- These are
appeals against decisions of the Employment Appeal Tribunal,
His Honour
Judge
Peter Clark presiding, sent to the parties on 30 May 2003 whereby
they dismissed
appeals
from Redrow Homes (Yorkshire) Ltd and Redrow Homes (North West)
Ltd ("Redrow") against
decisions of Employment Tribunals. There are two Employment Tribunal
decisions, the first given on 26 February 2002 by a tribunal held
at Leeds and the second on 24 September 2002 by a tribunal held at
Flint. In each case, the tribunal had been asked to decide whether
applicants were "workers" within the meaning of the Working
Time Regulations 1998 (SI 1998/1833). The Leeds tribunal heard an
application by Mr B Wright and the Flint tribunal by Mr K Roberts
and others that they were workers within the meaning of the Regulations.
In each case, the unanimous decision of the tribunal was that the
applicants were workers and, as such, were entitled to the compensation
relating to entitlement to leave in Regulation 14. In Wright, calculation
of the amount due was adjourned. In Roberts, Redrow was ordered to
pay £658 to each of the eight applicants.
- Mr Wright is a bricklayer by trade and worked for Redrow between 9
October 2000 and 23 April 2000 on two of its sites in West Yorkshire.
He worked with another bricklayer, Mr R Milner. The tribunal found
that they were offered work by Redrow’s Mr Hall at remuneration rates
he stipulated and Mr Wright received Redrow’s pre-printed form, to
which I will refer, which named him alone. In the event, Mr Wright
and Mr Milner performed their services as bricklayers personally
throughout the whole period.
- Mr Milner
was largely responsible for making claims for payment of sums
due. The
claims
indicated the proportions in which the payment should be divided
between him
and Mr
Wright. Payments were made weekly into each man’s bank account.
The form showed the gross amount, the
amount of retention against defective
workmanship
and the amount of tax deducted. Mr Wright had what is known
as a CIS4 Certificate
which obliged Redrow to deduct
tax at
the rate of 18% from each payment. Mr Wright earned a total
of about £9600.
- Redrow provided the bricks, pre-mixed mortar, a forklift truck and
driver, scaffolding and normally one labourer per site. Mr Wright
and Mr Milner provided their own hand tools. They were given a set
of drawings and were subject to a building programme. Subject to
their obligation to conform to the building programme, and to daily
outside limits of time, they could regulate their hours and work
to suit themselves.
- The tribunal found similar facts in the case of Roberts and others.
There were eight originating applications, including that of Mr Roberts
and each of the men worked for Redrow from July/August 2000 to January/February
2001. There were two gangs of workers each comprising four men. Mr
Roberts’ gang of four included one, Mr Forbes, who worked only as
a labourer. Redrow employed a site manager on each of their many
residential house building sites, together with a forklift truck
driver and a labourer. By way of payment, each bricklayer received
a valuation sheet and was paid weekly.
- The tribunal found that the applicants accepted the offer of work in
accordance with typed conditions which, we were told, were slightly
different from those in the Wright case but not materially so. The
other bricklayers did not receive a copy of the document containing
the conditions.
- The Working Times Regulations 1998 amongst other things implement Council
Directive 93/104/EC on Working Time. Regulation 2(1) provides a number
of definitions. It is provided that:
" "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."
- It is not
suggested that the applicants worked under a contract of employment.
Nor is
it suggested save, possibly, as an aid to construction,
that the closing words of sub-paragraph
(b) dealing
with "profession
or business undertaking" have any relevance. Redrow do not claim
the status of client or customer.
The applicants’ case is that
they entered into or worked under a contract whereby each of them
undertook
to do or perform personally work
for Redrow. The case turns upon
whether the individual applicants had undertaken to do the work specified
in the contract personally.
- The written
contract consisted of a form entitled Official Order accompanied
by "Conditions and Acceptance of Order".
