Lynch v Perfecseal Ltd [2007] NIIT 572

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The decision of the tribunal is that the Company was the employer of the claimant from 13 September 2004 until 24 March 2006.

The claimant was represented by Mr Canavan of McGuinness & Canavan Solicitors.

The Company was represented by Mr P Bloch, Barrister-at-Law, instructed by E E F.

The Agency was represented by Mr C Sherrard, Barrister-at-Law, instructed by Caldwell & Robinson, Solicitors.

2. The Tribunal heard evidence from the claimant, Mr Reid, Human Resources Manager for the Company, Miss Julie Roddy, Operations Manager and Miss Helen O'Kane, Recruitment Consultant, on behalf of the Agency. The Tribunal also had the benefit of an agreed bundle of documentation and other documentation submitted during the course of the hearing together with copies of relevant case law.

3. Having carefully analysed the evidence before it the Tribunal found the following facts in relation to the issue before it.

(i) The Company is a private company (‘the Company') and the Agency is a recruitment agency (‘the Agency'). The claimant visited the Agency on 12 September 2004 and was seen by Helen O'Kane, Recruitment Consultant, who at that stage was in charge of the section dealing with temporary jobs. The claimant did not sign any documentation during that visit. The Tribunal accepts Ms O'Kane's evidence that a 12 month contract with the Company was not discussed but that she did discuss hours of employment, shift work, rates of pay and holidays and enquired of the claimant as to whether he wished to ask any questions. The Tribunal is satisfied that a check list was not produced at that stage nor was any contractual documentation. The claimant worked for the Company from 13 September 2004 until 24 March 2006. Thereafter on 3 April 2006 his contract with the Agency, which was signed on 24 March 2006, was terminated. The said contract, does make clear, inter alia, that “these terms constitute a contract for service between MPA and the temporary worker and they govern all Assignments undertaken by the temporary work. However no contract shall exist between MPA and the temporary worker between Assignments”. Paragraph 2 of the same document states “For the avoidance of doubt, these terms shall not give rise to a contract of employment between MPA and the temporary worker. The temporary worker is engaged as a self-employed worker although MPA is required to make statutory deductions from the temporary worker's remuneration in accordance with clause 4”. Paragraph 6 states that “the temporary worker acknowledges that the nature of temporary work means that there may be periods when no suitable work is available, the suitability of the work to be offered will be determined solely by the employment business. MPA shall incur no liability to the temporary worker should it fail to offer opportunities to work”. There then follows an explanation as to remuneration and the calculation thereof together with the hourly rate. Paragraph 8 is quite explicit in stating that “the temporary worker is under no obligation to accept any offer of an Assignment, but if he/she does so, he/she shall at all times when services are due to a client comply with the following conditions”. There then follows a number of specific conditions including the obligation to comply with all disciplinary rules or obligations in force at the premises where services are performed to the extent that they are reasonably applicable. Paragraph 13 states that “MPA may instruct a temporary worker to end an Assignment with a client at any time”. Provisions are made for periods of illness, opt outs under the Working Time Regulations, and holiday pay. This document, although not retrospective in nature, appears, on the evidence, to be the standard type of contract used by an employment agency and is useful for guidance as to the intended nature of the claimant's arrangements with the Agency and Company, in the absence of any other contractual documentation between the claimant and the respondents spanning the period from 13 September 2004 until 24 March 2006. The Tribunal accepts the claimant's evidence that he signed the MPA recruitment contract after his Assignment had ended with the Company.

(ii) The Tribunal is satisfied that at the commencement of his Assignment with the Company, the claimant received a period of induction and signed a Health & Safety assessment form together with a training record. The Tribunal is also satisfied that the claimant was made aware of the inspection procedure and the Company's document entitled “Dress Code Policy & Personal Health & Cleanliness for Production Areas”. The claimant was not paid the same overtime rate as the Company's permanent employees on Sundays. In relation to holidays, the Company was able to facilitate the claimant for up to two days and the issue would be referred thereafter to the Agency. Furthermore he was not paid during a period of one week following an accident and submitted a sick line on the second week to the Agency which was responsible for Statutory Sick Pay. The Tribunal is also satisfied that an episode took place some two to three weeks prior to 24 March 2006 when a blue safety glove was found in a package sent to a customer. Mr McCarter, the Company's shift manager spoke to the claimant, (who was working as an operative in the Company), about the matter, and referred to the handwriting on the package which the claimant denied was his. The Tribunal accepts the claimant's evidence that at that stage Mr McCarter indicated that the company wished to give the claimant a warning but he did not want to do so. He then went over the training record with the claimant. The Tribunal further accepts that approximately two weeks later reference was made again to the “blue glove” incident and the claimant was asked to leave the building. This coincided with other agency workers leaving their Assignments with the Agency. The Tribunal finds, on the balance of probabilities, that the claimant was told that he was being “sacked” by the Company.

