The claimant was a mechanical engineering apprentice with the respondent. He was sponsored by them to undertake a university degree under a 'University Sponsorship' contract. The claimant withdrew from the degree course and the respondent gave him the option of either resuming it or accepting an internship, both of which he declined. The claimant wanted to return to full time employment with the respondent to which he considered he was entitled. The respondent refused this request on the basis that there were no positions and anyway, his contract stated that, following his apprenticeship, they were not obliged to offer him a job. The claimant claimed unfair dismissal at the ET and won, the majority approaching matters on the basis that he had been continuously employed, and he was awarded more than £33,000 in compensation. The respondent appealed.

The main argument put forward by the respondent was that the claimant was not employed under a contract of employment. It was submitted that the Tribunal should not have proceeded on the basis that he was because if it was found there was no contract of employment, they would not have had jurisdiction to hear the case. The EAT found that he was not employed under a contract of employment and therefore had no rights under s98 of the ERA.

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Appeal No. UKEATS/0069/10/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

At the Tribunal

On 22 November 2011

Before

THE HONOURABLE LADY SMITH, MISS S B AYRE FIPM, FBIM, MR R P THOMSON

G E CALEDONIAN LTD (APPELLANT)

MR TIMOTHY JUSTIN McCANDLISS (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR B NAPIER (One of Her Majesty's Counsel)

Instructed by:
Labour and Employment Counsel
GE Aviation
Cheltenham Road
Bishops Cleeve
Cheltenham
GL52 8SF

For the Respondent
MR J MACMILLAN (Solicitor)

MacRoberts LLP
Capella
60 York Street
Glasgow
G2 8JX

CONTRACT OF EMPLOYMENT – Whether established

SEX DISCRIMINATION – Jurisdiction

Unfair dismissal. Sponsorship of former mechanical engineering apprentice (Claimant) for university degree under a 'University Sponsorship' contract. Claimant withdrew from degree course and sponsor gave him the option of either resuming it or accepting an internship, both of which he declined. Sponsor refused him full time employment to which he considered he was entitled. Employment Tribunal found that he had been unfairly dismissed and awarded compensation (based on the full time rates payable to a semi skilled engineer – approaching matters on the basis that he had been continuously employed). On appeal, held that the Tribunal had erred. The Claimant was not employed under a contract of employment and had, accordingly, no rights under s.94 of the Employment Rights Act 1996.

1. This is an appeal from a Judgment of a majority of the members of an the Employment Tribunal sitting at Glasgow, Employment Judge Rosemary Sorrell, one of the lay members dissenting, registered on 14 September 2010, finding that the Claimant was unfairly dismissed and awarding him compensation of £33,518.75.

1. For convenience, we will continue referring to parties as Claimant and Respondent.

1. The Claimant represented himself before the Tribunal and was represented by Mr J Macmillan, solicitor, before us. The Respondent was represented by Mr C Mackenzie, advocate, before the Tribunal and by Mr Napier QC before us.

1. The Respondent operates an aircraft engine overhaul facility at Prestwick, Ayrshire. The Claimant began a four year apprenticeship in August 2002, along with four others. His apprenticeship contract was signed on 27 August 2002. The relevant provisions relating to duration were:

"1. Date of Commencement of Apprenticeship

Your period of apprenticeship will be deemed to have commenced on Thursday 29 August 2002………..

2. Duration

Your contract of Apprenticeship …..will endure for four years ….and will expire automatically on the Friday 25 August 2006 without the necessity of notice to or by either party."

The Claimant attained his trade qualifications by June 2009. He carried on working for the Respondent on his apprentice's rate of pay until the start of the autumn university semester in 2009. The Claimant had no entitlement to employment with the Respondent after the termination of his apprenticeship. That is spelt out in two of the contractual provisions:

" 2. Duration

…………

Please note that it is usual for all apprentices to be offered a full time permanent contract at the successful conclusion of the apprenticeship. It is however not a right to receive permanent employment. (see section 13 of this contract).

…………………………

13. Waiver of Statutory Rights

………………

Please note that the Company is under no obligation to re-employ you upon the completion of your apprenticeship, and if they choose to re-employ you, they will be entitled to employ you in any position, which choice shall be at the sole option of the Company."

