Case Studies

Barely a day goes by without a court making a decision about something interesting. This is where we tell you about our favourites and those that we think you should know about.
  • 27/04/2017 Employee who slept-in entitled to national minimum wage for full duration of the night shift

    In Royal Mencap Society v Tomlinson-Blake, the EAT has determined that an employee who was required to carry out a sleep-in shift to provide support and care to vulnerable adults in their own property was entitled to national minimum wage for the full duration of the night shift. 

    NEWS

    In Royal Mencap Society v Tomlinson-Blake, the EAT has determined that an employee who was required to carry out a sleep-in shift to provide support and care to vulnerable adults in their own property was entitled to national minimum wage for the full duration of the night shift. 

    DETAILS

    In Royal Mencap Society v Tomlinson-Blake, Mrs Tomlinson-Blake was obliged to remain at the private accommodation of the service users throughout her sleep-in shift and to keep a ‘listening ear’ during the night in case her support was needed and to respond to emergencies that may arise.  If nothing required to be done, she was entitled to sleep throughout the shift.  For each sleep-in shift, Mrs Tomlinson-Blake received a flat-rate payment together with one hour’s pay.  

    Mrs Tomlinson-Blake claimed that the whole sleep-in shift should have been treated as ‘time work’ and accordingly she had not been paid in accordance with the national minimum wage regulations.  Mencap argued that the obligation on Mrs Tomlinson-Blake during her sleep-in shift was to be ‘available’ at her place of work and as time spent asleep did not count as ‘time work’ she had been paid correctly.  

    The appeal was heard by the EAT in conjunction with two other appeals covering the same issue, namely, whether employees who sleep-in in order to carry out duties if required, engage in ‘time work’ for the full duration of the night shift or whether they are only entitled to the national minimum wage when they are awake and carrying out their relevant duties?  

    Despite recognising the need for clarity on this issue, the EAT confirmed that there is no ‘bright line principle’ that can be applied.  Instead, the EAT held that the proper approach is to adopt a ‘multifactorial evaluation’ in considering whether the individual is ‘working’ during the period for which they claim.  In doing so, the EAT also identified the following potentially relevant factors in determining whether a person is ‘working’ by being present at the work place:

    • the employer’s particular purpose in engaging the worker to the extent that it informs what the worker might be expected or required to do;
    • the extent to which the worker’s activities are restricted by the requirement to be present and at the disposal of the employer;
    • the degree of responsibility undertaken by the worker; and 
    • the immediacy of the requirement to provide services if something untoward occurs or an emergency arises. 

    In Mrs Tomlinson-Blake’s case, the factors relied on included: Mencap’s regulatory and contractual obligations to have someone on the service user’s premises; the responsibility on Mrs Tomlinson-Blake throughout the sleeping shift to be and remain present throughout (whether asleep or not); and to keep a listening ear and exercise her professional judgment to determine whether or not to intervene.  The EAT found that the ET was entitled to conclude that Mrs Tomlinson-Blake was performing the role of a carer during the sleep-in shift, whether asleep or not, and accordingly she had not received the pay required by the NMW regulations.  

    If you require any further information on the above, please contact a member of the team.

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  • 19/04/2017 WILL BREXIT LEAD TO AN INCREASE IN CROSS-BORDER MERGERS?

    “Such mergers are relatively uncommon in a group.”

    On 23 January 2017, a UK High Court ruling cleared the way for UK companies to be absorbed by European subsidiaries as they restructure in response to Brexit. This article discusses the ruling and its impact.

    Background

    On 23 January 2017, the UK High Court approved a reverse cross-border merger in which a UK parent company (Formenta Ltd) was absorbed by its Italian wholly owned subsidiary (Newco Immobiliare S.R.L.). The ruling has cleared the way for UK companies to be absorbed by European subsidiaries as they restructure in response to Brexit. The mechanism of a ‘reverse cross-border merger’ is set out in the European Commission directive on cross-border mergers (2005/56/EC), but had not previously been permitted under English law. The reverse merger could potentially be the first of many, although it is our view that it is unlikely.