In the
Wright case, Mr Wright was named on the Official Order, site
details were
provided and it was stated:
"Please
undertake,
execute, carry out and complete the undermentioned works subject
to:
a) the undermentioned conditions and
b) the terms and conditions of business of Redrow Group
plc.
Acceptance
of this
order will be deemed to be acceptance to all the said conditions."
- The works
are specified as "brickwork" and "items and
costs" are specified in considerable detail. Provision is made
for payment to be made weekly.
The Official Order includes the
following provision:
"The contractor is to ensure that a copy of their
current Health & Safety Policy together with a Method Statement
for the work is forwarded to
our offices prior to commencement
on site"
- In the
document "Conditions and Acceptance of Order" twenty-three
conditions are set out. Argument
has centred mainly on conditions
1 and 6:
(1) that the Contractor having had an opportunity of
inspecting our Conditions of Contract shall be deemed to have noted
its provisions, and hereby agrees to be bound by them insofar as
they are applicable to his subcontract.
(6) LABOUR
In respect of all operatives employed by the Contractor, the Contractor
is responsible for and shall keep the Company indemnified against
any claim or liability for National Insurance, Graduated Pension
Contributions, Pay-As-You-Earn, Holiday Pay, Construction Industry
Training Board levy. Travelling Expenses and other emoluments payable,
all other payments required by Law or otherwise which may be necessary
for the proper execution of the contract work whether current or
introduced during the period of the contract.
The Contractor must at all times provide sufficient
labour to maintain the rate of progress laid down from time to time
by the Company, and shall supply such labour with all necessary tools
and equipment.
On each site where the work is in progress the Contractor
must maintain a competent foreman or chargehand who has complete
control of all labour engaged on the work. Any instructions given
to such foreman or chargehand shall be deemed to have been given
to the Contractor.
Condition 20, which Redrow submit is readily reconcilable
with Condition 6, provides:
(20) SUBLETTING
No order, nor any part order issued by the Company shall
be assigned, sublet or transferred without the prior consent in writing
of the Company. In the event of any such assignment, subletting or
transfer, the Contractor shall be responsible for securing compliance
with these conditions in every respect.
- Reference was made to other conditions:
(16) PROGRAMME OF WORK
Programmes of work issued by the Company from time to
time must be adhered to rigidly, in regard to both rate of progress
and the sequence in which work is to be completed.
(17) HOURS OF WORK
No Contractor or employee of the Contractor shall be
permitted to work on site outside normal working hours of 8.00am
to 5.30pm Monday to Friday, Saturday 8.00am to 12.00 noon inclusive,
unless prior to consent has been given by the Company in writing
and only then when the Company’s appointed supervisor is on site.
Condition
18, having
dealt with payment, states that the company "requires Contractors to provide their VAT registration
number or statement that they are not VAT registered".
- For Redrow,
Mr. Stafford QC submits that the men are not workers within
the
meaning
of the Regulations because there is no contractual obligation
on Wright or Roberts, or any
of the
others, to do the work "personally".
Moreover, it is submitted that
Condition
6 was a term of the contract and the condition plainly contemplates
that work may be done by other
men. It provides that the contractor
must
supply sufficient labour to maintain the rate of progress laid
down and all necessary tools
and equipment for such labour.
The clause
also requires the contractor to maintain a competent foreman
or chargehand on site. These are
requirements inconsistent with
a personal
obligation. It is submitted that a personal obligation cannot
be inferred from the presence of
the subletting clause. A party
to the
contract can employ other bricklayers without subletting the
contract. The status of additional labour
taken on by the contractor is
the contractor’s
problem and does not affect the position as between the contractor
and Redrow. Each contractor
is under an obligation to complete
the specified
works, it is submitted, and may employ other men to do it.
- Mr Stafford submits that in finding that Wright, Roberts and the others
were workers within the meaning of the Regulations, the Employment
Tribunals have erred, in particular by having regard to the way in
which the contracts were performed by the individuals concerned.
