Brook Street Bureau (UK) Ltd v Patricia Dacas
|England & Wales
|Lord Justice Mummery,Lord Justice Sedley,Mr Justice Munby
|05 March 2004
| EWCA Civ 217
|Case No: A1/2003/0205 EATRF
|Court of Appeal (Civil Division)
|05 March 2004
 EWCA Civ 217
Lord Justice Mummery
Lord Justice Sedley
Mr Justice Munby
Case No: A1/2003/0205 EATRF
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
(MR JUSTICE BURTON, PRESIDENT)
Royal Courts of Justice
London, WC2A 2LL
MR C JEANS QC and MR J CORNWELL (instructed by Clifford Chance) for the Appellant
MR J FOY QC and MR R O'DAIR (instructed by FRU) for the Respondent
MR J SWIFT (instructed by Solicitor for Wandsworth LBC) for the London Borough of Wandsworth.
The issue here is whether a cleaner, who is the applicant in proceedings for unfair dismissal, was an employee of an employment agency. The other possibilities are that she was an employee of a client (the end-user) of an employment agency, or that she was not an employee at all. Although the statement of the issue suggests that it is short and simple, it is neither of those things. Recent cases in the Employment Tribunal, the Employment Appeal Tribunal and in this court demonstrate that there is confusion in the workplace and considerable uncertainty in the law about the status of individuals who obtain work through employment agencies: see, for example, the notes in paragraphs 5–10 and 5–12 in the 3 rd Supplement updating the 18 th edition of Clerk & Lindsell on Torts.
Some may be surprised to learn that a significant number of people in the labour market, who cannot be accurately described as casual, intermittent or temporary workers, who reasonably think that they are in stable employment relationships and whom reasonable people would regard as employees, may not be employees after all and will be denied the protection of such basic employment rights as the right not to be unfairly dismissed. If those people are not employees, it follows that the doctrine of vicarious liability would be unavailable to claimants in actions for tort against those exercising control over such workers, who committed torts in the course of their work: see paragraph 72 of the judgment of Sedley LJ, with which I agree. It is also the case that an entire industry for the supply of workers has been established and is in practice conducted on the basis, for which there is support in the cases, that an individual is not employed under a contract of service, if the end-user, who exercises day to day control over the worker, is not contractually bound to pay remuneration for the work to the worker: see the judgment of Munby J at paragraphs 81–85. In those circumstances a longer introduction than usual is required to explain the legal background to the question, on which the tribunals below in this case have arrived at different answers.
Under s 94 of the Employment Rights Act 1996 (the 1996 Act) an employee has the right not to be unfairly dismissed by his employer. An "employee" is defined in s 230 (1) of the 1996 Act by reference to the nature of the contract under which an individual works: an employee is
' a person who works under (or where the employment has ceased worked under) a contract of employment."
The definition of a "contract of employment" in s 230(2) of the 1996 Act reflects the traditional common law differentiation of contracts under which an individual works for another person as either a contract of service or as a contract for services: a contract of employment is
' a contract of service or apprenticeship whether express or implied, and (if it is express) whether oral or in writing."
There is no definition or further description of a "contract of service" in the legislation. The omission is deliberate. For better or for worse, Parliament decided to leave in the hands of the courts and tribunals the responsibility for defining the limits of a contract of service on a case by case approach. The general principles of the law of contract are applied and, in dealing with cases brought under the employment rights legislation, the courts take into account the object and scheme of the relevant statutory provisions. In that way the courts and tribunals decide who is within the category of employees, on whom it is intended to confer employment rights, such as the right not to be unfairly dismissed. The courts have to address general, as well as technical, questions: who is Parliament legislating for? If not for an individual in the position of the applicant, why not? What is meant by "a contract of service" in this context?
The extent of the difficulty should not be exaggerated. In the vast majority of the thousands of unfair dismissal claims brought in the Employment Tribunals each year, there is no dispute that the applicant is an employee and that the respondent is the employer. In some cases, however, the applicant's status is an issue. Debatable cases at the margin of a legal concept are inevitable and even formal statutory definitions would not eliminate them. The marginal cases challenge the courts to explore the essence and to examine the boundaries of something that is very familiar because it readily fits the standard case.
In my view, this claim for unfair dismissal is a difficult case. The tribunals below disagreed on the outcome. It is becoming clear that, in the interests of consistency and predictability, Employment Tribunals require as much guidance as can be usefully derived from the relevant legal principles and from the current state of the authorities. Although, as I shall explain later, this case is complicated by the circumstances in which the appeal has come before this court, its facts neatly pose a troublesome question of employment law concerning the status of a cleaner who obtained, through an employment agency, four years of regular paid work with one end-user. This court would be failing in its function if it did not address that wider question. One of the reasons for spending a long time on this judgment is that the wider question is now the most intractable, as well as the most basic, in the whole of employment law. On the one hand, it would be more consistent with a purposive construction of the 1996 Act to hold that workers in the position of Mrs Dacas are entitled to protection from unfair dismissal than to hold that they are not. On the other hand, it has to be recognised that that result runs counter to the views and assumptions shared by many, both professional and lay, involved in setting up, operating and using employment agencies.
From personal experience everyone knows something about the rapid increase in recent years in the flexibility and diversity of complex legal and economic relationships and practices in the workplace. (The changing shape and structure of the labour market are examined in Professor Freedland's invaluable work, The Personal Contract of Employment (2 nd ed 2003) published shortly before the hearing of this appeal. As will appear, I am indebted to him for his treatment of this topic.) The development of "complex employment relationships,"which flourish on the theoretical freedom of the people in the labour market to make contracts of their choice, has added to the difficulty of deciding whether an individual, doing paid work for another, does so under a contract of service and, if so, for whom. The common law notion of a "contract of service" has to be applied by the courts, in the employment rights context, to constantly changing conditions in and outside the workplace. The general principles of the law of contract are sufficiently flexible to cope with many changes; but sometimes only legislation can supply the solution that the common law is unable to deliver. For example, the working conditions of "temporary agency workers" have prompted proposals for an EC Directive establishing a protective framework for temporary workers and providing a consistent and flexible framework conducive to the activities of temporary employment agencies, which post temporary workers employed by them to user undertakings to work temporarily under the latter's supervision.
The particular problem in this case may in due course be regarded as a matter for legislation. It arises from a similar triangular set -up for the organisation of work, which is not necessarily "temporary" from the point of view of the employment agency, the worker (using a legally neutral in the present context) or the end-user. Within the triangle various contractual relationships are expressly created and documented in detail in connection with the organisation of the work to be done by individual workers i.e. type, place and hours of work, rates of pay, dismissal and so on. The rights and obligations normally found in employment relationships are, however, distributed differently in the contractual documents, thereby creating an initial impression of functional dislocation. To take just one example, the applicant not only finds work through the agency; the agency pays for the work done for the end-user, who is under an obligation to make regular payments to the agency based on the hours worked by the applicant for the end-user.
The legal problems are articulated by Professor Freedland at p. 55 of his work:
"Our analysis of the current state of the law of personal employment contracts showed that there was a complex of serious functional problems with regard to employment arrangements or relations involving an end-user of services and an intermediary entity such as an employment agency having some kind of employing role between that end-user and the worker. The problems were firstly, that there is great resistance to the construction of...
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