MR D CLARKSON v PENSHER SECURITY DOORS LTD [2009] UKEAT 0107_09_1606

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2009] UKEAT 0107_09_1606

Case No Appeal No. UKEAT/0107/09

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MR D CLARKSONAPPELLANT

PENSHER SECURITY DOORS LTDRESPONDENT

Before

His Honour Judge Reid

Date 16 June 2009

[1]APPEARANCES For the Appellant MS CLAIRE DARWIN (of Counsel) For the Respondent MR STEFAN BROCHWICZ-LEWINSKI (of Counsel) Instructed by: Messrs Ward Hadaway Solicitors Sandgate House of Lords 102 quaywide Newcastle upon Tyne Tyne and Wear NE1 3DX SUMMARY WORKING TIME REGULATIONS: Worker The Appellant did work for the Respondent. Was he a worker or did he carry on a business undertaking? The Employment Tribunal held he was not a worker. It did not err in law in so holding. HIS HONOUR JUDGE REID QC This is an appeal from a decision of the Employment Tribunal held at Newcastle Upon Tyne on 30 July and 11 September of last year. The judgment was sent to the parties on 6 October.

[2]The judgment was the judgment at a Prehearing Review at which the issues were whether the Claimant was an employee of the Respondent or, if not, whether he was a worker for the Respondent and therefore entitled to the protection of Part 11 of the Employment Rights Act 1996 and the Working Time Regulations of 1998. The Tribunal held that he was neither an employee nor a worker. The appeal is limited to an appeal against the second of those findings. It is now accepted that the Claimant was never an employee.

[3]The relevant statutory provision is to be found at section 230 of the Employments Rights Act 1996. The identical provisions are to be found in the Working Time Regulations . Section 230, so far as material reads:

"230 Employees, workers etc. (3) In this Act "worker" (except in the phrases "shop worker" and "betting worker") means an individual who has entered into or works under (or, where the employment has ceased, worked under)— (a) a contract of employment, or (b any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker's contract shall be construed accordingly."

[4]The issue in this appeal is in relation to the expression:

"any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual."

[5]The background facts are that the Appellant (Claimant) was a family friend of the McAllisters, who were respectively Chairman and Managing Director of the Respondents. The McAllisters' business employed 91 employees; 83 of them at the site where the Claimant worked.

[6]From October 2005 until December 2007 the Claimant undertook nearly all of the electrical work that was required by the Respondent. There was some electrical work done by other electricians but it appears that was specialist work which was not within the capability of the Claimant. The Tribunal held that there was an obligation on both parties to provide and to undertake a reasonable amount of work and the parties were agreed that the Claimant was expected to and did provide his services personally.

[7]The Claimant was supplied with some tools and materials. He provided his own hand tools. There was one piece of equipment which was acquired essentially for the Claimant's use by the Respondent, on the basis that when the Claimant had finished with the Respondent the tool would be sold to him for £1,000. The factual position appears to be that he has retained the tool; it is of some use to him but he has not in fact paid for it. So far as the tools that were provided for him were concerned, although it is a slightly odd use of the word, that appeared to include ladders and scaffolding, which was already on site, and some Hilti power tools. The materials that he needed for his work were provided by the Respondent.

[8]The Respondent's exercise of control over the Claimant was a very general nature, in that the Claimant was told what work needed to be done. He was not told how he was expected to do it.

[9]The Tribunal noted there were some factors which indicated that the Claimant might be an employee. For example, the fact that he worked consistently for the Respondent over a period of time; that he was paid at an hourly rate rather than by the job and he had to clock in and clock out of work. So far as that last point was concerned, the explanation given was, first of all, the Respondents had to know who was on site for safety reasons, so that was essentially neutral, and secondly, to cross check on timings for the purposes of payment. It would not, of course, be an absolute cross-check since the Tribunal apparently accepted that the Claimant charged for and was paid for travel time. But it does appear in the schedule set out in the course of the Decision that it was perhaps not altogether unwise since there appear to be considerable divergences between the two sides as to the extent of time worked: not necessarily large amounts, but in some cases they were substantial.

[10]The Tribunal found that the Claimant worked under a contract; that there was a mutuality of obligations; and to the limited extent that I have noted that there was control. It went on to say that the Claimant came very close to the dividing line between being a worker and having or being a business undertaking.

