Employment law lecture 3, alternative work relations (still do lecture 2)

The first thing the students of labour law learn is that only individuals engaged in certain
kinds of contract for the provision of work, typically those who are “employees” or
“workers”, are entitled to claim statutory employment rights against their employer. By
contrast, the “self-employed” are assumed to be capable of looking after their interests in
contractual negotiations. Consequently, this boundary question is pivotal. The ingenuity of
judges in devising legal tests to trace the boundary has been matched only by the ingenuity
of employers in devising contractual arrangements to evade it.’
Alan L Bogg, ‘Sham self-employment in the Court of Appeal’ (2010) 126 LQR 166
Discuss.

Sham contracts: employers try to stick in terms to make it look like workers are self-
employed, but when you look into it the real relationship is one of a traditional
employment.
Traditional test: Snook v London & West Riding Investments Ltd [1967]: ‘common intention
that the acts or documents are not to create the legal rights/obligations which they give the
appearance of creating’ – test now outdated
**Consistent Group Ltd v Kalwak [2007] - the next case
 Focus on real relationship, but:
Rimer LJ: a sham requires finding that both parties intended to deceive – can be criticsed,
why would the employee want to deceive
***Protectacoat Firthglow Ltd v Szilagyi [2009]  Smith LJ: the next case
Focus on the ‘true intentions or expectations of the parties, not only at the inception of the
contract […] but at any later stage where the evidence shows that the parties have expressly
or impliedly varied the agreement between them. […] If there is a contractual document,
that is ordinarily where the answer is to be found. But, if it is asserted by either party, or in
some cases by a third party, that the document does not represent or describe the true
relationship, the court or tribunal has to decide what the true relationship is” (paras 50, 55)

The new authority – the now leading case **Autoclenz Ltd v Belcher and others [2009]
Supreme Court:
Main issue: whether car valeters were employees or alternatively, workers
 They claimed: entitled to the minimum wage and paid holiday
Terms:
Contracts described them as ‘subcontracted independent contractors’
Valeters could provide a substitute, ‘provided that such an individual is compliant with
Autoclenz’s requirements’
No mutuality of obligation: ‘You will not be obliged to provide your services on any
particular occasion’ and A had no obligation to engage their services
Worked at A’s site, and were provided cleaning products, overalls…
Paid by piecework but deductions for cleaning materials & tax/NI

**Autoclenz Ltd v Belcher and others [2009]

Lord Clarke:
1) It is not possible to imply terms into a contract that are inconsistent with express terms.
Only means by which a party may argue that a contract contains a term that is inconsistent
with an express term is to allege that the written terms do not accurately reflect the true
agreement  Sham
2) In an employment context, it is not always necessary to demonstrate that both parties
intended to paint a false picture to find that a sham contract exists (Kalwak, Rimer LJ
disapproved)
3) Approving Kalwak and Protectacoat, Lord Clark ruled that in an employment context the
key question is:
‘what was the true agreement between the parties?’
The contract did not reflect the true agreement between the parties.
 Valeters were workers despite terms of their contracts.
- Contract has terms which are inconsistent with express terms

However, the name given to the relationship/written agreement is sometimes relevant:

Ferguson v John Dawson [1976]: building site worker, oral contract
Declarations of the parties should be disregarded if the remainder terms point to the
opposite direction

Massey v Crown Life Insurance Co [1978]: employee agreed to become independent

contractor
New agreement: genuine change in status

Carmichael v National Power Plc [1999]

 What the parties agreed: ‘one important source of material’ + objective inferences about
what they said/did when they were engaged/subsequently

Continuity in employment :
To enjoy some employment rights  double requirement:
Being an employee + Continuously employed for min. period
Ex1: unfair dismissal: employee for at least 2 years -s108(1) ERA
Ex2: statutory maternity pay: 26 weeks – s164(2)(b) SMPGR

Starts counting when employee ‘starts work’ – s211(1)(a) ERA

Calculated by working weeks – s210(3) ERA
If a week is missing, continuity can be broken – s210(4) ERA

BUT: what happens if an individual is engaged on a series of individual contracts (with gaps
between them)?