    Such mergers are relatively uncommon in a group context. Usually, a parent company absorbs a wholly owned subsidiary, or sister companies merge and may or may not create a new holding company.

    The Companies (Cross-Border Mergers) Regulations 2007 (SI 2007/2974) (the "Regulations") provide for three different types of cross-border merger:

    1. merger by absorption (the existing company absorbs one or more other merging companies);
    2. merger by absorption of a wholly-owned subsidiary; and
    3. merger by formation of a new company (two or more companies merge to form a new company).

    Broadly, the effect of a cross-border merger under the Regulations is that:

    1. the assets and liabilities of the non-surviving entity and the rights and obligations arising from its employment contracts, are automatically transferred to the surviving entity; and
    2. the non-surviving entity is dissolved without going into liquidation.

    In the case of a merger by absorption or a merger by formation of a new company, the members of the non-surviving entity become members of the surviving entity.

    Why was this different?

    It is the ‘reverse’ element of the transaction that is notable. Reverse cross-border mergers have two key additional complexities:

    1. potentially violating laws that prevent a company from acquiring shares in itself; and
    2. determining the merger process, since the formalities depend on the type of merger.

    The UK Regulations do not address the situation in which a subsidiary absorbs its parent company or the potential infringement of laws preventing a company from acquiring shares in itself.

    The two issues were addressed as follows:

    1. Prohibition on a company acquiring its own shares: as is the case in the UK, Italy bars companies from acquiring their own shares. To manage this, all of the Italian subsidiary’s share capital was cancelled and its net assets were cancelled to create a surplus. New shares were then issued to the shareholders of the UK parent and the subsidiary’s share capital was restated to reflect the net assets contributed by the parent. The parent’s share capital was also cancelled.
    2. Determining the merger ‘type’: EU legislation was implemented differently in Italy to the UK. In Italy, the merger needed to follow provisions governing ‘mergers by absorption of wholly owned subsidiaries’, whereas, in the UK, the acquisition constituted a ‘merger by absorption’. The UK court ruled that the laws applicable to the surviving company should prevail; consequently, the formalities associated with mergers by absorption of wholly owned subsidiaries would apply.

    Brexit

    This is a significant case. It established how a reverse cross-border merger could take place and it provided another way to cross-transfer activities rather than using other options, such as the transfer of seat using a Societas Europaea or a business transfer and liquidation.

    While the Regulations increase the options available to UK companies looking to restructure European operations, a cross-border merger is unlikely to be the first choice. The extent to which UK companies will be able to continue to rely upon this regime after Brexit remains unclear and will depend upon the Brexit model ultimately adopted.

    Howes Percival

    Howes Percival’s Corporate lawyers Edward Lee and Venetia Phipps have particular expertise in multi-jurisdictional transactions. To contact Edward, please email edward.lee.@howespercival.com or call 01908 872203

    © Howes Percival LLP, all rights reserved.

     

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  • 16/03/2017 ECJ holds that headscarf ban in the workplace did not constitute direct discrimination

    NEWS

    In Achbita v G4S Secure Solutions, the ECJ decided that an employee dismissed for insisting on wearing a headscarf in the workplace did not suffer direct discrimination. This was on the basis that the dismissal was further to a company policy which banned all wearing of political, religious or similar signs regardless of any particular religion or belief. However, the ECJ stated that an employer may be indirectly discriminating against an employee if they are not able to justify such a requirement.

    NEWS

    In Achbita v G4S Secure Solutions, the ECJ decided that an employee dismissed for insisting on wearing a headscarf in the workplace did not suffer direct discrimination. This was on the basis that the dismissal was further to a company policy which banned all wearing of political, religious or similar signs regardless of any particular religion or belief. However, the ECJ stated that an employer may be indirectly discriminating against an employee if they are not able to justify such a requirement.