[11]The appeal is mounted on two grounds; the first asserts that the Tribunal could not have reached that conclusion had it not erred in law. It is said that there was no evidence before the EAT on the basis of which properly directed it could have found that the Claimant was operating a business undertaking. It is noted that there was no evidence the Claimant had annual accounts drawn up, no evidence that he actively marketed his services elsewhere or to the world in general and that he only registered as self-employed under the Construction Industry Scheme and only submitted an invoice for work done after the event, i.e. after he had ceased working and at a time when he was seeking to obtain payment, which he has said is still outstanding of work which he did.

[12]The structure of section 230(3)(b) is that prima facie contracts to perform work or services personally will be performed by a worker. There is then the exception which relates to the carrying on of a business undertaking; see the words:

"any work or services for another party to the contract whose status is not by virtue of that contract that of a client or customer of any profession or business undertaking."

That much I think is common ground.

[13]It is also common ground that, as it is set out in Byrne Brothers v Baird and Others

[2002] IRLR 96

, the words "business undertaking" need to be construed with some care and comparatively narrowly. The Recorder in that case, Underhill J as he now is, said in paragraph 17:

"(2) "[Carrying on a] business undertaking" is plainly capable of having a very wide meaning. In one sense every "self-employed" person carries on a business. But the term cannot be intended to have so wide a meaning here, because if it did the exception would wholly swallow up the substantive provision and limb (b) would be no wider than limb (a). The intention behind the regulation is plainly to create an intermediate class of protected worker, who is on the one hand not an employee but on the other hand cannot in some narrower sense be regarded as carrying on a business. (Possibly this explains the use of the rather odd formulation "business undertaking" rather than "business" tout court ; but if so, the hint from the draftsman is distinctly subtle.) It is sometimes said that the effect of the exception is that the Regulations do not extend to "the genuinely self-employed"; but that is not a particularly helpful formulation since it is unclear how "genuine" self-employment is to be defined."

[14]The decision as to whether or not someone falls within the business undertaking exception is said by James v Redcats (Brands) Ltd EAT

[2007] IRLR 296

at paragraph 64 to be one which must be identified from the proper analysis of the contract. Elias J (then the President of the EAT) said:

"But even if that is wrong, the existence of the exception for those in business on their own account demands that the courts must differentiate between workers and those in business, and that inevitably requires consideration of whether the contract, properly analysed, is predominantly of the former or the latter kind. So a similar test to identify the dominant characteristic of the contract applies."

[15]Obviously, the plainest case of someone who falls within the business undertaking exception, outside section 230(3)(b), is a tradesman who commercially markets his services; see Cotswold Developments v Williams

[2006] IRLR 181

at paragraph 53. But it does not seem to me that a person who does not commercially market his services necessarily falls within section 230(3)(b); there may well be people who market their services through the "old boy network", through local contacts and the like, who could not properly be said to be commercially marketing their services, are none the less happily running their own small businesses. Langstaff J said at paragraph 53 in Cotswold :

"Thus viewed, it seems plain that a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations, will in most cases demonstrate on which side of the line a given person falls."

That part of the paragraph is relied on heavily by the Claimant. However, the paragraph continues:

"It is not necessary for this decision to examine more closely the individual cases which may fall much closer to the dividing line, and the principles upon which those cases should be determined, because in the present case the Tribunal determined that Cotswold was not in the position of a client or customer of any profession or business undertaking carried on by the Claimant reason of "the nature of the Claimant's relationship with the Respondent"

. They did not elaborate further."

[16]This was a case where, as the Employment Judge said, the case fell close to the dividing line. He described it as being a much more difficult question than the question of whether the Claimant was an employee.

[17]The Appellant's argument ran that the Tribunal should have asked itself, but did not, whether the status of the other party to the contract was by virtue of the contract that of a client or customer of any profession etcetera. It was submitted that the Employment Tribunal failed to look properly at the status of the parties by virtue of the contract. Reference was made to the wording used from time to time. But, it seems to me, that the Tribunal did have the correct text clearly in mind because at paragraph 38 of the Decision, the Employment

Judge said:

"The evidence I had heard was consistent with the claimant having entered into some kind of contract to undertake work personally for the respondent. The final question was therefore was the respondent's status by virtue of that contract that of a client or customer of a profession or business undertaking carried out by the claimant."

[18]He clearly posed the correct question to himself. It was said then that the Tribunal failed to look properly at whether "he was a business undertaking" (whether that is grammatically correct may be doubtful but the sense of it is clear enough). The Tribunal, in my view, did look and see whether or not the Claimant was conducting a business undertaking. I accept that, as the Claimant complains, the Employment Tribunal made no findings as to financial risks taken by him. That much is true. But it did look, in very considerable detail, at all the factors which were raised. It looked (as it was entitled to do) at the nature of the contract between the parties and in doing so it did look at the position with the benefit of seeing what happened under the contract. As was pointed out by the learned Recorder (as he then was) in Byrne Brothers at paragraph 17:

"(6) What we are concerned with is the rights and obligations of the parties under the contract - not, as such, with what happened in practice. But what happened in practice may shed light on the contractual position: see Carmichael (above), esp. per Lord Hoffmann at pp 1234-5."

