EMPLOYMENT APPEAL TRIBUNAL 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
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1 Appeal No. UKEAT/0107/08/MAA EMPLOYMENT APPEAL TRIBUNAL 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS At the Tribunal On 8 May 2008 Judgment handed down on 22 May 2008 Before THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT) MR D G SMITH MR D WELCH ST IVES PLYMOUTH LIMITED APPELLANT MRS D HAGGERTY RESPONDENT Transcript of Proceedings JUDGMENT ã Copyright 2008
2 APPEARANCES For the Appellant MR SINCLAIR CRAMSIE (of Counsel) Instructed by: Messrs Dechert LLP Solicitors 160 Queen Victoria Street LONDON EC4V 4QQ For the Respondent MR SAUL MARGO (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon LONDON SW19 1SE
3 SUMMARY JURISDICTIONAL POINTS Worker, employee or neither Continuity of employment The employee, a casual worker, initiated a claim for unfair dismissal. The issue arose whether she had the requisite continuity of employment. The Tribunal found that there was a sufficient mutuality of obligations in the gaps when no work was performed to infer the existence of an umbrella or overarching contract. This gave the Tribunal jurisdiction. The EAT, by a majority, held that the Tribunal had been entitled to reach that view. Appeal dismissed. Discussion on relation between expectations and legal obligations. ã Copyright 2008
4 . THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT) 1.This case raises a very short point, whether the Employment Tribunal was entitled to find that there were mutual obligations subsisting between the employer and the employee during periods when the employee, a casual worker, was not actually engaged on any particular shift. The background. 2.The background briefly is as follows. The claimant (as we shall continue to call her, although she was the respondent before us) was employed as a bindery assistant in the business of the appellant. They print books and magazines. The appellants employ a core of permanent employees and supplement them with a bank of casual workers whom they employ for particular shifts, as and when required. They also employ agency workers to supplement the casual workers. The work fluctuates considerably, and at very short notice. 3.The Tribunal s key findings were as follows: 7. The pattern of work was that the requirements for each individual shift were identified and arrangements were made by the crew in clerk, a young lady called Ellie, to fill the necessary shift requirement with permanent employees and the casual employees as necessary. If insufficient casual employees were available the respondents would contact employment agencies. The respondents explained to me that the work involves some skill and casual workers such as the claimant developed a degree of skill through experience which the respondents valued. At the conclusion of a particular shift a casual would contact Ellie to discuss his or her availability for the following day. It would be open to the casual to indicate whether or not he or she was available and, no doubt, Ellie would indicate whether he or she was needed. There was no arrangement on the part of either party that a casual would be offered a minimum amount of work over any given period or that he or she would accept a specified minimum amount of work. The respondents explained to me, and I accept, that if a casual was offered work and accepted, it was expected and understood that that individual would honour the arrangement and turn up for work and having turned up and worked the shift he or she would be paid for it. That was an implicit part of the bargain. If a casual was unable to work Ellie would telephone other casuals on the list in order to ascertain if they were available to work. Once an offer had been made and accepted once again it was expected that the individual would turn up for work.
