complaints by the client company to the Agency (JU) that work and skill was provided until it was said to be deficient, and a "master" asserted its power to remove the job, then this might be held to reveal that an employer existed somewhere. However, it is equally obvious that whilst it confuses all concerned if the law appears to be operating absurdly the appearance or not of common sense is not decisive, as the Employment Tribunal acknowledges. In these matters the guidance given by the authorities to Employment Tribunals is to consider all the pros and cons of whether there was a contract of service. As to the relationship between Mrs Montgomery, the Employment Agency (JU) and the client company (O & K) the complications were faced by the Employment Tribunal fairly and squarely and without erring in law in paragraphs 30 – 37 of the Extended Reasons, importantly stating that they were involved in "giving the balance as seems to us appropriate" (paragraph 37).[30]It matters not whether or not another Tribunal would have come to a different conclusion. In the light of the experience of the majority it is perfectly reasonable that the Employment Tribunal came to the decision that it did despite the obvious difficulties Mrs Montgomery has of enforcing her contract in any meaningful way.[31]For those reasons the view of the majority is that the Employment Tribunal did not err in law, their decision was not perverse and therefore the appeal should be dismissed. The view of the minority Employee or independent contractor: the approach or test to be applied at law[32]In Carmichael v National Power Plc [1999] 1 WLR 2042 at pages 2047 A/B the Lord Chancellor refers to the "irreducible minimum of mutual obligation necessary to create a contract of service" and cites inter alia the judgment of Stephenson LJ in the Nethermere case [1984] ICR at 623 C/G (see also Lord Hoffmann at 2051C). In that passage Stephenson LJ says this:
"The obligation required of an employee was concisely stated by Stable J. in a sentence in Chadwick v Pioneer Private Telephone Co. Ltd . [1941] 1 All E.R. 522, 523D: 'A contract of service implies an obligation to serve, and it comprises some degree of control by the master'.. That was expanded by MacKenna J. in Ready Mixed Concrete (South East) Ltd. v Minister of Pensions and National Insurance [1968] 2 Q.B.497, 515: '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'. Of (iii) MacKenna J. proceeded to give some valuable examples, none on all fours with this case. I do not quote what he says of (i) and (ii) except as to mutual obligations: 'There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill'. There must, in my judgment, be an irreducible minimum of obligation on each side to create a contract of service. I doubt if it can be reduced any lower than in the sentences I have just quoted … ."
The passages from the judgments of Stephenson LJ and of Mackenna J are referred to by the Court of Appeal in Express and Echo Publication Ltd v Tanton [1999] IRLR 366 paragraphs 26 to 30 with approval. In particular at paragraph 30 Peter Gibson LJ cites with approval the passage from the judgment of Stephenson LJ to the effect that the sentences from the judgment of MacKenna J identify the irreducible minimum of obligation necessary for the creation of a contract of employment.[33]It was argued before us by reference for example to the judgments of Kerr and Dillon LLJ in the Nethermere case [1984] ICR at 629D and 634G that a contract of employment could exist with less than the minimum of obligations identified by Mackenna J. I do not agree. In my judgment Kerr and Dillon LLJ (and also by way of example the Lord Chancellor in Carmichael v National Power Plc [1999] 1 WLR 2042 at 2047 A/B) are identifying the absence of one of the minimum requirements (i.e. the obligation to provide and carry out work) and are not, as was submitted to us, asserting that that requirement identifies the extent of the minimum requirements.[34]Understandably and correctly in identifying the approach or test to be applied the Employment Tribunal refer to, and rely on, the decision of the Court of Appeal in McMeechan v Secretary of State for Employment [1997] IRLR 353 . This case was also concerned with an employment agency and decided that Mr McMeechan was employed by the employment agency and therefore following the liquidation of that employment agency he was entitled to recover unpaid earnings from the Secretary of State in accordance with s. 122 Employment Protection (Consolidation) Act. At paragraphs 9 and 10 of his judgment (which is the judgment of the court) Waite LJ says this:
