MR D THORPE v (1) MR K L DUL (2) MR C MCGRATH (BROOKSBY MELTON COLLEGE) [2004] UKEAT 0041_04_0609

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2004] UKEAT 0041_04_0609Case No Appeal No. UKEAT/0041/04 & UKEAT/0042/04Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR D THORPEAPPELLANT(1) MR K L DUL (2) MR C MCGRATH (BROOKSBY MELTON COLLEGE)RESPONDENTSMR D THORPEAPPELLANTMR K L DULRESPONDENT
Before
His Honour Judge Ansell Ms B Switzer Mr S YeboahDate 6 September 2004
[1]APPEARANCES For the Appellant MR D THORPE (the Appellant in Person) For Mr K Dul For Brooksby Melton College MR HORAN (of Counsel) Instructed by: Melton Citizens Bureau 9 Burton Street Melton Mowbray Leicestershire LE13 1AE MR C McGRATH (Representative) SUMMARY Contract of Employment Modern contract of employment of apprenticeship. Contract of employment or training. HIS HONOUR JUDGE ANSELL This is an appeal by the Respondent employer, Mr Thorpe, from a decision of an Employment Tribunal held at Leicester on 3 November 2003, who in a decision promulgated on 7 November unanimously decided that the employee, Mr Dul's, application for unfair dismissal succeeded. He was awarded compensation in the sum of £2,966.50 and his complaint for breach of contract failed.[2]Mr Thorpe's appeal relates primarily to what he alleges is a failure by the Tribunal to carry out the instructions given by the Employment Appeal Tribunal who have considered this matter previously, in making a specific determination as to the nature of the relationship between employer and employee in this case, arising out of the contention originally that it was a contract of apprenticeship. There is also a ground of appeal which was not in very clear terms but would appear to relate in part to the award of compensation.[3]This case has had a chequered history. Before coming to it we set out the background facts about the case. The employee was at school when he picked up a leaflet produced by the TEC, the Training and Enterprise Council, in relation to apprenticeships. He was put in touch with the employer, Mr Thorpe, who at the time was the manager of a small business run by Mr Larrington. Mr Thorpe had previously indicated to the Council his willingness to take on an apprentice. Mr Thorpe was informed that the apprentice would be trained by him as off site training and would also receive one day a week training at a college and that an allowance of at least £40 per week had to be paid by Mr Thorpe, the employer, although the TEC usually expected a larger sum to be paid.[4]Mr Dul was passed onto Mr Thorpe and indeed the relationship commenced and he was initially paid £60 per week, eventually, after various increases, going up to £100 per week. Other than the one day a week when he went off to college, he worked in the business, tax and national insurance being deducted, and he was often also required to work extra on a Saturday morning, and there were occasions when Mr Thorpe was away that he ran the business himself.[5]There was a finding by the Tribunal that both Mr Thorpe and Mr Larrington believed the Applicant was employed; and that only after the relationship ended was it suggested that it was a placement. Mr Thorpe today has suggested that right at the outset he was told that effectively it was a placement, that there was no real responsibility on him and that if the relationship broke down for any reason the TEC acting through the local college would find Mr Dul another apprenticeship.[6]The relationship was meant to last for a period of 3 years, but that depended how he progressed at college. The Tribunal noted several documents which referred to the Applicant being an employee, including warnings of disciplinary action. From time to time the TEC kept in touch with the employer and he was required to fill in, from time to time, progress reports on the progress of Mr Dul.[7]The Tribunal noted that it also the benefit of hearing from Mr McGrath, as we have today. He represents the Brooksby Melton College where we understand there are now quite a few young men and women undergoing similar training. He told the Tribunal that he regarded that there were two types of modern apprenticeship; one being where the apprentice is initially employed by the employer and is then sent off to college; the second type as in the case which is regarded as a placement where the young person involved is not considered, certainly by the college, as being employed, but there are paid an allowance by the employer of at least £40, fixed at that level because it is below the national insurance and tax threshold.