Continuity in employment ii:

there a way to bridge the gaps?
Sickness/injury, temporary cessation, arranged by custom- s 212(3) ERA
Gaps between successive contracts  Is there an ‘umbrella contract’?
Cornwall CC v Prater [2006] – teacher on an ad hoc basis – found an exchange of
employment no continuity of employment

Ford v Warwickshire County Council [1983]– gap  in work – looked at length of period out
and in work, if in work was longer than out, one could claim continuity – if work is regular.
E.g same shifts

Flack v Kodak Ltd [1987] 1 WLR 31 – total length of employment

Alternative personal work contracts and relationships:

Alternatives to employment statuts ;

Casual workers : zero – hour contracts, on call workers – nurses.
Agency workers: employee shareholdes , office shareholders, company directors,

trainees and apprentices

who is a worker:

Section 230(3) of ERA 1996 defines a worker as an

‘individual who has entered into or works under (or, where the employment has ceased,
worked under):A contract of employment; or 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.’
ERA 1996, s 230(3): ‘worker’  At least 4 elements:
- A contract (of employment or not);
- Mutuality of obligation
- A degree of personal service;
- The hirer of the individual’s labour must not be the latter’s client;
[Subordination (?)]

A contract (of employment or not)

Required by ERA 1996, s 230(3)
Sharpe v The Bishop of Worcester [2015] – Church of England rector
 Relationship governed by Ecclesiastical law, not a contractual arrangement
Gilham v MoJ [2017] [appeal pending] – District judge
 Judges are office holders, no employment relationship with the Lord Chancellor
 Office holder as a more appropriate status to avoid subordination

2) Mutuality of obligation
Reminder: mutuality of obligation has 2 levels:
Exchange: work/wage bargain – only one required to find that someone is a worker
Reciprocity: mutual promise to work/provide work
James v Redcats (Brands) Ltds [2007]
Worked as a courier delivering parcels to private addresses
Own vehicle
Could provide substitutes if ‘unable’ to work
Could deliver parcels for other businesses (but never did)
No holiday/sick pay, pays tax/NI herself
Is she an employee? A worker?

Pimlico Plumbers Ltd v Smith [2017]

Required to wear uniform, company ID card, company mobile phone and hire company van
‘Self-employed’ - No obligation to offer/accept work (but inform if unavailable)
But normal working hours: 5 days a week (40h)
Term on how much would be paid for his services
No express right of substitution but:
Could decline jobs
Send another operative if he could not attend
(3) A degree of personal service & (4) The hirer of the individual’s labour must not be the
latter’s client;
If there is a personal service, both element no.3 and no.4 are fulfilled
James v Redcats (Brands) Ltds [2007]  Dominant purpose test
‘whether there was an obligation to perform work personally was a matter of construction
of the contract, and, in the present case, the fact that a substitute could be provided only
when the claimant was “unable” to provide work, rather than when “unable or unwilling”,
meant that the claimant was obliged to do the work personally’
‘in deciding whether an individual was contracting with a company as a customer of her
business, the tribunal had to try to determine whether the essence of the relationship was
that of a worker or someone who was engaged albeit in a small way in a business
undertaking, but, if the obligation for personal service was the dominant feature of the
contractual relationship, the contract would lie in the employment, rather than the
business, field’
Pimlico Plumbers Ltd v Smith  ‘the dominant feature of the contracts was an obligation of
personal performance.’
- Right to substitute is so insignificant you don’t even have to involve it In the contract,
the wording refers to you, this therefore means the dominant feature in the contract
was permanent service, this means again the 3rd and the 4th requirement is satisfied.

A degree of personal service & (4) The hirer of the individual’s labour must not be the
latter’s client;
Cotswold Developments Construction Ltd v Williams [2006] Integration test
Carpenter subcontracted  maintenance services at London Underground
Is the person actively marketing his/her services as an independent person to the world in
general (hirer = client  self-employed), OR
Is the person recruited by the other person to work for it as an integral part of its
operations? (hirer  client  worker)?

(3) A degree of personal service & (4) The hirer of the individual’s labour must not be the
latter’s client;
 Integration or Dominant Purpose Test?
Hospital Medical Group Ltd v Westwood [2013]
Maurice Kay LJ: ‘I do not consider that there is a single key with which to unlock the words
of the statute in every case. On the other hand, I agree with Langstaff J that his ‘integration’
test will often be appropriate, as it is here.’
Bates van Winkelhof v Clyde & Co LLP [2014]
Lady Hale agrees with Maurice Kay LJ: ‘neither the Costwold ‘integration’ test nor the
Redcats ‘dominant purpose’ test [are] purported to lay down a test of general application.
[…] There can be no substitute for applying the words of the statute to the facts of the
individual case.’