    DETAILS

    In Achbita v G4S Secure Solutions, Ms Achbita worked as a receptionist at G4S.  G4S had a company policy that prohibited employees from wearing visible signs of their political, philosophical or religious beliefs in the workplace. She was dismissed because she insisted on wearing the Islamic headscarf at work.

    The ECJ held that G4S’s company rule prohibiting the wearing of visible signs of political, philosophical or religious beliefs is not directly discriminatory on the ground of religion or belief because the rule treats all employees in the same way, namely, requiring them to dress neutrally. Further, it was not evident that the rule was applied differently to Ms Achbita than to other employees. 

    However, the ECJ further held that such a prohibition may constitute indirect discrimination if the rule results in persons adhering to a particular religion being put at a particular disadvantage. Such indirect discrimination may be objectively justified by a legitimate aim (in this case, the employer’s pursuit to have a policy of political, philosophical and religious neutrality in its relations with customers would be considered a legitimate aim) provided that the means of achieving that aim are appropriate and necessary. However, it was for the national court to decide whether it would have been possible for G4S to offer Ms Achbita a different role that didn’t involve her coming into contact with any customers.

    We previously reported on the Advocate General’s opinion in Bougnaoui and anor v Micropole in July 2016. This case was also considered by the ECJ.  Ms Bougnaoui worked as a design engineer for Micropole. When she was recruited, it was made clear to her that, due to the customer-facing nature of her role, she wouldn’t be able to wear her headscarf at all times. Following a complaint from a customer, Micropole asked Ms Bougnaoui not to wear the headscarf in future. She objected and was subsequently dismissed. The Advocate General was of the opinion that the requirement for Ms Bougnaoui not to wear a headscarf when in contact with customers could not be a ‘genuine and determining occupational requirement’. 

    The ECJ noted that it was not clear whether the national court had found treatment based on directly or indirectly discriminating on the basis of religion or belief. Also, it was not clear whether Micropole operated a neutral policy to all political, philosophical or religious beliefs, as the employer did in Achbita. The ECJ held that these issues would have to be determined by the national court in light of the Achbita ruling. However, the ECJ did hold that if there is no such general company rule or policy, then an employer who relies on a customer’s objections to an employee wearing a headscarf as a reason for that employee’s dismissal will not be able to defend the dismissal on the basis of a ‘genuine and determining occupational requirement’ under Article 4 of the EU Equal Treatment Framework Directive.

    COMMENT

    Nick Benton comments: "This case serves as a reminder that dress codes should be carefully considered by employers in relation to their impact on increasingly diverse  workforces.  If there is a potentially discriminatory element then employers will need to consider whether any such element is an appropriate and necessary means of achieving their legitimate business aims"

    If you require any further information on the above or assistance with any of your compliance projects, please contact a member of the team.

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  • 07/03/2017 Insolvency: Is the tide turning in favour of petitioning creditors?

    In the case of Cod Hyde Limited v Space Change Management Limited, heard on 7 April 2016, an application to restrain the presentation of a Winding up Petition on the grounds of dispute and counter-claim was refused because of the failure, by the claimant, to adhere to the provisions of a bespoke JCT Design and Build contract entered into between the two parties. William Shirley considers the decision.

    Cod Hyde Limited v Space Change Management Limited [2016] EWHC 820 (Ch)

    Background

    A winding up order will not be made against a company if the debt is genuinely disputed, see for example Re LHF Wools Ltd [1970] Ch. 27. However, in Re a Company No. 006685 of 1996 [1997] B.C.C. 830 the Court held that a petition will not be struck out or dismissed merely because the company alleges that the debt is disputed. The Court must be satisfied there is a genuine dispute founded on substantial grounds. If the debt is disputed the Court will strike out the petition leaving the question of the validity of the debt to be determined in other proceedings.