5 8 It was part of the arrangement, however, that a casual was free to decline particular offers if he or she wished to do so. There would ordinarily be no comeback or action taken against that individual. Mrs Haggerty explained to me that it was perfectly in order for her or one of her casual colleagues to notify the respondent of any periods when they would be unavailable to work through holiday or other reasons. Sick absence, if notified in advance or when it arose was, again, something to which the respondents did not object. Equally the casuals had no expectation of being offered a set minimum amount of work. 9 During the course of the evidence the respondents explained to me that they regarded the casuals as a valuable resource and took steps to try and ensure that each received a reasonable amount of work offered. The reason for this was that a casual who did not receive a reasonable amount of work offered would be likely to go elsewhere and the respondents would lose the availability of his services. On the other side of the coin if a casual consistently failed to accept offers of work over a long period without an acceptable reason such as illness or holiday some enquiry would, at the very least, have been made to ascertain whether he or she was still interested in remaining on the bank of casuals. The ultimate position might be that if an individual failed to respond over a long period to repeated offers of work his or her name would be removed from the list altogether. I have been shown a list of all the shifts [for] the weeks that the claimant worked from April There is a pretty consistent pattern of the claimant working most weeks and her evidence to me was that rarely, if ever, did she refuse a shift offered. There were periods when she took holiday. Over the whole of the period from 1998 onwards the claimant has found it impossible now to identify any particular dates which were holiday when obviously she would have been unavailable for work or to identify dates when she was offered work but refused it as opposed to dates when she was not offered work at all. The record discloses that there are a number of periods of sick absence over the years that the longest being for a period of some 12 weeks in Some qualification is required to paragraph 9. It may be taken to suggest that the claimant always worked when requested, with possibly the additional inference that she felt obliged to do so. Mr Margo, counsel for the claimant, submits that this would not be fair inference when that paragraph is read with the two preceding paragraphs. He does accept that the following statement of the evidence noted by the appellants accurately represented the evidence given before the Tribunal by the claimant. There was evidence to the effect that: this was an arrangement whereby she could choose which days to work and that this arrangement suited her personal circumstances. The Claimant did not at any stage in her evidence claim that she only took time off work for holiday or sickness ; and her general practice was to give the [appellant] prior notice of any days during the following week on which she did not wish to work; that, as a UKEAT/0107/08/MAA - 5 -
6 result, she would not be offered work for those days (even if work was available). 5. It was also accepted that there were many days when the claimant would have chosen not to make herself available outside sickness and holiday periods. The Tribunal was shown a chart which showed that for 2006 she worked 126 shifts but there were 77 when she would have chosen not to make herself available and agency staff were recruited. 5.There was an incident in February 2007 when the claimant left the shift following an altercation with another individual. Disciplinary action was taken against her and she resigned and brought her claim for constructive unfair dismissal. 6.It was common ground that the claimant was employed under a contract of employment during the period when she was actually at work. However, in order to have sufficient continuity to be able to bring her claim for unfair dismissal she had either to show that she was employed under what is often termed a single umbrella or overarching contract, or that the gaps in her employment would count for continuity purposes by virtue of the statutory provisions in section 212 of the Employment Rights Act The employment judge found that there was an umbrella contract, and this is the subject of this appeal. He also concluded that had there been no such contract, the claimant would not have been able to take advantage of the statutory provisions to secure the requisite continuity. There has been no cross-appeal against that latter finding. The Tribunal s reasoning. 7.In order to establish the existence of a continuing contract, it is now firmly established that there must be some level of mutual obligation between the employer and the employee during the period when no work is being performed: see for the most authoritative statement the decision of the House of Lords Carmichael & Anor v National Power [1999] ICR 1226 (HL) per Lord Irvine of Lairg at page 1230G (Lords Goff, Jauncey, Browne-Wilkinson and Hoffmann
7 concurring.) The Tribunal properly directed itself as to the relevant legal test. 8.The Tribunal concluded that such mutual obligations did exist. The reasoning was as follows: It is accepted by the parties that whilst she was actually working a shift for the respondents the claimant was working under a contract of employment. There are, in my judgment, two significant factors. First of all I am reminded that the intention of the parties may be deduced from their conduct over a long period of time. In this situation, there was an expectation that the claimant would be available for a reasonable amount of work. Her services were valued and frequently called upon. I entirely accept that there was no obligation upon her to accept any particular offer but I am satisfied that had she persistently declined offers of work her name would be removed from the list of casuals. Equally although there was no guaranteed minimum amount of work the claimant had an expectation that she would be offered a reasonable amount of work. If the flow of work had dried up she would undoubtedly have sought work elsewhere. I find that those circumstances are sufficient just sufficient to amount to the minimum of mutual obligation between the parties to enable me to find that there was an overarching contract of employment. I am supported in this conclusion by the fact that the respondents took disciplinary action against the claimant. It might have been argued that disciplinary action was an incident of a single contract relating to a specific period during which the claimant worked. Were that to be the case it is surprising that it continued following the termination of that particular work period when the claimant left early. In my judgment, that is supporting evidence of a continuing obligation between the parties. 