In Wright, the Employment Tribunal stated, at paragraph 25:
"Furthermore, in construing the contract, we are
entitled to have regard to all the circumstances. They include the
fact that the contract was performed personally throughout the period
of engagement. We find that that reflected the parties’ expectation
that it would be so performed."…..
- At paragraph 31, it was stated:
"Looking
at the
above factors, we are left with the clearest impression that
the applicant was in a subordinate and
dependent position vis-a- vis
the respondent,
similar to that of an employee. We find accordingly that the
respondent’s status was
not by virtue of the contract
with
the applicant that of a customer of a business undertaking
carried on by the applicant. The applicant
and Mr Milner were not a firm.
They
were two individual workers who worked together and personally
provided
their service as bricklayers to the respondent."
- In Roberts,
the Tribunal held, at paragraph 8, that it was "the
common intention and understanding of the parties that all the applicants
would undertake to work personally", and at paragraph 17 that "there
was mutuality of obligation for the purposes of whether the applicants
were workers because of the factual matrix in this case". The
Tribunal cited fully, and, as
did the Wright Tribunal, relied
on a judgment of the EAT, Mr Recorder Underhill QC presiding, in Byrne
Brothers (Formwork) Ltd v Baird and Ors [2002] IRLR 96.
- Considering sub-paragraph (b) of the definition of worker in Regulation
2(1), Mr Recorder Underhill stated, at paragraph 17(4) and following:
"(4) It seems to us that the best guidance is to
be found by considering the policy behind the inclusion of limb (b).
That can only have been to extend the benefits of protection to workers
who are in the same need of that type of protection as employees
stricto sensu – workers, that is, who are viewed as liable, whatever
their formal employment status, to be required to work excessive
hours (or, in the cases of Part II of the Employment Rights Act 1996
or the National Minimum Wage Act 1998, to suffer unlawful deductions
from their earnings or to be paid too little). The reason why employees
are thought to need such protection is that they are in a subordinate
and dependent position vis-à-vis their employers: the purpose
of the Regulations is to extend
protection to workers who are,
substantively and economically, in the same position. Thus the essence
of the intended
distinction must be between,
on the one hand, workers whose
degree of dependence is essentially the same as that of employees
and, on
the other, contractors who have
a sufficiently arm’s-length and
independent position to be treated as being able to look after themselves
in
the relevant respects.
(5) Drawing that distinction in any particular case
will involve all or most of the same considerations as arise in drawing
the distinction between a contract of service and a contract for
services – but with the boundary pushed further in the putative worker’s
favour. It may, for example, be relevant to assess the degree of
control exercised by the putative employer, the exclusivity of the
engagement and its typical duration, the method of payment, what
equipment the putative worker supplies, the level of risk undertaken
etc. The basic effect of limb (b) is, so to speak, to lower the pass-mark,
so that cases which failed to reach the mark necessary to qualify
for protection as employees might nevertheless do so as workers.
(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 [2000] IRLR 43, esp.
per Lord Hoffmann at pp.[46-47]."
- Mr Recorder Underhill added, at paragraph 18:
"Self-employed
labour-only
subcontractors in the construction industry are, it seems to
us, a good example of the
kind of worker who may well not
be carrying
on a business undertaking in the sense of the definition; and
for whom the ‘intermediate category’
created by limb (b) was designed.
There
can be no general rule, and we should not be understood as
propounding one: cases cannot decided
by applying labels. But typically
labour-only
sub-contractors will, though nominally free to move from contractor
to contractor, in practice
work for long periods for a single
employer
as an integrated part of his workforce: their specialist skills
may be limited, they may
supply little or nothing by way
of equipment
and undertake little or no economic risk. They have long been
regarded as being near the
border between employment and
self-employment:……….