[19]The Tribunal, having been through all relevant factual matters, then considered whether the Appellant was recruited by the Respondent to work as an integral part of the Respondent's organisation. It was said that guidance was simply a part of the guidance to distinguish those individuals who are recruited to work outside an organisation, in an arm's length commercial relationship, and or to work as an identifiable organisation in their own right, and that, therefore, the Employment Tribunal erred in looking at the level of integration. It was noted that a worker was described in one of the cases as being "semi-detached". The Tribunal, however, in my judgment, committed no error in this regard.

[20]The Tribunal looked at a wide variety of factors to determine the extent to which it could properly be said that the Claimant was integrated into the business run by the Respondent. It noted that, for example, (I think this is the finding from paragraph 42) although he had the use of a desk, he did not have a desk in Mr McAllister's office. His phone number was on the company's list because it was necessary to contact him from time to time. There was nothing to indicate that he played any part in the company. For example, he was in general terms not someone who took part in company meetings. He was someone who came and went as he chose. He was not involved in procedures such as appraisals. He determined how and when he worked subject to any practical exigencies such as emergencies and deadlines. On occasion, he worked long into the night. He was not paid when he did not work and it was noted that he had specialist skills.

[21]In my judgment, the Tribunal was perfectly entitled to look at these matters as part of the overall picture. It was also entitled to look at these matters when determining whether or not the Claimant had crossed the lower threshold ("the lower pass mark", as it was described by Langstaff J in one case) for being a worker, as opposed to being an employee.

[22]In my judgment, when one looks at the totality of the case, one cannot say that the Tribunal erred in law. It did not rely disproportionately on any particular part of the authorities; I had three authorities cited to me. It correctly asked itself (as I have indicated) at paragraph 38 the relevant question. At paragraph 44, it answered that question:

"Notwithstanding the duration and consistency of the work he undertook he was offering a service to the respondent as a business undertaking. The position of the claimant could perhaps be described as a 'trusted independent contractor'."

He was (I should point out) a trusted, independent contractor who was at liberty to, and did, do work elsewhere. It may not have been a vast amount of work and it may have been that the Respondent was entirely happy for him to do it but that again was another indication which the Tribunal took into account, and was entitled to take into account, in reaching its conclusion that he had a business undertaking of his own.

[23]The second point that was taken by way of appeal was a suggestion that in paragraph 44 of the judgment, the Employment Tribunal erred in law when it made reference to the Claimant's work skills. The passage that was referred to was in these terms:

"By his own account his skills were such that they were worth an annual gross salary of about £47,000 per annum. These skills distinguish his position from that of the labour only workers described in Byrne Brothers (they were form work carpenters on building sites). Where someone has specialist skills which they can sell to the market place (as the Claimant at least admitted he had done in the past), they are in a much stronger position than other workers. In this situation more weight can be given to the intention of the parties, as the bargaining position is more equal."

So far that sets out a statement which may or may not be an entirely accurate statement of the law but the Employment

Judge went on:

"Having heard both the claimant's evidence and that of the respondent's witnesses I was absolutely satisfied that the claimant never wanted to be an employee or worker of the respondent. He turned down the offer of employment when he chose to discontinue using one agency he looked for others. He may have wanted to be an agency worker or even possibly an employee of an agency but the question here is his relationship to the respondent."

[24]When one looks at that, it seems to me there is no error of law that is demonstrable from that. It is prayed in aid, in a sense, as a very minor point backing up the conclusions that had been reached from an exhaustive and meticulous examination of the evidence and a meticulous finding of fact. In those circumstances, I cannot see how it can be said that the omission of that part of the judgment or indeed saying per contra, "I take no account whatsoever of his skills" would have made the faintest difference to the conclusion that was reached. On the findings of fact which were reached by the Tribunal, this was a decision that was entirely open to the Tribunal to reach. It was done after a careful consideration both of the law and the facts and it is not sufficient to say, "Some other Tribunal might have viewed those facts differently".

[25]In my judgment, there was no error of law demonstrated in the Tribunal's judgment. It is not being suggested that the Decision could be categorised as perverse and in those circumstances the appeal fails and is dismissed.