(iii) The claimant was also appraised whilst with the Company. Any wages discrepancy had to be dealt with by the Agency and the Company's permanent employees were given preference in relation to time off for holidays. The Tribunal also accepts that holiday pay was the responsibility of the Agency. Tax and National Insurance were deducted by the Agency. However, the Agency was performing essentially an administrative function in relation to pay and recharged these amounts to the Company having deducted amounts in accordance with the arrangements made with the Company, following the submission of timesheets. The Tribunal also accepts that the claimant did not know that other agency workers had left the Company's premises until he visited the Agency's premises on 24 March 2006. The Tribunal accepts Mr Reid's evidence on behalf of the Company that the induction period for agency workers, including the claimant were shorter and less comprehensive than for the company's employees. A pool of staff was available and provided the necessary induction and references were obtained, assigned workers were able to be substituted for existing workers. However, an agency worker could be subject to appraisal by the company or disciplined if necessary. Mr Reid, under cross-examination, conceded that it was “conceivable” for an agency worker such as the claimant to have been disciplined in the way he claimed. It was also conceded by Mr Reid that the terms “employers” and “employees” were referred to in the Health & Safety documentation which also related to the claimant, although the Tribunal is satisfied that this useage was for practical purposes only and does not have any particular significance in the context of this case.

(iv) Significantly, however, when asked during cross-examination if agency workers did what the Company directed, Mr Reid answered in the affirmative and stated the company was in control of their work and that the agency had no input. However, he denied that the company had any control over what agency workers were being paid. However, the Company was recharged with all payments made by the Agency except for statutory sick pay. In terms of discipline, any role played by the Agency would be in the context of an investigation but the Agency did not, as a general rule, participate in matters of discipline. The Tribunal is satisfied that, in practice, the Agency and the Company operated the arrangements largely in accordance with the terms of Contract signed by the claimant with the Agency dated 24 March 2006.

4. The law in relation to the issue before the Tribunal is governed by Article 3 of the Employment Rights (Northern Ireland) Order 1996 (“the Order”) in relation to the definition of employee. Article 3(2) of the Order states that, “in this Order ‘contract of employment' means a contract of service or apprenticeship, whether expressed or implied, and (if it is expressed) whether oral or in writing”. The Tribunal also considered the cases of Brook Street Bureau (UK) Ltd -v- Patricia Dacas [2004] EWCA Civ 217, Astbury -v- Gist Ltd [2005] ALL ER (D) 165, the Northern Ireland Court of Appeal decision in Marie Louise McGurk -v- Department for Social Development (delivered 21/03/06), Cable and Wireless PLC -v- Muscat [2006] ICR 975, James -v- Greenwich Council [2006] UK EAT (18/12/06) and Craigie -v- London Borough of Haringey UKEAT (12 January 2007).

Canavan, on behalf of the claimant, urged the Tribunal to follow the reasoning in the case of Dacas -v- Brook Street Bureau (UK) Ltd (‘Dacas') recited above together with the Northern Ireland Court of Appeal decision in McGurk -v- Department for Social Development (“McGurk”) also recited above. Although conceding that it would be difficult to argue that the Agency could be the claimant's employer in light of the requirements for mutuality of obligation and the control test, he urged the Tribunal to find on the evidence that the Company was the claimant's employer and was bound to offer him work and the claimant was bound to work for it and in accordance with McGurk he had been indirectly paid by the Company. He contended that there was an implied contract of service as between the claimant and the end user although submitted that the instance case was unique in that no form of contractual documentation was available other than a document signed by the claimant with the Agency dated 24 March 2006 being the date on which he stopped work with the Company. However, he referred to Article 3 of the Order and submitted that such contractual arrangements could be oral and that the definition of a “contract of employment” could include an implied contract of service. He also urged the Tribunal to take into account Article 6 of the European Convention on Human Rights and Fundamental Freedoms and contended that in the event of the Tribunal finding that neither of the respondents was the claimant's employer the claimant would be deprived of his entitlement to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Mr Bloch, Counsel for the Company also referred to the areas of payment, mutuality of obligations and the control test. He likewise conceded that it would be difficult to argue that the Agency was the claimant's employer but urged the Tribunal, on the evidence, and on the case law, to find that the Company could not be the claimant's employer and that conceivably neither respondent was his employer. Mr Sherrard, Counsel for the Agency, urged the Tribunal to find that there was no mutuality of obligation as between the Agency and the claimant nor did the Agency exercise control over the claimant. He submitted that the issue of payment was not as relevant as the other two elements.