    However, in Tallington Lakes Limited -v- South Kesteven District Council [2012] EWCA civ 443, Etherton LJ provided guidance in relation to an application to restrain the presentation of a winding up petition, stating that "I have to emphasise, however, in this context that it is well established that the threshold for establishing that a debt is disputed on substantial grounds in the context of a winding up petition is not a high one for restraining the presentation of the winding up petition and may be reached even if, on an application for summary judgment, the defence could be regarded "shadowy"."

    Key Facts

    On 2 October 2015 Cod Hyde Limited ("COD Hyde" or "the Employer") and Space Change Management Limited ("Space" or "the Contractor") entered into a bespoke JCT Design and Build Contract ("the Contract"), a construction contract within the meaning of the Housing Grants, Construction and Regeneration Act 1966. The Contract included clauses relating to the issue, by the Contractor, of applications for interim payment, the procedures to be followed by the Employer in the event that an interim payment amount is disputed, the date by which the interim payment must be paid and the procedures for termination of the Contract, by either party, in the event on non-payment (by the Employer) or default (by the Contractor).

    Space issued COD Hyde with separate applications for interim payments on 29 October 2015 (application number 6), 30 November 2015 (application number 7) and on 18 December 2015 (application number 8) totalling £613,377.66, none of which were paid by COD Hyde.

    On 29 January 2016 Space wrote a letter to COD Hyde headed "Notice of Default and Notice of Suspension" giving notice of COD Hyde's failure to pay and of Space's intention to suspend the performance of obligations arising under the Contract. The letter requested payment of the outstanding balance within 7 days, failing which the Contract would be suspended. On 9 February 2016 Space wrote to COD Hyde stating that the suspension was in effect and enclosed a statutory demand claiming the sum of £649,659.27 including interest.

    On 15 February 2016 COD Hyde wrote to Space's agent rejecting the demand for payment "on the basis of the sums included being in dispute at this time". The letter also referred to errors in arriving at the amount claimed in the statutory demand. This error was acknowledged resulting in a revised claim of £628,689.27. On 29 February 2016 COD Hyde wrote to Space putting them on notice of default as a result of Space "suspending works without reasonable notice" and the Contractor's "failure to proceed regularly and diligently with performance of obligations". On 7 March 2016, COD Hyde's solicitors wrote to Space's solicitors stating that "the threat to present a winding up petition is misplaced because the alleged debt to which the SD relates is disputed" which, the solicitors state "is abundantly clear because there is a dispute about whether the Contract has been terminated and if so by whom". On 15 March 2016 COD Hyde advised Space that the Contract had been terminated.

    The on-going dispute between the two parties led to an application being made by COD Hyde to restrain the presentation of a winding up petition against it. That application was heard on 7 April 2016, the same day that Space entered into administration.

    Space argued that as COD Hyde had not adhered to the procedures set out in the Contract, it had an unanswerable claim for the amounts set out in the interim applications. COD Hyde on the other hand argued that there was a dispute sufficient to justify an injunction restraining presentation of a petition.

    Judgment

    Following an exhaustive analysis of the facts, the Court found that whilst Space had followed the procedures laid down by the Contract, COD Hyde had not. In relation to two of Space's applications for interim payment, being number 6 dated 29 October 2015 and number 7 dated 30 November 2015, the Court found that COD Hyde's Payment Notices were both issued outside the time limit laid down in the Contract.

    Mr Justice Warren held that "It is said that there is a dispute about the progress of the works which the Contractor [Space] has failed diligently to pursue. I have no detail in relation to that. There are only the most general assertions in the letter dated 7 March 2016...." and "... even if those assertions could be substantiated, the fact is that no default notices were ever served in respect of them and they afford no answer to the claims under the interim applications which were not answered by valid Payment Notices or Pay Less Notices". Mr Justice Warren went on to state that "Finally the Employer [COD Hyde] asserts that it has a counterclaim which will exceed the amount of the SD (as corrected on the figures). There is simply no evidence before me that that is so".