[8]The Tribunal felt that the Applicant fell within the first of those categories, although we note that there is this distinction, that in fact in this case the employment had not started first before the training started. In other words, it was not a case of the employer employing somebody and then sending him off for training. This person, Mr Dul, was in fact placed for training with the employer.[9]The Tribunal went over the history of the case and particularly recorded that, for reasons that we need not go into, when Mr Larrington retired Mr Thorpe took over the business and under Transfer of Undertaking (Protection of Employment) Regulations 1981 (" TUPE ") arrangements, Mr Thorpe was therefore regarded as the employer. But really before he started working for Mr Thorpe, Mr Dul unfortunately got involved in some disciplinary matters with the police and as a result his employment never continued and his training as far as Mr Thorpe was concerned came to an end.[10]The Tribunal took the view that there was overwhelmingly a relationship of employer/ employee between Mr Larrington and Mr Dul and, at the time of his dismissal with Mr Thorpe. No doubt the Tribunal had in mind various tests such as the mutuality of obligation and in particular the control test.[11]We now step back in time to see how matters got to this Tribunal because this case had originally been heard by another Employment Tribunal in January 2002. They had come to the view that this more modern form of apprenticeship agreement still fell within the concept of an apprenticeship contract within the meaning under the Employment Rights Act 1996 , and had awarded a substantial sum to Mr Dul arising in this way, namely that they took the view that there was a breach of contract by the employer in bringing the apprenticeship to an end and they awarded a sum equivalent to that which he would have earned from the remaining part of the 3-year term, less certain allowances, Job Seekers Allowance and some temporary work that he had done, and in addition awarded a sum of £2,000 representing a period of one year after the apprenticeship agreement would have been completed to take account of the difficulties that he might have had in obtaining alternative employment after that time.[12]The Tribunal did find that the employee had contributed to his dismissal by 50%, but since they were dealing with a breach of contract rather than an unfair dismissal claim there was no scope to reduce damages as there would have been had it been compensation under the Employment Rights Act 1996 .[13]The matter was appealed to the Employment Appeal Tribunal who, in a decision delivered on 1 July 2003, given by Wall J, reviewed the history of apprenticeship agreements, and in particular having heard representations again from Mr McGrath and in particular from Mr Sheldon, who was invited by the EAT to make representations on behalf of the government through the Learning and Skills Council, took the view that the relationship between Mr Thorpe and Mr Dul was not a classic apprenticeship agreement and their conclusions were set out towards the end of their decision where they said at paragraph 64 that:
"64. On the available evidence, it is clear to us that the MAA [the Modern Apprenticeship Agreement] in this case is not a contract of apprenticeship in the traditional sense and as described in Dunk v George Waller & Sons Ltd ."
Later on they said this: "65. In our judgment, the MAA is something different. We accept Mr. Sheldon's submission that the MAA and the scheme on which it is based is a combination of training and job experience. Whilst in no sense conclusive, it is notable that the word "training" is predominant throughout the MAA and that the funding for it is provided by the TEC. 66. Whilst it is possible that there was a contract of employment between Mr. Larrington and Mr. Dul … it is equally clear to us that the MAA itself is not a contract of employment between Mr. Larrington and Mr. Dul. ... However, the employer did not pay the trainee: the funds for paying him came from the LSC through the college. That was clearly an error of fact and is acknowledged as such today, that no monies came from the Council or from the college to the employer to cover the cost of remuneration. Although the college did obtain funds from the government to support this scheme, those monies, it appears, were used entirely on providing the training in-house by the college.[14]The Tribunal commented at paragraph 67, and we have some sympathy for the position of Mr McGrath and his organisation, that:
"67. … were potential employers to be found liable to reimburse modern apprentices for the notional loss of income for the remaining period of the apprenticeship, and were they to be liable for damages for breach of contract, this would have a serious effect on the take up rates for the scheme."