1. At one point in 2005, the Respondent's head of Human Resources, Andrea Clydesdale, advised the Claimant that the Respondent would be prepared to sponsor him during an engineering degree course after he completed his apprenticeship. He decided to accept. The relevant contract was in the form of a letter, the terms of which the Claimant signed as having accepted, on 18 July 2006:

"University Sponsorship

I am pleased to confirm that the Company will sponsor you during the 3 year B. Eng. Honours course at Glasgow University.

The following conditions of sponsorship will apply:-

Your sponsorship will commence on 26 September 2006 and will continue over a period of 3 years, subject to satisfactory results being achieved at university and during industrial training.

During periods at University

A sponsorship of £1,200 per term (2 terms per year) will be paid at the beginning of each term with effect from the first term in 2006.

During Industrial Training in the Company

The Company will provide facilities for training during periods of industrial training.

Payment will be at the rate of £17,902/ per annum, paid fortnightly by credit transfer direct to your bank account.

Holiday Entitlement

Holiday entitlement will be related to the periods of industrial training and be calculated on the basis of 2.42 days per calendar month.

Breaks in the academic session will be excluded from this entitlement and students will not normally be expected to return to the Company.

Holiday Bonus

A holiday bonus will be paid in full based on the basic industrial training rate.

On completion of the degree course, you commit to offering your services for continued employment with GE Caledonian Limited for a period of 2 years. Should you resign from the Company within this period, a refund of the sponsorship award will be made.

All other terms and conditions of employment will apply.

Please confirm you (sic) acceptance of this offer on the terms and conditions as contained in the above letter by signing the duplicate copy and returning it to the undersigned.

Yours sincerely

"Laura Nicholson"

Laura Nicholson

HR Representative."

1. Laura Nicholson was the successor to Andrea Clydesdale.

1. The Claimant's fellow apprentices had, following completion of their apprenticeship contracts, been offered and accepted full time permanent contracts of employment as skilled engineers.

1. The Claimant undertook a year's study at Glasgow University and then asked the Respondent if they would agree to his transferring to Strathclyde University, to study for a degree that was more practically based. They agreed to his request.

1. By 2009, the Claimant was in debt. His degree course had one more year to run. Towards the end of the summer recess, on 31 August 2009, he emailed Laura Nicholson in the following terms:

"Just to let you know I have some personal issues that are interfering with my ability to focus at University at this time and am concerned that this could affect my ability to cope with my studies. Therefore after much thought I have decided to take a year off from University to resolve these issues to allow me to better cope with the pressures of university in the future. Please let me know if need to discuss further."

1. Laura Nicholson responded by email of the same date, saying:

"This is something we need to discuss further. We have spent a lot of money putting you through university to date and you cannot make that type of decision without discussing with the Company. I also need to know what you intend to do for the year you plan to take out."

1. The Claimant replied in an email of the same date in which he stated he intended "working for GE during this time off."

1. Laura Nicholson responded, again on 31 August:

"We need to discuss further, we have no open positions at the moment to offer anyone."

1. The Claimant was subsequently invited to a meeting with Laura Nicholson on 21 September 2009 at which he was accompanied by Mr Russell. Ms Nicholson explained that the Claimant was not on the Respondent's 'headcount' as he was a student.

1. She said that the Claimant was, by refusing to return to university, breaking his contract. She asked if the Claimant had any significant reasons for not returning to university but he did not respond. She said that from the Respondent's point of view, the Claimant had three options which were to return to university, accept an internship (which they were prepared to offer) or resign.

1. The Claimant was not prepared to consider any of those options. He asserted that his contract did not require him to complete the university course.

1. He was not content with matters and emailed Laura Nicholson on 21 September 2009. In that email he stated:

"I just want to return to my full time position within the company."

1. Laura Nicholson responded on 23 September, explaining that it was very difficult for the Respondent to discuss matters with him when he had not offered any reasonable explanation of why he was not able to go back to university and adding:

"…your current industrial training will end on 2nd October 2009 and in accordance with the terms of your student contract you are expected to return to university to complete your degree. You do not currently have a full time position with GE. As an alternative to continuing as a student we have given you the opportunity to carry out a year's intern placement. You have refused this opportunity on various occasions, so we therefore assume that, unless we hear from you to the contrary that you will continue under your sponsorship contract and return to university in October."