    Mr Justice Warren refused to grant the injunction sought and dismissed the application stating that "In all of the circumstances, I do not consider, on the material before me, that there is even a shadowy claim (see Etherton LJ in Tallington Lakes Ltd v South Kesteven District Council [2012] EWCA 443 at [22]) concerning the liability of the Employer [COD Hyde] to make the interim payments claimed ... I do not consider either that there is even a shadowy claim that the Contractor [Space] was not entitled to suspend work and ultimately terminate the Contract; the Contract was validly, in my view, terminated by the Contractor before the Employer purported to terminate it".

    Conclusion

    Although the general position currently is that the Courts tend to favour the debtor company when it comes to exercising its discretion to restrain the presentation of a winding up petition, this case gives some hope to petitioning creditors that the tide may be turning as the Court analysed in detail the grounds of the dispute and the counter-claim. Perhaps though, it is a decision which turns on its facts which involved a detailed contractual dispute resolution procedure which was not complied with and may not have more a general application.

    © Howes Percival LLP

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  • 23/02/2017 Insolvency: The High Court considers the issue of costs on an appeal against a bankruptcy order

    Cooke v Dunbar Assets Plc is the first reported case to deal with the issue of costs on an appeal against a bankruptcy order. There is surprisingly no previous direct authority on the matter and this was described as "remarkable" by Jeremy Cousins QC sitting as a Deputy Judge of the Chancery Division when giving his judgment in the present case. Sundip Mapara considers the impact this case has on clarifying the law in this area.

    Cooke v Dunbar Assets Plc [2016] EWHC 1888 (Ch)

    Background

    A bankruptcy order was made against Mr Brian Cooke on 18 December 2014 on a petition presented by Dunbar Assets Plc ("Dunbar"). Mr Cooke appealed the bankruptcy order and this was dismissed by the Judge on 6 April 2016. At this time, it became apparent that there was a fundamental disagreement between the parties as to the costs order which should be made on the unsuccessful appeal. More particularly, counsel for Mr Cooke suggested that the costs should be treated as a cost and expense of the bankruptcy, and counsel for Dunbar suggested that Mr Cook should be ordered to pay the costs personally. As a result, judgment was reserved in order for the parties to make further written submissions on the issue of costs.

    Key Facts

    The Issues

    The parties agreed that the costs should fall into three possible categories, namely:

    1. as a cost and expense of the bankruptcy in accordance with the order of priority set out in Rule 6.224(1) of the Insolvency Rules 1986 ("IR 1986") ("Category 1");
    2. as a provable debt in the bankruptcy ("Category 2"); and
    3. as a liability outside of the bankruptcy, ordered against Mr Cooke personally ("Category 3").

    The parties also initially agreed that the issue of costs was a matter of law and not discretion for the court.

    In light of the above, the court had to consider:

    1. under which of the above three categories the costs order can be made; and
    2. whether this decision was in the discretion of the court or a matter of law.

    The Parties' Legal Submissions

    Counsel for Mr Cooke argued that the costs order should fall under Category 1 and relied upon the provisions of Rule 12.2 IR 1986, which states at Rule 12.2(1):

    "All fees, costs, charges and other expenses incurred in the course of winding up, administration or bankruptcy proceedings are to be regarded as expenses of the winding up or the administration or, as the case may be, of the bankruptcy".

    Counsel for Mr Cooke argued that a bankruptcy appeal is not a standalone action that can be divorced from the bankruptcy proceedings and therefore the costs should be treated no differently to the costs of the petition, which it is common ground fall as a cost and expense of the bankruptcy.

    Alternatively, counsel for Mr Cooke argued that the costs awarded would constitute a bankruptcy debt as defined in Section 382 of the Insolvency Act 1986 ("IA 1986") and should be treated as a provable debt. Section 382(b) defines a provable debt as:

    "any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy".

    Either way, the costs should be payable from the bankruptcy estate, albeit, ranking differently in the order of priority of payment.