10. We think it is plain that the Tribunal reached this conclusion without misunderstanding the evidence given by the claimant. The grounds of appeal. 9.The ground of appeal can be very shortly stated. The appellants submit that the Tribunal has focused on the expectation of the parties the expectation of the employee to be given a reasonable amount of work by the employer, and of the employer that the employee will undertake a reasonable amount of the work offered and confused that with a binding legal obligation. UKEAT/0107/08/MAA - 7 -
8 10.Mr Cramsie, counsel for the appellants, says that the employment judge inferred a contractual obligation in circumstances where the conduct of the parties could be wholly explained by their mutual commercial interests. The fact that an employee may appreciate that if she too readily refuses to do the work she may ultimately be removed from the bank of casuals is not sufficient to establish a legal obligation on her to do the work. Similarly, the fact that the employer may consider it commercially convenient or desirable to allocate work on a reasonably regular basis because of a fear that the casual might otherwise find work elsewhere is not sufficient to impose a duty to provide work. 11.He relied in particular upon the analysis of the House of Lords in Carmichael. In that case the issue was whether guides who conducted tours around the Blyth power station in Northumbria were employed under an umbrella contract. They were employed as required, although they received training in order to perform their duties. They worked habitually for some 25 hours a week. Lord Irvine found that the Employment Tribunal was entitled to find that there were no mutual obligations binding the parties when no work was being performed, and bound to hold, in the light of that finding, that there was no umbrella contract in place. His Lordship recited the finding of the Tribunal as being that: The parties incurred no obligations to provide or accept work but at best assumed moral obligations of loyalty in a context where both recognised that the best interests of each lay in accommodating the other. 14. And later he described the nature of the arrangement as follows: In 1994, for example, Mrs Carmichael was not available for work on 17 occasions nor Mrs Lees on eight (p.1174d). No suggestion of disciplining them arose. The objective inference is that when work was available they were free to undertake it or not as they chose. This flexibility of approach was well suited to their family needs. Just as the need for tours was unpredictable so also were their domestic commitments. Flexibility suited both sides. As Mrs Carmichael said in her application form, the part-time casual arrangement would suit my personal circumstances ideally! The arrangement turned on mutual convenience and goodwill and worked well in practice over the years. The tribunal observed that Mrs Leese and Mrs Carmichael had a sense of moral obligation to the C.E.G.B., but would infer no legal obligation. Mr Lovatt also gave evidence for the C.E.G.B. that neither ladies are required to work if they do not wish to do so. In my judgment, therefore, the industrial tribunal was well entitled to infer from the March 1989 documents, the surrounding circumstances and how the
9 parties conducted themselves subsequently that their intention neither in 1989 nor subsequently was to have their relationship regulated by contract whilst Mrs Leese and Mrs Carmichael were not working as guides. The industrial tribunal correctly concluded that their case founders on the rock of absence of mutuality. 15. Mr Cramsie submits that this almost exactly describes the position here. The mutual convenience and goodwill wholly explained the conduct of the parties. There was no need to, and no justification for, inferring any legal obligations. There was no duty to offer or accept any work; it could be declined at will. 12.The claimant contends that there was nothing inconsistent with the Tribunal finding that there was no duty to work any particular shift, or even a minimum number of shifts, but that there was a duty to be offered and to work a reasonable number of shifts. We were referred to the decision of the EAT (Mr Justice Langstaff presiding) in Cotswold Developments v Williams [2006] IRLR 181 where the EAT emphasised in our view, perfectly correctly that the issue is not whether there may be circumstances when the employer can choose not to offer work, or the employee refuse to do it, but rather whether there is an obligation to offer some work and some corresponding obligation to do it. This, submits Mr Margo, was a finding that the Tribunal was entitled to make. Whilst expectations did not of themselves amount to legal obligations, the expectations of the parties were a relevant consideration for the Tribunal to consider and could in an appropriate case give rise to legal obligations. He placed reliance on the case of Nethermere (St Neots Ltd) v Gardiner [1984] ICR 612 which we consider more fully below. 13.Mr Margo properly reminds us that in a case of this kind, where the contract is not solely found in the documents, the EAT can interfere with this finding of the employment judge only if no reasonable tribunal, properly directing itself, could have reached this conclusion. This was firmly established in O Kelly v Trust House Forte [1983] ICR 728 and has been reiterated countless times since. UKEAT/0107/08/MAA - 9 -