"The Law This appeal involves a familiar but elusive question – what marks the difference between a contract of service and a contract for services? Many attempts have been made to provide criteria which will simplify the task of the industrial tribunals as they wrestle with it in particular instances. The distinction of stating, in a concise form, the balanced approach which the law requires to be adopted in all these cases belongs to the chairman of the industrial tribunal whose direction was approved by the majority of this court in O'Kelly v Trusthouse Forte [1983] IRLR 369 at 382, 84. The direction was to: 'consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account'. The empiricism of that approach does not preclude recourse to familiar touchstones which have been found useful over the years. Harvey on Industrial Relations gives a useful summary of them at paragraphs 10-53. I do not need in this judgment to mention more than one of them. It is usually referred to as the criterion of mutual obligation. The principle which it enshrines is that if there be an absence on the one side of any obligation to provide work and an absence on the other side of any obligation to do such work as may voluntarily be provided, then that provides a powerful pointer against the contract (assuming that in such circumstances any contract has arisen at all) being one of service. Temporary or casual workers pose a particular problem of their own, in that in their case there will frequently be two engagements (to use a neutral term) which the tribunal may be called upon to analyse. There is the general engagement, on the one hand, under which sporadic tasks are performed by the one party at the behest of the other; and the specific engagement on the other hand which begins and ends with the performance of any one task. Each engagement is capable, according to its context, of giving rise to a contract of employment. That was acknowledged by this court in Nethermere (St Neots) Ltd v Gardiner and Taverna [1984] IRLR 240 and accepted by the majority in O'Kelly's case (see Fox LJ at p.380 and Sir John Donaldson MR at p.381). it will be convenient at this point to say a word about both categories of engagement."
This passage refers in terms to the first of the irreducible minimum of obligations referred to by Mackenna J (mutual obligation) but not to the second (a sufficient degree of control), or the third (consistency of the remaining terms). But both of these points are referred to by the reference to Harvey of Industrial Relations.[35]Although the point was argued (see paragraphs 24 and 29 of the judgment in the McMeechan case) in the passage from the judgment of Waite LJ therein cited in paragraph 34 above he does not refer to the absence of mutual obligation as being fatal to the existence of a contract of service and thus as a minimum requirement. He refers to its absence as a powerful pointer. In my judgment this is at odds with(i) the judgments of Stephenson, Kerr and Dillon LLJ in the Nethermere case (see [1984] ICR at 623G, 629D and 634G),(ii) the judgment of Peter Gibson LJ in the Esso and Echo case (see [1999] IRLR 367 paragraph 30) and(iii) the approach and findings of the House of Lords in Carmichael v National Power Plc [1999] 1 WLR 2042 (see the Lord Chancellor at 2047 A/B and Lord Hoffmann at 2051C where they both conclude that the lack of mutuality of obligation had the result that there was not a contract of employment).[36]I accept that there are authorities which favour an approach which does not involve the establishment of a minimum of obligation (see for example Wickens v Champion Employment [1984] ICR 365 and the references at pages 368F to 369H therein to Warner Holidays Ltd v Secretary of State for Social Services [1983] ICR 440). However in my judgment the balance of authority at the time of the decision in the McMeechan case, and after it, supports the view that a minimum of obligation has to exist. Further in my judgment the approach and statements of the Lord Chancellor and Lord Hoffmann in the House of Lords in Carmichael v National Power Plc remove any difficulties that might have been advanced in respect of conflicting decisions of the Court of Appeal and demonstrate that in the McMeechan case the Court of Appeal erred in not recognising that the existence of mutual obligation was an irreducible minimum necessary to create a contract of service.[37]The approach approved in the O'Kelly case and cited by Waite LJ in the McMeechan case is in line with the approach approved by Nolan LJ in Hall (Inspector of Taxes) v Lorimer [1994] ICR 218 at 226 where he says:
"I agree with the views expressed by Mummery J. in the present case[1992] I.C.R. 739, 744-745: 'In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. 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, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The process involves painting a picture in each individual case. As Vinelott J. said in Walls v Sinnett (1986) 60 T.C. 150, 164: 'It is, in my judgment, quite impossible in a field where a very large number of factors have to be weighed to gain any real assistance by looking at the facts of another case and comparing them one by one to see what facts are common, what are different and what particular weight is given by another tribunal to the common facts. The facts as a whole must be looked at, and what may be compelling in one case in the light of all the facts may not be compelling in the context of another case'."