Cases which ‘could have gone either way’ under the old test
ought now generally to be
caught under the new test in
‘limb
(b)’. The fact that such a subcontractor may be regarded by
the Inland Revenue as self-employed, and hold
certificates to prove it, is
relevant but not decisive."
- In the
judgment of the EAT, reference was made to the "intermediate
category" described in Byrne Brothers. However, the EAT
relied, in dismissing the appeals, on the presence of clause 1 in
the conditions:
"It is plain that the conditions are drafted on
the basis that "one size fits all". It is specifically
envisaged that not all the terms
will be appropriate to all contracts
entered into by Redrow…..
Looking
at the
factual background it is clear to us, as it was to the tribunals
below, that it was the common intention
of the parties that under the
contract
the applicants would provide their personal services……. The
personal service requirement was made
out".
- Mr Stafford submits that, in concluding that clause 6 did not apply
to these applicants, the EAT has made the same mistake as the Employment
Tribunals; they have relied on what happened subsequently and how
the contracts were performed instead of considering what had been
agreed. An expectation that the work would be done personally, which
Mr Stafford accepts was present, is not an obligation to do the work
personally.
- In my judgment
there is force in the submission that Employment Tribunals
should
not be
deflected from a consideration of the definition of "worker" and
from a consideration of terms
of the
contract in that context by general policy considerations as
to the nature of employment and
self-employment. The reasoning
of the
tribunal in Roberts, with its long citation from Byrne Brothers,
appears
to come close to saying that, because the applicants ought
to come within definition
of worker, it follows that they
do. The
Regulations leave parties free to enter contracts and, whether
or not the contract includes
an obligation to do the work
personally,
is a matter of construction. The Tribunal in Wright appears
to have regarded the "subordinate
and dependent position… similar to that of an employee" of the
applicants as justifying a conclusion
that they came within the definition.
Moreover, it does not necessarily follow from the fact that the work
was done personally that there
was a contractual obligation
to do it personally.
- Mr Recorder
Underhill rightly stated at paragraph 17(6) that the tribunal
is concerned
with
the rights and obligations of the parties under the contract.
However, the general
distinction
he attempts to draw at paragraph 17(4) of the judgment must
not deflect tribunals, nor,
I think, was it intended to deflect
them,
from considering whether the necessary personal obligation
has arisen. Expressions such as "degree
of dependence" and "lower the pass-mark" assist little
in that task. The guidance in Byrne,cited in the present cases,
was given under the heading "business undertaking", the
expression which appears later
in Regulation 2(1)(b). As such,
it does not arise for consideration in this case and it is not necessary
to consider it or the guidance
given upon it.
- The tribunals
were entitled to construe the contracts in the light of the
circumstances
in which
they were made. An important issue is whether, in those circumstances,
condition
6 was a term of these particular contracts. Light
may be
thrown on that issue by considering, for example, the agreement
as
to how
the contract was to be performed, the method of payment. It
is not a question of looking at prior negotiations
but "absolutely anything which would have affected the way in
which the language of the document would have been understood by
a reasonable man". (Investors Compensation Scheme Ltd v West
Bromwich Building Society [1998] 1 WLR 896 at 912H, per Lord
Hoffman). While respecting the tribunals’ findings of fact, and admitted
facts, this court is in as good as a position as the tribunals to
consider that question.
- Relevant considerations are:
a) Redrow’s printed form of contract was plainly intended
to cover a wide range of situations, from contracts with substantial contractors
to contracts with applicants such as the present applicants.
- Arrangements between housebuilders such as Redrow and small gangs
of workers, such as the bricklayers in these cases, are common
in the housebuilding industry. Both Redrow and the present
applicants were accustomed to them.
- Condition
1 binds the applicants to the conditions "insofar
as they are applicable to [his] subcontract." Having regard
to the
wide
range of contracting parties by whom the conditions were intended
to be used, that provision is totally unsurprising.