1. By email dated 23 September 2009, the Claimant provided some detail of his 'personal reasons' explaining that they were financial ones. He also advised that he had told the university that he was not returning and would complete the course when he saw fit. At the end of the email he stated:

"…all I am asking is that I have my full time position back."

1. Laura Nicholson responded indicating that she was happy to meet to discuss his reasons further but:

"…the issue from our perspective is that you do not have a full time role, your previous role was as an apprentice and the current contractual agreement is that you work on a placement basis during the summer holiday period only."

1. Laura Nicholson met again with the Claimant on 24 September 2009. They discussed his circumstances. She indicated that the offer of an internship contract was still open. The Claimant did not accept that offer. The Respondent treated the sponsorship contract as having been terminated at the request of the Claimant, as from 5 October 2009.

1. The Respondent's position in the ET3 was that the Claimant did not have a contract of employment but was employed on a student contract. That being so, the Employment Tribunal had no jurisdiction; the Claimant was not dismissed from a contract of employment. Esto they were wrong about that and he was dismissed, the dismissal was, in all the circumstances, a fair one.

1. The Respondent, accordingly, gave clear notice that they considered that the principal issue was that of whether or not the Claimant was employed under a contract of employment, their position being that his student contract did not constitute such a contract and, that being so, the Tribunal had no jurisdiction to entertain his complaint..

1. Two matters arise. The first relates to the nature of a contract of employment. It is a contract of service and can be distinguished from a training contract under which the individual who receives training is under no obligation to perform services for the party who commits to its provision. When determining whether or not a person was employed under a contract of employment or whether the contract was in respect of some other arrangement (such as training), an Employment Tribunal requires to ask what was the principal object of the contract in question? Thus, in the case of M&P Steelcraft Ltd v Ellis and another [2008] IRLR 355, Elias P cautioned against separating out and focussing on individual features (paragraph 78) and against taking too narrow a view, bearing in mind that the crucial question was what was the purpose of the relationship. At paragraph 84, he said:

"In our judgment, the employment tribunal in this case committed essentially the same error. They did not consider the relationship in the round to determine its real objective but focused on the terms of engagement between the employer and the prisoner, which, taken in isolation were, we accept, consistent with a contract of service being in place."

1. He relied on Lord Denning MR in Wiltshire Police Authority v Wynn [1981] QB 95, at p. 656E:

"If the primary purpose was work for the master – and teaching the trade was only a secondary purpose – it was a contract of service. But if teaching the trade was the primary purpose – and work for the master was only secondary – then it was a contract of apprenticeship."

and on Dunn LJ, in the same case, where, at p.660, he said:

"In my judgment the Employment Appeal Tribunal failed to give sufficient weight to the question, what is the nature or substance of the relation created? Ever since the settlement cases of the 18th and 19th centuries, the common law has held that the court must look at the principal object of the contract in deciding whether or not a contract of service exists. Where the primary object of the contract is teaching or learning then there is no contract of service……….The fact that the conditions of engagement are consistent with a contract for service is not decisive if the principal object of the relationship is teaching and learning."

1. An Employment Tribunal has no jurisdiction to entertain a complaint of unfair dismissal other than where an employee has been dismissed under a contract of employment (Employment Rights Act 1996 s.94-5 and 98); it has no jurisdiction in respect of disputes arising from the termination of a training contract. It is, further, trite that the making of a concession cannot confer jurisdiction on an Employment Tribunal if the dispute in fact relates to a contract of a type over which it has no jurisdiction.

1. Secondly, if a person is employed under a series of short, fixed term contracts, it does not follow that he is continuously employed by the employer. Whilst there may be circumstances in which, on the facts of a particular case, a series of such contracts can be shown to amount to continuous employment, it does not arise as an issue in the present case.

1. The Employment Tribunal recorded that the Respondent's position was that the Claimant had a student contract, not a contract of employment, and that the Respondent was not under any obligation to take him into their employment in the circumstances which had occurred, namely that he had decided not to complete his university course.

1. They noted that the Respondent submitted that he was in material breach of that student contract and that his case was misconceived.

1. At paragraph 16(h), the Tribunal record what is plainly an esto position (which reflects the Respondent's case of which notice was given in the ET3) to the effect that if, contrary to the Respondent's principal argument, the Tribunal was persuaded that there was a contract of employment then it was accepted that, applying the normal principles of the law of contract, where an employer accepts a material breach by the employee and brings an end to the contract, the employee is thereby dismissed. It was not, however, accepted that if there was a contract of employment in this case, that dismissal was unfair.