In my judgment what Waite LJ describes as the empiricism of this approach needs to be qualified by reference to the irreducible minimum of obligation necessary to create a contract of employment.[38]In assessing whether such irreducible minimum of obligation exists all the circumstances need to be considered, including the nature of the work to be done (see for example the reference to a surgeon and the conductor of an orchestra in the Wickens case at 369G). Errors of law[39]In my judgment the Employment Tribunal made the following errors of law in their approach to the issue whether or not Mrs Montgomery was or was not an employee of JU, namely:(1) In adopting and following the McMeechan case they failed to recognise and therefore to take into account that for there to be a contract of service there must be an irreducible minimum of obligation on each side (see above and for example Stephenson LJ in the Nethermere case at [1984] ICR 623G).(2) In having regard to Mrs Montgomery's actual length of service as opposed to the intention that she would be "permanent part-time" (see Extended Reasons paragraph 36 (iii) and (v)) they took into account an irrelevant consideration. In my judgment the nature of the legal relationship between Mrs Montgomery in respect of the single or specific engagement with O & K cannot vary solely by reference to its actual length. In this respect it is to be noted that (a) the length of the engagement in the McMeechan case was very short, and (b) the length of the engagement was a point that Mr and Mrs Montgomery as lay persons (understandably) advanced in their general submission which was then directed to a primary assertion that Mrs Montgomery was employed by O & K (see Extended Reasons paragraphs 28 and 29).(3) In having regard to Mrs Montgomery's tax treatment (albeit on the basis that it was far from decisive – see Extended Reasons paragraph 36(i)) the Employment Tribunal erred and therefore took into account an irrelevant consideration. This factor carried the matter no further and is of no significance (see the McMeechan case paragraph 22).(4) In stating that they considered themselves bound by the judgment in the McMeechan case the Employment Tribunal erred in law (see the McMeechan case paragraph 23).(5) On their approach the Employment Tribunal failed to take into account, or to explain how they took into account, the absence in this case of the provision of a review procedure and the establishment of a grievance procedure which were provisions relied on by the Court of Appeal in the McMeechan case. As to point (5) it was further argued that the Employment Tribunal failed to take into account or to explain how they had taken into account the lack of (i) the express importation of common law duties, and (ii) the ability to dismiss for misconduct which were factors relied on in the McMeechan case. But I do not accept that taken together or alone these points would found a successful appeal. This is because (a) in respect of (i) I accept that clause 3 of the standard conditions with the temporary worker could be said to import common law duties or some of them, and (b) in respect of (ii) (i.e. the ability to dismiss for misconduct) I have not found, and despite my request was not shown, this power in the McMeechan case although it is mentioned in paragraph 43 of the judgment and further I note that clause 5 of the standard conditions with the temporary worker in this case corresponds to clause 5(g) in the McMeechan case.[40]Point (1) affects the approach of the Employment Tribunal to mutuality, control and the issue whether the provisions of the contract taken as a whole are inconsistent with a contract of employment.[41]Points (2) to (5) apply even if I am wrong as to Point (1).[42]I add that I do not agree with the submission made on behalf of JU that the Employment Tribunal erred by basing its decision "mainly" on the interpretation of the written terms and giving insufficient weight to the factual circumstances in which the work was performed. First in my judgment a fair reading of the Extended Reasons demonstrates that the Employment Tribunal had proper regard to the circumstances in which the work was performed and the overall arrangements and conduct of the parties having regard to them. Secondly in my judgment their approach to the standard terms was justified by the approach taken in the McMeechan case (see paragraph 38). I would however respectfully add that in my view that approach involves a consideration of the application and effect of the written terms rather than their interpretation or construction (see paragraphs 31 and 39).[43]It follows that I do not have to consider whether the Employment Tribunal reached a conclusion that no reasonable tribunal that had not misdirected itself in law could have reached. What course should I take?