We appreciate that comment but of course our duty here is to define whether or not it falls within an established employer/employee relationship.[15]We would only comment as far as that comment is concerned, made by the previous EAT decision, that the contract itself with the college clearly provides and puts an onus on both the employer and the college to find an alternative apprenticeship if the relationship breaks down. Indeed, Mr Thorpe told us today that he was assured by the Council that should there be a problem with the apprenticeship the college or the partnership running it would make sure that another apprenticeship was found for the employee. So, insofar as there is a risk to employers if there is a legal relationship with the apprentice, there is of course the fallback position that the college undertake the duty to try and find an alternative apprenticeship, though it does not seem to have happened in this case.[16]Thus the EAT sent the matter back to the Tribunal to consider the application in the light of the material they identified, although it is right to say that they had clearly indicated their view, namely that a modern apprenticeship agreement did not fall within the traditional concept of apprenticeship. They invited the Tribunal to make findings as to the status of Mr Dul in this case.[17]The complaint made by the grounds of appeal primarily is that the Tribunal failed to do that. We cannot agree with that complaint. Particularly in paragraph 9 the Tribunal clearly go through the relationship between the parties. They refer to the fact that he was treated throughout as an employee, given warnings and told of disciplinary action, and finally was dismissed by Mr Thorpe as an employee. Indeed, if one looks at the IT3, the Respondent's reply to the original IT1 in this case containing the grounds of resistance that were drafted by solicitors on behalf of Mr Thorpe, paragraph 2 reads as follows:
"2. On or about 30 th March 2001 the Respondent was made redundant by RLH and dismissed from his employment."
Again, clear evidence that that was how Mr Larrington and indeed Mr Thorpe regarded Mr Dul. The Tribunal came to the conclusion, at paragraph 9 that:
"9. … Whilst there is a training element in the relationship, we are quite satisfied that it is overwhelmingly a relationship of employer/employee and that the applicant was from the start an employee of Mr Larrington and at the time of his dismissal of Mr Thorpe."
[18]The Tribunal went on to add that it was not necessary for them to make any finding on the employment status of those who were merely paid an allowance without deduction of tax and national insurance, but they suspected that Tribunal would find that such people were also employees. We are therefore satisfied that the Tribunal in this case did perform the task that was given to them by the EAT in defining a relationship between the parties.[19]The Tribunal went on in paragraph 12 to take the view that since the Applicant had been dismissed because of his own defaults and, as we have indicated, the Tribunal made a finding of 50% contribution, the employee was guilty of substantial default in the employment relationship and they were therefore satisfied that defaults as such under the terms of the contract including the training element, the employer was entitled to terminate the contract in the way it could an ordinary employee without being bound to conclude the 36 months of the contract.[20]That finding raised the issue as to whether the employee was still entitled to compensation for unfair dismissal based on the fact that the apprenticeship would have lasted for the total 36 months and indeed the additional element of £2,000 which represents his lost opportunity thereafter.[21]The Tribunal went on to in fact award the same figures by way of compensation for unfair dismissal as the first Tribunal had awarded for breach of contract, although on this occasion they applied the 50% reduction because they were dealing with unfair dismissal compensation rather than damages for breach of contract.[22]Today Mr Thorpe appears to raise an issue so far as those damages are concerned suggesting that the Tribunal had not properly analysed the chances of Mr Dul finding alternative employment. In fact his ground of appeal, we are satisfied, is more limited than that and in ground 3 relates solely to the head of loss of benefits of apprenticeship, in other words, the £2,000 extra that was awarded originally by the Tribunal.[23]In any event we are satisfied that the Tribunal were entitled to bear in mind that evidence which they had previously heard from Mr Dul and which they referred to in their first decision relating to his attempt to find alternative employment and within paragraph 14 of their original decision they make clear findings as to the attempt to find alternative employment and the lack of success in so doing. Indeed, we have already commented that the college, the Council or the employer fulfilled its obligation trying to find him alternative apprenticeship arrangements. Therefore, we are not satisfied that there was any proper ground of appeal in relation to that head of claim.[24]However, we are satisfied that Mr Thorpe has properly raised the issue of the loss of benefits of apprenticeship and his argument runs that if the Tribunal on this occasion was satisfied that the employers were indeed entitled to bring the contract of apprenticeship to an end, why should they be liable for the loss of benefit he could have obtained by qualifying at the end of his apprenticeship.[25]We can see that there is merit in that argument, because on the face of it there is perversity in the Tribunal finding on the one hand that the employer was entitled to terminate the contract, and yet on the other awarding a sum that effectively arises out of that contract that should have run its full course.[26]What we therefore propose to do is to reduce the damages by that figure. It will be reduced by £1,000, in other words representing 50% of the £2,000 that was originally awarded. So the net result is that the compensation is reduced from £2,966.50 to £1,966.50; and to that extent the appeal succeeds.