- There
is no evidence that Redrow sought to enforce, or intended
to
enforce against these parties the conditions relating
to depositing
a current Health & Safety Policy and relevant
VAT registration.
It can be inferred, as an illustration of the flexibility
permitted by Condition 1, that these provisions were
not considered appropriate to the contracts with these
applicants,
as distinct
from bigger contractors.
- The items of work specified were not beyond the capacity of the
men to do it themselves.
- The agreed method of payment was not payment to the named contractor,
Mr Wright, but to each individual doing the work. The suggestion
that, by agreeing to pay Milner, Redrow was acting as agent
for Wright, produces an unnecessary and unlikely complexity.
While Milner is not an applicant, it is difficult to discern
an intention that his position be different from that of Mr
Wright.
- In Roberts, it was not suggested by Redrow that the other members
of the gang were in a position different from that of Mr Roberts.
- The
requirement in Condition 6 for a "competent foreman
or chargehand" is foreign to arrangements made, and customarily
made,
with
members of a small gang of bricklayers and it is difficult
to conclude that the parties intended it to be included
in these
contracts..
- Against
that background, each of the tribunals was in my judgment entitled
to find that
there
was "a mutuality of obligation" (Roberts),
or "a personal provision of services" (Wright). Criticism
can be made of the reasoning in each case but, in context, the conclusion
was correct and should be upheld in this court upon a consideration
of the evidence. In these contracts, Condition 6 was not intended
to be included so as to permit others to do the work. (When the tribunal
in Wright used the word "expectation" in paragraph 25,
already cited, I believe they
meant to convey the state of
mind of intention but that finding is not essential to my general
conclusion
upon Condition 6.)
- In my judgment, the intention of the parties when the contracts were
made involved, in each case, an obligation on the applicants to do
the work personally. That makes sense of Redrow’s decision to contract
with bricklayers individually. The scheme for payment points strongly
in the direction of contracts with individual bricklayers to do the
work personally. Had the intention been otherwise, Redrow would have
been likely to make arrangements with Wright and with Roberts alone
and arrange for the payments to be made to them. On the evidence,
the finding that the obligation to Redrow of each of the men was
personal was justified. An analysis has not been attempted by the
parties as to what the position would, on my conclusion, be as between
members of the gang, or as between one of them and Redrow, if a member
failed to do his share of specified work, and that does not need
to be determined in this case.
- I agree with the EAT that it was the intention of the parties that
personal services be provided and I would dismiss these appeals.
Lord Justice Latham:
- I agree
Mr Justice Holman:
- I agree that these appeals should be dismissed for the reasons given
by my Lord, Pill LJ. I only summarise my own reasoning very briefly
out of deference to the sustained argument of Mr Stafford QC to which
I pay tribute.
- So far
as is material to these appeals, the definition of "worker" in
the Working Time Regulations
1998 may be reduced to:
""worker" means
an individual
who….worked under …. a …. contract….whereby the individual
undertakes to do ….
personally any work….for another
party to the contract…."
The applicants are individuals. There were contracts
between them and Redrow to do work. The only question is whether by
the contracts ("whereby") the applicants undertook to
do the work "personally". I agree with Mr Stafford that
it is irrelevant that later the
applicants did in fact do the
work personally. The question is whether the contracts themselves
bound
or required the applicants to
do the work personally.
Clause 6
- I also
agree with Mr Stafford that the language of, and duties under,
clause
6 of
Redrow’s standard "Conditions and Acceptance of
Order" are inconsistent with an obligation to do the work personally.
The first and third sentences of clause 6 contemplate operatives
employed by the contractor and the need to maintain a foreman or
chargehand in control of them. The second sentence contemplates the
provision of sufficient labour to maintain the rate of progress laid
down by the company, and there is an absolute obligation under clause
16 rigidly to adhere to that rate of progress. So if clause 6 forms
part of the actual contracts between the applicants and Redrow, the
applicants could not have "undertaken" or been required
to do the work personally and
they might well have required
to engage the assistance of others.