[44]Having regard(i) to the need for the relevant decision maker to have regard to all relevant circumstances, and(ii) to the extent of the balancing exercise and the degree of judgment involved in answering the question whether Mrs Montgomery was, or was not, an employee of JU, I am of the view that this Tribunal cannot say that any Employment Tribunal properly directing itself would be bound to reach a particular conclusion on that judgmental issue.[45]The classic, standard or text book approach would therefore be for this Tribunal to remit the question whether or not Mrs Montgomery was an employee of JU to the Employment Tribunal (see for example the McMeechan case paragraph 31). However as in that case none of the parties urged this Tribunal to remit and there is no relevant dispute on the facts.[46]In my view this is therefore an exceptional case in which this Tribunal should not remit but should express its own view. My view on the issue whether or not Mrs Montgomery was an employee of JU[47]This is a "single engagement claim" case.[48]As appears above in my judgment the Court of Appeal erred in the McMeechan case in not recognising that there must be an irreducible minimum of obligation on each side to create a contract of employment. However in the McMeechan case the Court of Appeal held that:(a) a single engagement claim is maintainable and in part based that conclusion on the earlier decision of the Court of Appeal in the O'Kelly case (see paragraphs 33 to 37 of the judgment). In doing so the Court of Appeal decided that it was appropriate to link the employment status to the particular job of work in respect of which payment is being made (my emphasis – see paragraph 34), and(b) there was nothing repugnant in a state of affairs under which, in an employment agency case, the status of employee is allocated to a temporary worker (paragraph 35). In my judgment those parts of the reasoning of the Court of Appeal are binding on this Tribunal and I have to apply them in assessing whether Mrs Montgomery was an employee of JU. Mutuality of obligation.[49]The Court of Appeal in the McMeechan case deal with this in paragraph 41 of the judgment in a negative way, in that they say (and I accept) that the lack of mutuality as to future engagements is irrelevant when it comes to considering the terms of an individual self contained engagement. But they do not go on to explain the basis of the mutual obligation to provide and to do work in the context of the individual self contained engagement. Further I note that their obiter approach in respect of the general engagement is that the lack of mutuality may be fatal to a conclusion that there is a contract of employment and therefore this confirms that they did not regard the existence of mutual obligation as an irreducible minimum to the creation of a contract of employment.[50]The existence of mutuality has to be considered in the context that the issue whether Mrs Montgomery was an employee is to be linked to the particular job of work in respect of which payment was being made (i.e. her work at O & K). JU only provide that work in the sense that they had introduced and provided Mrs Montgomery to O & K to do that work (the "Works" as defined in the terms between JU and Mrs Montgomery – the "Worker's Terms") and had entered into a contract with O & K for the provision of a temporary worker, Mrs Montgomery, who could not sub-contract the Works and must perform them herself (clause 5 of the Worker's Terms, and see also clause 2 of the terms between JU and its clients – the "Client's Terms" – which made it clear that the client accepted a particular temporary worker and therefore here O & K accepted Mrs Montgomery). Mrs Montgomery agreed to carry out the Works to the best of her ability and to render services (and thus carry out the Works) (see clauses 2 and 3 of the Worker's Terms).[51]In short the mutual obligation during the currency of the O & K Works was that, through its contract to provide services to O & K, JU provided work for Mrs Montgomery to do at O & K and she promised to do that work. The two sets of terms did not expressly provide for termination of the two contracts but did provide that the client only had to pay for, and the temporary worker was only entitled to receive pay for, the hours actually worked. It seems that contracts with clients would often be for fixed periods (see clause 9 of the Client's Terms) but, as I understand it, this was not such a case and Mrs Montgomery's engagement with O & K was intended to last a lengthy and indeterminate period. As stated in paragraph 36(v) of the Extended Reasons the position was offered by JU as a permanent part time one. It seems to me therefore that in the absence of a term entitling a contracting party to terminate forthwith both contracts were terminable on notice. Control[52]The existence of a sufficient degree of control was not considered expressly by the Court of Appeal in the McMeechan case. Here the Employment Tribunal found that JU had little or no control, direction and supervision. This is clearly correct in respect of the manner in which Mrs Montgomery was to perform the Works (see clauses 3, 5, 6, 11 and 12 of the Worker's Terms and clauses 4, 7, 8 and 9 of the Client's Terms). Any control of JU was indirect (e.g. clause 5 of the Worker's Terms).