10 14.Mr Margo readily concedes that other tribunals may have reached a different result and that this was, as the employment judge recognised, a highly marginal case. However, there was no misdirection and there was a proper, if narrow, evidential basis for the decision which the EAT should loyally accept, whatever its own views may be. Conclusion. 15.In our judgment, given the clear findings on the evidence that there was no duty to work any particular shift or a minimum number of shifts, the crucial feature of the case is this: may the expectation of being given work, resulting from the practice over a period of time, of itself constitute a legal obligation to provide some work or to perform the work provided, even where there is no duty to undertake any particular work offered or a minimum amount of work? 16.Mr Margo says that there is and places reliance on the decision of the Court of Appeal in Nethermere to which we have made reference. In that case the applicants were home workers who sewed trouser flaps and pockets on machines provided by the company. 17.The evidence as to the nature of any legal obligation for the employer to provide work or the employee to do it was exiguous in the extreme. Stephenson LJ held that there was just enough evidence to sustain a finding that there were mutual obligations in the gaps when no work was being done (p.626d-627a): There must, I accept, be evidence to support that contract, otherwise there would be an error of law or a decision which no reasonable tribunal could have reached. I think that means evidence at least of an obligation to accept work offered by the company, and on the authority of Devonald v Rosser & Sons [1906] 2 KB 728, the obligation to accept piecework would imply an obligation to offer it. I agree that the evidence of these obligations is tenuous, so tenuous that the industrial tribunal s decision comes dangerously near the ill-defined boundary which separates the grey area of possible reasonable decisions from the jurisdiction of an appeal court to declare the decision wrong and to put it right. According to the chairman s note Mrs Taverna said: I worked whenever needed and that was understood in paragraph 3 of the industrial tribunal s decision as
11 meaning whenever needed by the company. She refused work when she could not cope with any more, but she let the company know in advance when she was taking a holiday; and Mr Amos, the company s van driver, agreed that she very rarely refused work and gave good warnings when she did not want it. Both Mrs Taverna and Mrs Gardiner submitted weekly time sheets regularly to be paid the same rate as the workers in the factory. Mr Weisfeld described how dependent the company were on their 11 home workers; the 70 employees in the factory could only do about 1,000 trousers per week which left about 5,000 to go out to home workers. The work they did was an essential part of the production, and it was the van driver s duty to be as fair as he could presumably in distributing the 5,000 trousers among the 11 home workers. There emerges from the evidence a picture of the applicants doing the same work for the same rate as the employees in the factory but in their own homes and in their own time for the convenience of the workers and the company. If that is a reasonably possible picture, the industrial tribunal s decision can only be upset if Airfix Footwear Ltd v Cope [1978] ICR 1210 was wrongly decided, and I do not think it was. I cannot see why well founded expectations of continuing homework should not be hardened or refined into enforceable contracts by regular giving and taking of work over periods of a year or more, and why outworkers should not thereby become employees under contracts of service like those doing similar work at the same rate in the factory. 22. Dillon LJ similarly concluded that expectations could of themselves justify a finding that there were legal obligations in place (p.634g-635a): For my part I would accept that an arrangement under which there was never any obligation on the outworkers to do work or on the company to provide work could not be a contract of service. But the mere facts that the outworkers could fix their own hours of work, could take holidays and time off when they wished and could vary how many garments they were willing to take on any day or even to take none on a particular day, while undoubtedly factors for the industrial tribunal to consider in deciding whether or not there was a contract of service, do not as a matter of law negative the existence of such a contract. I see no reason in law why the existence of a contract of service may not be inferred from a course of dealing, continued between the parties over several years, as in Airfix Footwear Ltd v Cope [1978] ICR Kerr LJ did not accept that that a course of dealing could convert itself into a binding contractual obligation to continue to enter into individual contracts and thereby create an umbrella contract (p.630f): A course of dealing can be used as a basis for implying terms into individual contracts which are concluded pursuant thereto, but I can find no authority for the proposition that even a lengthy course of dealing can somehow convert itself into a contractually binding obligation - subject only to reasonable notice - to continue to enter into individual contracts, or to be subject to some umbrella contract. UKEAT/0107/08/MAA