5) Subordination (?)
Bates van Winkelhof v Clyde & Co LLP [2014]
Whether an LLP partner was a worker
CA: No, because lack of subordination
SC: Lady Hale: ‘While subordination may sometimes be an aid to distinguishing workers
from other self-employed people, it is not a freestanding and universal characteristic of
being a worker’  Yes, was a worker
[Subordination requirement  based on EU equality law  e.g. Allonby v Accrington and
Rossendale College [2004] ]

The concept of an employed person:

Equality Act 2010, s 83(2):
Applies to those who are in and applying for
“employment under a contract of employment, a contract of apprenticeship or a contract
personally to do work”.

Equality Act 2010, s 83(2): ‘employed person’  At least 4 elements:

1. A contract (of employment or not)
2. Mutuality of obligation
3. A degree of personal service
4. Subordination

1. A contract (of employment or not)

X v Mid Sussex Advice Bureau [2012]
Volunteers are not contractually engaged to personally do work

2. Mutuality of obligation [exchange: wage-work bargain]

Mingeley v Pennock (Trading as Amber Cars) [2004]
M: taxi driver, pays weekly fee to access radio/computer system of Amber
Computer system allocates calls to a fleet of drivers
Own car, not obliged to work a fix amount of hours Wears company uniform, could
not work for other operators, had to charge Amber fares
Not an employee – it was not work in exchange for bargain. He paid for the service in
exchange of fee

3. )A degree of personal service

Mingeley v Pennock (Amber Cars) [2004]  Dominant purpose test
Personal execution of work or labour had not been the dominant purpose
Main purpose was allowing access to calls for
In exchange, his only obligation towards Amber Cars was to pay the weekly fee, he
was not obliged to personally execute work for them
Not an employed person within the meaning of the Race Relations Act 1976

4. 4) Subordination
5. Jivraj v Hashwani [2011]  private arbitrator
‘The essential questions are whether, on the one hand, the person concerned
performs services for and under the direction of [the hirer] in return for which he or
she receives remuneration, or, on the other hand, he or she is an independent
 provider of services who is not in a relationship of subordination with [the hirer].’-
no subordination, he makes up his mind

Halawi v World Duty Free [2015]  beauty consultant at duty free shop
Halawi’s own company  invoiced intermediaries (WDF)  invoiced Shiseido
The appellant was not subject to WDF's control in the way she carried out her work’
‘The lack of subordination is consistent with her lack of integration into WDF's
business’

Agency workers :

Is there:
Mutuality of obligation (with the agency or with the hirer)?
Control (by the agency or by the hirer)?

Can an agency worker become an employee of the hirer over time?

Dacas v Brook Street Bureau [2004]
 not obliged to accept work & no day-to-day control
Majority opinion:  A contract of service can be implied as a necessary inference
from the conduct of the parties, the circumstances and the work done  Obiter:
could be an employee of the hirer
Minority opinion: Munby J  Extensive
- She could be a direct employee of the hirer, it did not matter if the employer agreed
to pay the wages via a third party

Cable & Wireless plc v Muscat [2006]

1. An individual who provides his services to an end-user via his own service company (“a
triangular case”) can be the “employee” of end-user even though the contract(s) expressly
state that he is “self-employed”
2. Mutuality of obligation can be satisfied where the obligation to remunerate does not lie
on the person having control of the worker’s work so long as the remuneration was being
provided by the employer albeit indirectly.
 Necessary to imply a contract of employment to give business reality
But: James v London Borough of Greenwich [2008]
-The common law principle of necessity for implication has preference over criteria to
establish contract of employment
-If 2 valid contracts exist (hirer-agency, agency-worker)  no need to imply an employment
contract between hirer-worker
- james case, much more strict, terms can only be implied in a contract if they are rather
necessary, and therefore express terms take priority.
- no need to to imply the contract existence.

Agency worker, is a employee of the employer..? but not the case in james..

EU law: Temporary Agency Workers Directive 2008/104/EC

Agency Workers Regulations 2010
(Limited) Right to equal treatment between agency workers & employees
Covers: remuneration, paid holiday, working hours, overtime, maternity and anti-
discrimination, BUT: 12 week qualifying period
!!! The regulations don’t govern employment status  case law

Summary :
• Sham contracts: Autoclenz  real relationship + common intention to deceive not
required
• Continuity in employment: on a case by case basis, but in general: look at exchange
of work/wages (mutuality)
• Workers v employed persons: main difference?
• Requirement of subordination for employed persons
• Subordination relevant but not strictly necessary to find that someone is a
worker
• Agency workers:
• Following James v London Borough of Greenwich [2008]  difficult to imply a
contract of employment between hirer-worker
•
• Additional source of rights: Agency Workers Regulations 2010