    Counsel for Dunbar relied on Rule 7.51A IR 1986 in applying Part 44 (General Rules About Costs) and Part 47 (Procedure for Assessment of Costs and Default Provisions) of the Civil Procedure Rules 1998 ("CPR") and argued that the court had an unfettered discretion as to the costs awarded on an appeal and that Rule 7.51A IR 1986, and consequently, CPR Parts 44 and 47, amounted to the only statutory guidance on the treatment of costs of appeals from bankruptcy order. Furthermore, it was Dunbar's case that any award for costs should fall into Category 1 or Category 3.

    Counsel for Dunbar also submitted that an order for costs could be made in the alternative, i.e. that Mr Cook be ordered to pay the costs (Category 3), but if not paid by him, they be treated as a cost of the bankruptcy (Category 1). They could not fall within Category 2 because the liability was incurred post-bankruptcy as the litigation in this case did not exist before the bankruptcy proceedings.

    Judgment

    The Judge ruled that the purpose of Rule 12.2 IR 1986 was to safeguard the interests of those who have incurred costs and expense in promoting the interest of the creditors and not those who make unsuccessful claims causing the bankruptcy estate to incur costs. In his judgment he explained that Rule 12.2 does not contain an "exhaustive statement as to how costs are to be treated".

    Furthermore, as there is no inconsistency between the provisions of Rule 12.2 and CPR 44, the general rules in CPR 44 would apply which includes the provision that the unsuccessful party will be ordered to pay the costs of the successful party. Therefore, the starting point would be that Mr Cooke should pay Dunbar's costs. CPR 44.2(2)(a) also makes provision that the court may make a different order.

    The Judge went on to explain why he considered there to be good policy reasons why Rule 12.2 should not have the affect for which Mr Cooke's counsel contended:

    "(1) Neither a bankrupt, nor some other party whose interest are aligned with his, or who has his own reasons for wishing to litigate in the bankruptcy, should be afforded the opportunity to do so without being at risk as to costs. The risk of an adverse costs award acts as a deterrent against the advancing of cases that are without merit.

    (2) A person in the position of Mr Cooke, who appeals against the making of a bankruptcy order, does so of his own volition. As the provisions to which I have referred to above demonstrate, a bankrupt actively needs to pursue permission to appeal; an appeal is a distinct process initiated by the appellant. It is not something which flows inexorably from being caught up in the initial bankruptcy proceedings.

    (3) The bankruptcy estate should be protected, where possible, from the need to fend off unmeritorious disputes which will dissipate the estate to the prejudice of creditors".

    Submissions made on behalf of Mr Cooke that the costs of the appeal were a contingent liability so as to give rise to a provable debt (Category 2) were dismissed on the basis that the costs would need to rank twice, i.e. as a priority as an expense and then as a much lower ranked non-preferential debt. The Judge explained that "such a notion would not be harmonious with the priority of debts established by s328; the expenses of the bankruptcy are afforded priority over other debts, preferential or otherwise".

    Mr Cooke was ordered to pay Dunbar's costs personally, and to the extent that they were not satisfied by him, they should be treated as an expense of the bankruptcy.

    Conclusion

    This case confirms that bankrupts will not be immune from adverse costs risks should they unsuccessfully challenge a bankruptcy order by way of an appeal. This should serve as a deterrent for unmeritorious appeals but it is debateable whether a personal costs order has much impact in practice given the financial status of a bankrupt.

    If you have any issues regarding bankruptcy please contact Sundip Mapara on 0116 2473587 or email him at sundip.mapara@howespercival.com. Sundip is a specialist insolvency solicitor and will be able to advise you on all matters relating to personal and corporate insolvency.

    For further information on this case please click here.

    © Howes Percival LLP

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  • 14/02/2017 “Self-employed” plumber held to be a worker

    In Pimlico Plumbers Limited v Smith, the Court of Appeal has upheld the decision of the Employment Appeal Tribunal to find that Mr Smith, who was engaged as a self-employed contractor, was also a “worker” under the Employment Rights Act 1996 and the Working Time Regulations 1998 and an “employee” under the wider definition of that term in the Equality Act 2010.