[53]The Employment Tribunal did not consider whether Mrs Montgomery had agreed expressly or impliedly that in performance of the work and skill she had agreed to provide she would be subject to JU's control to a sufficient degree to make JU her master (see the formulations of Stable J and MacKenna J cited with approval by Stephenson LJ in the Nethermere case at [1984] ICR 623 C/G). The existence of the minimum obligation of mutuality and of control[54]In my judgment neither exist in this case.[55]As to mutuality, in my judgment the nature and degree of mutuality set out above was not such that Mrs Montgomery had entered into an obligation to serve JU, or to provide her work and skill, in the performance of some service for JU or work provided by JU.[56]But if I am wrong about that, or I am bound by the decision in the McMeechan case to hold that the minimum of mutual obligation necessary to create a contract of service exists in this case, in my judgment the degree of control that JU had over Mrs Montgomery was not of a nature or degree to make JU her master. In respect of the Works JU had at most some indirect control over how they are performed and thus how, where and when Mrs Montgomery provided her work and skill. The obligation to JU under the Worker's Terms to carry out O & K's requirements and thus to, for example go there when required and work as directed by O & K, did not in my judgment contain an element of control that was sufficient to render JU Mrs Montgomery's master.[57]It follows in my judgment that there is an absence of the irreducible minimum of obligation on each side to create a contract of employment between JU and Mrs Montgomery.[58]I add that in my judgment none of the other terms of the contracts between JU and O & K, and between Mrs Montgomery and JU were so inconsistent with the creation of a contract of employment that the third minimum requirement identified by MacKenna J and approved in the Nethermere case by Stephenson LJ was not satisfied. An alternative approach[59]As an alternative I adopt the approach taken by the Court of Appeal in the McMeechan case and therefore the directions and approach approved in the O'Kelly case and the Hall case. This involves a consideration of all aspects of the relationship in the factual circumstances of the case including those in which the work was done. This involves what has in some cases between described as a weighing or balancing exercise, or the drawing of a balance sheet and comparing the factors for and against there being a contract of employment. These are difficult exercises to carry out because in many respects like is not being compared with like and it is difficult to give a weighting to competing factors. As Lord Wilberforce pointed out in Science Research Council v Nasse [1980] AC 1028 at 1067D/F a description of this exercise as a "balancing exercise" is only a rough metaphor as balancing takes place between commensurables. The judgment involved in carrying out a consideration of competing factors gives rise to the result that this (and other appeal tribunals) have to recognise that there is a band of reasonable decision open to the decision maker. This has the consequence that different decision makers (Employment Tribunals) could reach different and conflicting conclusions on the same set of facts and neither decision could be successfully appealed.[60]The existence of the band of reasonable decision, the judgmental nature of the exercise, the fact that it is based on all the circumstances and the difficulty of giving comparative weight and importance to competing factors also make it very difficult, and often dangerous and misleading, to apply the detailed reasoning of one case to another.[61]In paragraphs 34 and 36 of the Extended Reasons the Employment Tribunal identify factors pointing for and against a contract of service.