Franks v Reuters Ltd and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Thorpe,The President |
| Judgment Date | 10 April 2003 |
| Neutral Citation | [2003] EWCA Civ 417 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A1/2002/1479& 1479/A |
| Date | 10 April 2003 |
[2003] EWCA Civ 417
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL
The President
Lord Justice Thorpe and
Lord Justice Mummery
Case No: A1/2002/1479& 1479/A
MR MICHAEL SUPPERSTONE QC & JAMES WARD (instructed by Sternberg Reed Taylor & Gill, Solicitors, 12/18 Station Parade, Barking,Essex, IG11 8DN) for the Appellant
MR PAUL ROSE QC (instructed by Latham & Co Solicitors, 15 High Street, Melton Mowbray, Leicestershire, LE 13 OTX) for the Respondent
Introduction
The issue on this appeal is whether the employment tribunal erred in law in holding that Mr Raymond Franks was not an employee of Reuters Limited (Reuters) within the meaning of the Employment Rights Act 1996. In section 230 an "employee" is defined as an individual, who has entered into or works under or worked under a contract of service. The contract may be expressed orally or in writing, or it may be implied.
Mr Franks went to work at Reuters on a temporary placement as a driver at the end of 1993. He found the work through an employment agency, First Resort Employment Limited (First Resort), which is now in liquidation. First Resort took no part in the appeal to the employment appeal tribunal or to this court.
After six months Mr Franks became a full time driver at Reuters. He remained so until November 1997. He was then selected to work as a back up at the Help Desk. In April 1998 he became permanent on the Help Desk. He also carried out new driving duties. His hourly rate of pay was increased. On 13 August 1999 he was told that his services were no longer required. He worked for another month and left on 10 September 1999.
The response of Reuters to the claims for unfair dismissal, redundancy pay and damages for breach of contract, which Mr Franks made in the belief that he was an employee, was that he was not employed by them, but by First Resort, who paid his wages, after deducting PAYE. First Resort denied that they employed him, but they were willing to continue to offer him available assignments.
On 12 May 2000 the employment tribunal held, after hearing evidence from Mr Franks, the Operations Manager of Reuters and a director of First Resort on a preliminary issue, that he was not an employee of either respondent. Mr Franks had no claim for anything against either of them. On 27 June 2002 the decision was upheld by the employment appeal tribunal.
Decision in Carmichael v. National Power plc
The employment tribunal's reading of the decision of the House of Lords in Carmichael v. National Power plc [1999] 1 WLR 2042 on the importance of "mutuality of obligation" conditioned their characterisation of the relationship between Mr Franks and Reuters. The speeches of Lord Irvine LC and Lord Hoffmann also contain valuable guidance of the highest authority on the role of employment tribunals in finding facts relevant to the issue whether a tribunal applicant is, or is not, an employee.
In this case the tribunal cited Carmichael as authority for the proposition that mutuality of obligation is a necessary condition of an employment relationship. They applied that proposition to their findings of fact and concluded that they could not see, in the relationship between Mr Franks and Reuters, any mutuality of obligation which would override the other matters they had taken into consideration. In their view the point was that
"…he [Mr Franks] could have said that he did not wish to work for [Reuters] any longer and similarly [Reuters] could have said that they no longer wished to have him working for them." (Paragraph 8 of the extended reasons.)
It will be necessary to examine the basis for the tribunal's decision on that point. Before that, however, more should be said about Carmichael and the context of the key ruling on the requirement of mutuality of obligation.
The question for the employment tribunal in Carmichael was whether guides taking parties on tours of power stations on "a casual as required basis" were entitled to require a statement of the terms of their employment in accordance with s 1 of the Employment Protection (Consolidation) Act 1978. The tribunal held that they were not employees of National Power and dismissed their applications.