- However,
the whole of the conditions are governed by and subject to
clause 1:
the contractor
agrees to be bound by the conditions "insofar
as they are applicable to his sub-contract." The words "insofar
as they are applicable to his sub-contract" are quite neutral
in their effect or onus. There
is neither a presumption that
any particular clause applies unless in some way expressly disapplied,
nor a presumption that a clause
does not apply unless expressly
applied. The conditions were described
by the Employment Tribunal in
the Wright case
as "all embracing" and by the Employment Appeal Tribunal
in the conjoined appeals as "one size fits all".
- In short,
the effect of clause 1 is to make the remaining clauses of
the printed
conditions
a "menu" and it is necessary to
determine which particular clauses or conditions were applicable
to the actual sub-contracts under consideration. This is a different
exercise or task from that of construing the meaning of the words
used. Rather, it requires the tribunal or court to determine which
clauses the parties themselves intended to select, and did select,
as applying to their contract. In that task the "matrix of fact" is,
in these cases, predominant and,
indeed, the only guide as to
which clauses or conditions were applicable. Nothing was said or
written
expressly to apply or not apply
any particular clause. The subjective
intent of the parties is not admissible, nor do we know it. The question
has to be: would reasonable people,
in the position of these parties
and having all the background knowledge
which would reasonably have
been available to them in the
situation in which they were
at the time of the contract, intend to apply or not apply clause
6?
- At paragraphs 33 – 36 of their judgment the Employment Appeal Tribunal
gave their reasons for concluding that clause 6 did not apply to
the contracts with these applicants. In my view their reasoning is
permissible and their reasons are cogent and we should not interfere
with their conclusion that it did not.
Undertaking to do the work personally
- However, that is not the end of the case or the appeals. The non-application
of clause 6 merely eliminates from the contracts and the case a provision
that would be necessarily inconsistent with an obligation to do the
work personally. The question remains: did the contracts in fact
positively require the applicants to do the work personally? Again,
this must be determined in the context of the matrix of fact. I agree
with the submission of Mr Stafford (although he expressed it more
politely) that, with respect to them, the reasoning of both Employment
Tribunals is weak and confused and takes into account inadmissible
or irrelevant considerations – in particular by placing weight on
the irrelevant consideration that the applicants did later in fact
do the work personally (see paragraph 25 of the Extended Reasons
in the Wright case and paragraph 8 in the Roberts case).
I agree, too, with his submission that in paragraph 25 in the Wright case
the Employment Tribunal wrongly
referred to "the parties’ expectation
that it would be" personally performed. The correct consideration
is not "expectation" but intention.
- But I consider that on a fair overall reading of their respective Extended
Reasons both Employment Tribunals clearly found as a fact that the
parties did intend that the applicants must do the work personally.
The tribunals are specialist tribunals and the finding was based
upon their specialist understanding of the realities of the case.
The finding is summarised in the last sentence of the Extended Reasons
in the Wright case as "They were two individual workers
who worked together and personally provided their services as bricklayers
to the respondent." In the Roberts case at paragraph
8 there is a finding of fact: "We find that it was the common
intention and understanding of the parties that all the applicants
would undertake to work personally." Although that finding is
followed by some inadmissible reasoning (by reference to what later
actually happened) the tribunal continued: "….it accords with
the understanding and common
sense of the circumstances…."
- In the
conjoined appeals the Employment Appeal Tribunal said at paragraph
38
of their
judgment: "Looking at the factual background
it is
clear to us, as it was to the tribunals below, that it was
the
common intention of the parties
themselves
that under the contract the applicants would provide their
personal services."
- Despite the sustained argument of Mr Stafford, these seem to me to
be findings and conclusions of specialist tribunals which accord
with common sense and with which, despite errors in the reasoning
processes, I would not interfere. I would accordingly dismiss both
appeals.