Ms E Leyland and Others v Hermes Parcelnet Ltd: 1800575/2017 and Others

Case Numbers: 1800575/2017 1800594-1800599/2017 1801037-1801039/2017 1801166-1801169/2017 1801320/2017 EMPLOYMENT TRIBUNALS Claimants Ms E Leyland and others Respondent Hermes Parcelnet Ltd PRELIMINARY HEARING Heard at Leeds Before: Employment Judge Davies Appearances For the Claimants: For the Respondent: On: 30 April (reading), 1, 2 and 3 May 2018 Mr S Jones QC (counsel) Mr R Lieper QC (counsel) JUDGMENT 1. The Claimants are or were workers of the Respondent within the meaning of s 230(2)(b) Employment Rights Act 1996, regulation 2(1) Working Time Regulations 1998 and s 54(3)(b) National Minimum Wage Act 1998. REASONS Introduction and issues 1.1 These are claims brought by a number of individuals operating as couriers for Hermes Parcelnet Ltd (“Hermes”). There is no dispute that these couriers are self-employed. The issue to be decided at this preliminary hearing is whether they are also workers falling within limb (b) of the relevant statutory definitions in s 230 Employment Rights Act 1996, regulation 2 Working Time Regulations 1998 and s 54(3) National Minimum Wage Act 1998 (“limb (b) workers”). 1.2 The Claimants were represented by Mr S Jones QC and Hermes by Mr R Lieper QC. I was provided with agreed bundles of documents and referred to those to which the parties drew my attention. Both representatives also provided extremely helpful skeleton arguments. 1 Case Numbers: 1800575/2017 1800594-1800599/2017 1801037-1801039/2017 1801166-1801169/2017 1801320/2017 1.3 The parties agreed on representative Claimants who would give evidence (not formally identified as lead Claimants) and all parties agree that they will be bound by the findings made in respect of those representative Claimants. I heard evidence from three of the representative Claimants: Mr E Cross, Ms K Dunford and Mr D Clarke. Two further Claimants, Mr S Hughes and Mr J Guy, did not give oral evidence but provided written statements. Obviously, less weight could be attached to the evidence of the witnesses who did not give oral evidence. For Hermes I heard evidence from Mr C Ormsby, Head of Courier, and Ms M Scott, Assistant Head of Courier North. Legal principles 2.1 I begin by summarising the relevant legislative provisions and legal principles. Between them, the Claimants bring claims for: the national minimum wage pursuant to the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015; paid annual leave pursuant to the Working Time Regulations 1998; and unauthorised deduction from wages pursuant to the Employment Rights Act 1996. 2.2 So far as the claims for paid annual leave are concerned, it is important to remember that this right derives from the Working Time Directive 2003/88/EC. Article 7(1) of that Directive gives a right to 4 weeks’ paid annual leave to “every worker.” Although the Directive does not define what is meant by “worker”, it has an autonomous meaning, which is well-established in the decisions of the CJEU. According to that definition, the “essential feature” of an employment relationship is that “for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.” It is for the national court to apply that concept. The national court must base its classification on objective criteria and make an overall assessment of all the circumstances of the case having regard both to the nature of the activities concerned and to the relationship of the parties involved: see e.g. Union Syndicale Solidaires Isere v Premier Ministre and others C-428/09 [2011] IRLR 84 at para 28 and Fenoll v Centre d’Aide par le Travail “La Jouvene” C-316/13 [2016] IRLR 67 at para 27. 2.3 Neither counsel submitted that I should adopt a different approach to the question whether the Claimants undertook personally to perform work or services within the meaning of limb (b) for the purposes of the right to paid annual leave, compared with that taken in respect of purely domestic rights. 2.4 Turning to the domestic legislation, the relevant definitions provide, so far as material, as follows: Working Time Regulations 1998 2 Interpretation (1) In the Regulations – … 2 Case Numbers: 1800575/2017 1800594-1800599/2017 1801037-1801039/2017 1801166-1801169/2017 1801320/2017 “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; … National Minimum Wage Act 1998 54 meaning of “worker”, “employee” etc … (3) in this Act “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; … Employment Rights Act 1996 230 Employees, workers etc … (3) In this Act “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 the client or customer of any profession or business undertaking carried on by the individual; … 2.5 The starting point in determining whether an individual is a limb (b) worker as so defined is to identify the terms of the contract and what they mean. The express terms of a contract are, of course, those expressly agreed, in writing or orally, by the parties. Where there is a written contract, the issue may arise whether it contains the whole of the agreement between the parties. As the Supreme Court made clear in Autoclenz Ltd v Belcher [2011] ICR 1157 SC the Tribunal may disregard a written term that is not part of the true agreement. The question is always, “What contractual terms did the parties actually agree?” The Tribunal must consider whether the written term represents the actual legal obligations of the parties. In doing so it must examine all the relevant evidence. That will include the written term itself, read in the context of the whole agreement, but also evidence of how the parties conducted themselves in practice. But Tribunals must bear in mind that the relevance of how the parties in fact 3 Case Numbers: 1800575/2017 1800594-1800599/2017 1801037-1801039/2017 1801166-1801169/2017 1801320/2017 conducted themselves is simply that it is one of the factors that may elucidate what legal obligations were actually agreed at the time. In answering that question, Tribunals are entitled to and should take into account that contracts relating to work or services are often different from commercial contracts between parties of equal bargaining power. Frequently, organisations offering work are in a position to dictate the written terms, which the other party has to accept. The Tribunal must therefore take into account the relative bargaining power of the parties in deciding whether the written terms in truth represent what was agreed. They must be “realistic and worldly wise.” If the reality of the situation is that nobody seriously expects, for example, that a worker will seek to provide a substitute, the fact that the contract expressly provides for this unrealistic possibility will not alter the true nature of the relationship. Equally, if the clause genuinely reflects what might realistically be expected to occur, the fact that the right has not been exercised in practice will not render it meaningless. Tribunals must take a sensible and robust view to avoid form undermining substance. 2.6 In this case the principal focus of the dispute is on whether these are contracts under which the Claimants undertake to perform the work “personally.” The Supreme Court gave its decision in Pimlico Plumbers Ltd v Smith [2018] UKSC 29 after the preliminary hearing in this case. The Supreme Court did not disapprove the decision of the Court of Appeal in that case, in which guidance on the approach to this issue was given. The Supreme Court identified a further test that may be helpful in some cases in answering the question whether the individual undertakes to perform work personally. Accordingly, the following principles apply: 2.6.1 The question of personal service is a distinct element of the definition, to be considered separately from the question whether the individual is carrying on his or her own business undertaking: see Redrow Homes (Yorkshire) ltd v Wright [2004] ICR 1126, CA. 2.6.2 The question turns entirely on the terms of the contract: see Pimlico Plumbers Ltd v Smith [2017] ICR 657, CA at para 73. 2.6.3 Freedom to do a job oneself or through someone else is inconsistent with a contract of service although a “limited or occasional” power of delegation may not be. An essential feature of a contract of service is the performance of “at least part of the work” by the servant himself: see Pimlico Plumbers SC at para 22. An unfettered right to substitute another person to do the work or perform the services is therefore inconsistent with an undertaking to do so personally: see Pimlico Plumbers CA at para 84. 2.6.4 A conditional right to substitute another person may or may not be...