The employment tribunal found that the tour guides did not have contracts with National Power, "whether of service or otherwise": see p.2044H. In reaching that conclusion, the employment tribunal did not confine their consideration to the written correspondence passing between the guides and National Power, which was relied on by the guides as constituting a contract of employment. The tribunal also considered evidence of the surrounding circumstances, the way in which the tour guide system was operated by the parties, how the parties had conducted themselves subsequently and evidence of the parties as to how the engagement had been understood by them. The House of Lords held that to be the correct approach to the employee issue: see p. 2045F-H. On the material before them the tribunal found that the guides were only paid for the hours they worked. When they were not working as guides they had no contractual relationship of any kind with National Power. There was an absence of mutuality. There was no obligation on the company to provide casual work. The company was merely intimating that work might be offered. There was no obligation on the applicants to undertake it. The applicants did no more than intimate that they were ready to be invited to attend for casual work as station guides, as and when National Power required their services. The correspondence was not intended by the parties to constitute an exclusive or complete record regulating their relationship. So, the employment tribunal were entitled to make inferences from evidence of the surrounding circumstances and the subsequent conduct of the parties.
The House of Lords held that, on the findings of fact by the tribunal, there was no error of law in their conclusion that the tour guides had no contracts, that their engagement gave rise to no legal obligations at all and that they could not therefore be employees of the company. There was absent from the relationship the irreducible minimum of mutual obligation necessary to create a contract of service.
The notable point is that the employment tribunal did not reach their decision simply on the basis of construing the correspondence between the company and the tour guides. The tribunal correctly looked beyond and beneath the documents. They made their finding of lack of mutuality of obligation only after considering evidence of what the parties said and did, both at the time when they were engaged and subsequently, including evidence as to how the relationship had been understood by them: see the speech of Lord Irvine LC at 2045F-H and of Lord Hoffmann at 2049C-D, 2050C—2051C.
Decision of employment tribunal
Mr Supperstone QC, who did not appear in the employment tribunal or in the appeal tribunal, submitted on behalf of Mr Franks that the tribunal had erred in their approach to the resolution of the preliminary issue of whether Mr Franks was an employee. They had failed to address the question whether there was an implied contract of service between him and Reuters. As a result they had failed to consider evidence, or to make the findings of fact, relevant to that issue. It would be necessary to remit the matter for re-hearing by a fresh tribunal.
His submissions centred on the tribunal's findings of fact set out in paragraph 5 of the extended reasons sent to the parties on 12 May 2002:-
"1. The Applicant had entered into an Agreement with [First Resort] whereby they agreed to try to find him (described in the Contract as the Temporary Worker) work, and agreed to pay to the Temporary Worker wages calculated at an hourly rate for each hour worked. We also find that under the provisions of that Contract and from what Mr Hayes [a director of First Resort] told us that the Temporary Worker was not under an obligation to accept an offer and there was no obligation on [First Resort] to provide any work to the Temporary Worker.
2. [Reuters] did not pay the Applicant. They paid to [First Resort] a fee for their services which included an agreed sum which [First Resort] paid to the Applicant in respect of the hours which he worked.
3. [Reuters], while requiring the Applicant so long as he worked for them, to comply with the hours which they set for him, were under no obligation to continue to accept his services. The Applicant was under no obligation to continue to work for them, but could have informed [First Resort] that he no longer wished to perform work for [Reuters] and to have asked [First Resort] to find him other work.
4. The Applicant was not paid sick pay, and was only paid holiday pay because [Reuters] paid to [First Resort] a sum which included money to be set aside for when the Applicant took holidays, and which [First Resort] paid to him.
5. The Applicant had to arrange his holidays with [Reuters]."
Having regard to those findings, the tribunal then asked themselves what was the position of Mr Franks vis-a-vis Reuters? They concluded that he was not an employee within s 230 of the 1996 Act. They expressly dealt with two submissions. First, they rejected the contention of Mr Hayes, a director of First Resort who represented them at the hearing, that the matter was concluded by the provision in paragraph 8 of the Terms and...
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