6. (i) The Tribunal, took into account the findings of fact, the statutory provisions

It found the case of McGurk of considerable assistance and, in particular, paragraphs 7, 8 and 9 where Kerr L C J states as follows “A common theme running through the authorities on this vast area is that there must be a sufficient element of control”. In Stephenson -v- Delphi Diesel Systems Ltd [2003] ICR 471, Elias J returned to that theme in his discussion as to whether the test was satisfied in that particular case. He said at paragraph 10:-

“10. For the purpose of analysing this decision it is not necessary to set out

an exegesis of the law in this area”. It is perhaps sufficient to start with an observation of Longmore L J in Montgomery -v- Johnson Underwood Ltd [2001] ICR 819, 831, para 46:

“Whatever other development this branch of the law may have seen over the years, mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment: see Nethermere (St. Neots) Ltd -v- Gardener [1984] ICR 612, 623, per Stevenson L J approved in Carmichael -v- National Power PLC [1999] ICR 1226, 1230 per Lord Irvine of Lairg L C”.

7. But, as Elias J explained, undue literal emphasis on the requirement of mutuality of obligation is inappropriate in the circumstances where the person who claims to be an employee is supplying services and the person who is said to be the employer is supplying (whether directly or indirectly) payment for those services. Elias J pointed out: “the question of mutuality of obligation poses no difficulty during the period when the individual is actually working. For the period of such employment the contract must, in our view, clearly exist. For that duration the individual clearly undertakes to work and the employer in turn undertakes to pay for the work done. This is so even if the contract is terminable on either side at will”.

8. In this case the employee, Mrs McGurk, clearly was supplying her services or to borrow the language of Elias J undertaking to work. The Department for Social Development, we are satisfied, undertook to pay for the work that she rendered although it was a payment that was made through the medium of Worknet, the recruiting agency”.

(ii) In paragraph 16 of the Dacas case Lord Justice Mummery states: “The statutory definition of a contract of employment as a ‘contract of service' expressly includes an ‘implied' contract. This should not be overlooked. I think that it has been. Like other simple contracts, a contract of service does not have to be in any particular form. Depending on the evidence in the case, a contract of service may be implied - that is, deduced - as the necessary inference from the conduct of the parties and from the circumstances surrounding the parties and the work done. As already indicated, the overall situation under consideration is shaped by the triangular format used for the organisation of the work: the applicant, the employment agency and the end user are all involved. Each participant in the triangular situation may have an express contract with either one of, or with each of, the other two parties.

9. The critical part is that, although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual terrority or exhaust all the contractual possibilities. In determining the true nature of the relationship (if any) between each of the respective parties it is necessary to consider the total situation occupied by the parties. The totality of the triangular arrangements may lead to the necessary inference of a contract between such parties, when they have not actually entered into an express contract, either written or oral, with one another. Although there was no express contract between the applicant and the end user in this case, that absence does not preclude the implication of a contract between them. That depends on the evidence, which includes, but may not be confined to, the contractual documents.

10. As a matter of law when an issue is raised about the status of the applicant in unfair dismissal proceedings, an implied contract between parties who have no express contracts with one another is a possibility that should be considered by the Employment Tribunal in making its findings of fact. It is relevant to the decision whether the applicant works under a contract, and, if so, what kind of contract it is and with whom it was made. There may be no contract of any kind, because it is found that there is no mutuality of obligations. There may be an implied contract, which may be characterised as a contract of service as a contract for services. There may be an implied contract of some as yet unclassified kind … If the applicant has a contract of service in a triangular situation of this kind, it may be with:-

(b) the employment agency, depending on the construction of the express contract between the applicant and the agency and on other admissible evidence or, thought this is more problematical,

(c) more than one entity exercising the functions of an employer, namely the employment agency and the end user jointly”.

(iii) It is important to note that in the Dacas case the appeal was brought by Mrs Dacas but only in respect of the claim against the Agency. The Tribunal, having considered the case law prefers the analysis set out in the earlier cases and in particular Dacas and McGurk (supra), and concludes that an implied contract of service existed during the period of the claimant's work with the Company. For that period of time, the claimant undertook to work and the Company in turn undertook to pay for the work done. This was effected indirectly by payment through the Agency. The Tribunal also concludes, on the facts as found, that day-to-day control of the claimant rested with the Company.

The Tribunal further concludes that the Company was the employer of the claimant, from 13 September 2004 until 24 March 2006.

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	Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> Lynch v Perfecseal Ltd [2007] NIIT 572_06 (15 March 2007) URL: http://www.bailii.org/nie/cases/NIIT/2007/572_06.html Cite as: [2007] NIIT 572_6, [2007] NIIT 572_06

Industrial Tribunals Northern Ireland Decisions