12 24. The case of Airfix v Cope, to which the judges refer, was one where the claimant was a homeworker fixing heels to shoes. The evidence was that she had done the work five days a week for several years. In that context the EAT (Slynn J presiding) held that it was plainly open to the tribunal to find that there was an umbrella contract regulating the relationship. However, in that case there appears to have been no specific evidence that the employee could refuse to do the work, far less that she habitually did so. The case does not, therefore, seem close to the facts here. 25. Unfortunately, we are not able to reach agreement on the effect of these principles to the facts of this case. We are, of course, bound by the reasoning of the majority in Nethermere. The majority (the President and Mr Smith) recognise that there was some evidence in Nethermere that the claimant felt obliged to do the work whenever needed. But in our opinion the two passages we have extracted from the judgments of Stephenson and Dillon LJJ do not make that finding central to their analysis; rather they focus on the course of dealing itself. 26. In our judgment, it follows that a course of dealing, even in circumstances where the casual is entitled to refuse any particular shift, may in principle be capable of giving rise to mutual legal obligations in the periods when no work is provided. The issue for the tribunal is when a practice, initially based on convenience and mutual cooperation - an alternative if less personal description may be market forces - can take on a legally binding nature. 27. The point was put succinctly by Sir John Donaldson MR in the O Kelly case. One of the issues in that case was whether there was an umbrella contract regulating the relationship of the employer and the waiters who regularly worked for them during banquets. The Employment Tribunal held that there was not, and the Court of Appeal held that this was a sustainable decision. Sir John Donaldson said this (762H-763A):
13 So far as mutuality is concerned, the arrangement, to use a neutral term, could have been that the company promised to offer work to the regular casuals and, in exchange, the regular casuals undertook to accept and perform such work as was offered. This would have constituted a contract. But what happened in fact could equally well be attributed to market forces. Which represented the true view could only be determined by the tribunal which heard the witnesses and evaluated the facts. 28. On this analysis, the only issue is whether the Tribunal in this case was entitled to find that there was a proper basis for saying that the explanation for the conduct was the existence of a legal obligation and not simply goodwill and mutual benefit. The majority consider that it is important to note that the test is not whether it is necessary to imply an umbrella contract, or whether business efficacy leads to that conclusion. It is simply whether there is a sufficient factual substratum to support a finding that such a legal obligation has arisen. It is a question of fact, not law. The majority place weight on the fact that nowhere does Lord Irvine state that the only proper conclusion for the Tribunal was to find a lack of mutual obligations. The emphasis is on this being a finding that the Tribunal was entitled to make. 18.It is in truth a highly artificial exercise for a tribunal, not least because there are no clear criteria for determining when it is the one rather than the other, or indeed both (which we suspect will frequently be the case). However, in the judgment of the majority, there was a sufficient basis here. We recognise that in part it may be said that the Tribunal s reasoning is finding the legal obligation arising out of the practical commercial consequences of not providing work on the one hand or performing it on the other. But we do not see why such commercial imperatives may not over time crystallise into legal obligations. 19.Furthermore, there were other factors which were taken into account, including the lengthy period of employment, the fact that the work was important to the employers, and the work was regular even if the hours varied. One might also readily infer, although it was not spelt out, that the employers felt under an obligation to distribute the casual work fairly, rather as did the UKEAT/0107/08/MAA
14 allocator in the Nethermere case. 20.Mr Welch takes a different view. He considers that there is no proper basis for distinguishing this case from Carmichael. He accepts the argument of Mr Cramsie (see para 15 above) to the effect that the relationship can be wholly explained by the sense of mutual support falling short of legal obligations. There is no necessity to infer a contract and no justification for so doing. He considers that even if Nethermere ever did support the proposition that a course of dealing may of itself give rise to a legal obligation to provide or perform work, that analysis can no longer stand consistently with the observations of Lord Irvine in the Carmichael case when he observed that no terms could be implied by business efficacy unless and until the relationship itself was contractual. The majority recognise the force of this point, if only because these comments do appear to reflect similar observations in the minority judgment of Kerr LJ in the Nethermere case which we have extracted above. However, there was no express rejection of the reasoning of the majority in Nethermere on this specific point (and indeed the decision was followed on the need to establish mutuality of obligation) and the majority do not think that the reasoning of the majority of the Court of Appeal should be taken to have been overruled. 21.We would only add that, contrary to the analysis of the Tribunal, none of us would have given any weight to the fact that the employer was choosing to introduce disciplinary proceedings. Plainly that would be of the greatest importance if they were being initiated because of a refusal to work. But it is wholly consistent with the fair treatment of a true casual, who is not subject to an umbrella contract, that he should not be struck off the bank of casuals unless he has had an opportunity to meet the charges against him. The fact that the employer affords such a fundamental right of natural justice ought not to weigh against him when determining the true nature of the relationship. Disposal.
15 33. It follows that the appeal fails. The majority take the view that the decision was one for the employment judge and we cannot say that he erred in law. The substantive claim for unfair dismissal will therefore now have to be heard. UKEAT/0107/08/MAA
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