    NEWS

    In Pimlico Plumbers Limited v Smith, the Court of Appeal has upheld the decision of the Employment Appeal Tribunal to find that Mr Smith, who was engaged as a self-employed contractor, was also a “worker” under the Employment Rights Act 1996 and the Working Time Regulations 1998, and an “employee” under the wider definition of that term in the Equality Act 2010.

    DETAILS

    Mr Smith (S) signed a ‘self-employed operative’ agreement with Pimlico Plumbers (PP).  The agreement provided for the performance of “building trade services” by S.  His working hours would be agreed between the parties; PP was not obliged to provide work, nor was S obliged to accept work.  It also expressed that S would comply with all reasonable rules and policies of PP, including those contained in its company manual.

    The manual set out numerous work requirements, including wearing a PP uniform, carrying a PP ID card at all times, working at least 5 days and 40 hours a week, leasing a van from PP adorned with the company logo and holding a mobile phone (with the tariff deducted from monthly wages). Plumbers had to contact the PP control room frequently and make all customer contact, appointments and scheduling through the control room.  Plumbers would also not be paid until PP had received payment from customers and could even receive wage deductions if a customer did not honour a payment or made a late payment.  The agreement also contained eight restrictive covenants which restricted the post-termination business activities of S.  The agreement did not include any express right for S to send a substitute in his place.  However, S did have to provide his own tools and equipment and pay for accounting costs and professional indemnity insurance.  He also filed tax returns and believed himself to be self-employed.

    Following the termination of the agreement, S brought claims alleging unfair dismissal, wrongful dismissal, entitlement to pay during the period of a medical suspension and failure to provide particulars of employment.  These claims all depended on S being an “employee” within the meaning of the Employment Rights Act 1996 (ERA), i.e. employed under a contract of employment.  The Employment Tribunal (ET) held that S was not employed under such a contract and so had no jurisdiction to hear these claims. 

    S additionally claimed unpaid holiday pay and unlawful deductions from wages.  This required him to show he was a “worker” under ERA and the Working Time Regulations 1998 (WTR).  That is, an individual either working under a contract of employment or any other contract whereby he personally performs any work or services for another party who is not a client or customer of any profession or business carried on by the individual.  S also claimed disability discrimination, which required him to be an “employee” within the extended definition of that term under the Equality Act 2010 (EA) and such definition essentially follows the definition of “worker” in the ERA and WTR.

    The ET found that S was a “worker” for the purposes of the WTR and ERA.  Therefore, he was also entitled to the protection of the EA.  The purpose of the agreement was for S to personally provide work for PP, which included completing minimum working hours without the right to a substitute.  Although S had autonomy in respect of the estimates he gave and in carrying out the work, PP enjoyed such a degree of control that S could not be considered to be self-employed and running his own business.  PP appealed.  

    The Employment Appeal Tribunal upheld the decision of the ET.  The ET had correctly considered the facts, including that S had no right to provide his services through a substitute and that the restrictive covenants were inconsistent with the idea that S was running his own business.  PP subsequently appealed to the Court of Appeal.

    The Court of Appeal supported the decision of the ET and held that S was a “worker” and not carrying out a business on his own account.  The express wording of the agreement required personal performance from S.  S also had no right of substitution and was obliged to work a normal 40 hour week under the company manual.  Furthermore, the notion that S was under no obligation to accept work was undermined by this minimum working hours requirement and the practical realities of the relationship.  As S had to cover costs, such as tools, van expenses and a mobile phone tariff, the relationship between PP and S would only work if S was given and worked a minimum number of hours to cover those costs and make a profit.  For these reasons, the appeal was dismissed.

    COMMENT

    Paula Bailey comments: "Following several high profile cases, this decision offers further guidance on the issue of worker status and worker rights.  Once again, the courts have emphasised that contracts will be rigorously scrutinised against the realities of the working relationship when determining employment status.  Here, personal performance and the degree of control exercised by the company were critical factors".

    If you require further assistance please contact a member of the team.


    © Howes Percival LLP

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