[62]The factors they identify against a contract of service are as follows: "(i) Little or no control direction and supervision. (ii) The absence of any importation of 'common law duties'. (iii) Save for the subsequently agreed holiday pay, the applicant was entitled to be paid only for work actually done. (iv) The express exclusion of any employer / employee relationship. (vi) The express limitation of liability on termination to amounts due up to expiry of the notice. I agree that these are factors against there being a contract of service. To these I would add (in no particular order) the following:(a) Clause 10 of the Client's Terms which reinforce the point that the Temporary worker is not an employee of the client.(b) The absence of a review procedure and the establishment of a grievance procedure which were provisions relied on by the Court of Appeal in the McMeechan case.(c) The nature of the tripartite arrangement and thus of the mutual obligations entered into between Mrs Montgomery and JU described above.(d) The fact that in practice JU, O & K and Mrs Montgomery had all acted in accordance with the standard terms and the regime put in place thereby.[63]Excluding the factors in paragraph 36 (iii) and (iv), which in my judgment the Employment Tribunal were wrong in law to include, the factors identified by the Employment Tribunal in favour of a contract of service are as follows:
"(i) The first respondent's express power to terminate with 'notice.. immediately' on grounds effectively relating to the applicant's capacity and / or performance, and the right reserved to deduct from payments due any losses which the first respondent might incur as a result of the applicant not carrying out her work properly. (ii) The term of engagement providing for an hourly rate of pay calculated by the first respondent. (v) Notwithstanding the label 'temporary' in its terms and conditions, the respondent first offered the position as permanent part-time, meeting the applicant's previously stated preference."
I agree that these are factors in favour of a conclusion that there was a contract of service.[64]Standing back and having regard to all these factors in their context I have concluded that they show that Mrs Montgomery was not an employee of JU.[65]In reaching that conclusion I am conscious(i) that I am reaching a different conclusion to that reached by the Court of Appeal in McMeechan ,(ii) that I am not justifying, and in my view it would be difficult to justify, my conclusion on the differences of detail in the terms and circumstances in which the work was carried out in this case and in the McMeechan case, and(iii) that therefore this judgment could cause uncertainty. However I am fortified in my conclusion by the following: (a) The legal test to be applied gives rise to a band of reasonable and possible decisions and therefore some uncertainty is inherent in it. (b) Even if mutuality and control are not treated as minimum requirements but as touchstones in my judgment when they are analysed as important touchstones they point to a conclusion that Mrs Montgomery was not an employee of JU. (c) My overall view corresponds with (i) the overall view of the Tribunals in the Wickens case, albeit that it was based on their view of the position of the temporary workers generally, and (ii) the general impression expressed in paragraph 30 of the Extended Reasons in this case which I agree with and which, in my judgment, supports the conclusion that as a matter of general impression and commercial common sense Mrs Montgomery was not employed by JU. (d) In my judgment my conclusion is supported by the approach taken by the House of Lords in Carmichael v National Power Plc [1999] 1 WLR 2042 as to the effect of the conduct and understanding of the parties. (e) In my judgment my conclusion is supported by the recognition by Parliament that there are agency workers as defined by s. 13 Employment Relations Act 1999 who are not workers or employees within s. 230 Employment Rights Act 1996.[66]I add that in my judgment it would not be correct in determining the question whether Mrs Montgomery was an employee of JU to seek to differentiate between this case and the McMeechan case on the basis of the reason why the question arose for determination, or to conclude that a different test should be applied to answer that question by reference to that reason. In the McMeechan case Mr McMeechan was seeking payment from the Secretary of State, whereas here Mrs Montgomery wants to make a claim for unfair dismissal. I however comment that it seems to me that there was no practical difficulty in the Secretary of State making payment to Mr McMeechan, but my preliminary view is that a number of difficulties would arise in applying the statutory provisions relating to unfair dismissal to Mrs Montgomery on the basis that she was an employee of JU.[67]For the above reasons I would have allowed JU's appeal and decided that Mrs Montgomery was not an employee of JU.