1. When it came to considering their decision, the Employment Tribunal dealt, however, only with the esto case. They did not address the fundamental question of whether or not they had jurisdiction, bearing in mind that the Respondent's primary argument was that the Claimant was, at the relevant time, on a student contract, not a contract of employment. They went straight to what we will, for convenience, refer to as s.98(2) and s.98(4) considerations (potentially fair reason for dismissal and fairness of dismissal - see Tribunal's reasons at paragraph 25). They did so, it appears, on the basis of what they refer to as a concession on behalf of the Respondent that the Claimant was dismissed but they fail to take account of the context in which that concession was made, namely, in the context of the esto position to which we have referred. In so doing, they failed to address the question of whether or not the Claimant was actually employed under a contract of employment at all.

1. The Tribunal's factual analysis includes that the Claimant "was not advised at any stage by the respondent that he would be jeopardising his full time permanent position with the respondent by deciding to go to University" (paragraph 3(j)).

1. At paragraph 27, which was relied on by Mr Macmillan as supporting his submissions, the majority of the Tribunal said:

"27. The majority of the Tribunal does not accept that the student sponsorship letter represented the sole contractual relationship between the claimant and the respondent. It was a letter setting out the terms and conditions of the student sponsorship that formed a part of the claimant's continuing employment. The respondent did not dispute the claimant was an employee. References made in the sponsorship letter to "All other terms and conditions of employment will apply" and that "On completion of the degree course, you commit to offering your services for continued employment with GE Caledonian Ltd for a period of 2 years" are clear statements that the claimant would have a continuing contract of employment with the respondent throughout and after his course of study. Evidence was also heard from the respondent that upon completion of his degree, the respondent was likely to have offered the claimant a permanent position in the company."

1. The Tribunal thus proceeded on the basis that the Claimant had a continuing contract of employment throughout the years he was at university and that it was subsisting as at October 2009.

1. Mr Napier submitted that the Claimant's contract was plainly a training contract, not a contract of employment. The Respondent was not, under its terms, obliged to employ the Claimant at all, even during the industrial training periods. That was clear and it meant that the Tribunal had no jurisdiction; they should have but had not addressed that important issue. Whilst some of the wording of the contract could have been clearer, it was evident from the contract as a whole that it was not a contract of employment. The reference to "continued" employment in the third last paragraph was otiose and cannot have meant that the Claimant was in continuous employment throughout the years he was at university since he was clearly not working for the Respondent during the university terms and, further, there would have been no need for setting out the Claimant's obligation to offer his services at the end of his degree course if in fact he was already in the Respondent's employment. It was far fetched to suggest that it meant that it was agreed that he was already in the Respondent's employment. As for the phrase "All other terms and conditions of employment will apply", it was, perhaps, ambiguous but certainly did not provide a sufficient basis for any case that the Claimant was employed under a contract of employment.

1. Regarding paragraph 27 of the Tribunal's Judgment, it showed first, that they had fastened on to individual aspects and failed to stand back to look at the whole of the relationship created by the contract. Also, where they referred to the Respondent not disputing that the Claimant was an employee, that cannot have been a reference to any concession. Rather, it was clear that they were stating what was their interpretation of the student contract. No such concession had been made.

1. Regarding the basis on which the Claimant worked from June to September 2009, that was either on an extension of his apprenticeship contract or on a casual basis but that did not matter. His status changed when he took up the student contract.

1. Mr Napier submitted that the facts were clear and we could determine the issue which had not been addressed by the Tribunal. We should do so by holding that the contract was not a contract of employment and that the Tribunal had, accordingly, no jurisdiction.

1. For the Claimant, Mr Macmillan referred to the Respondent being a 'major global provider' and to the Claimant having been sixteen years old when he began his apprenticeship, twenty years old when it ended and twenty three years old when the contract was terminated. He referred to the Claimant as having been treated differently because he was of star quality. The relevance of these observations to the issue we had to determine was not apparent. He said that in July 2006, when his apprenticeship ended, he had moved on to something else and even if it was casual employment, that was employment.

1. He referred to the terms of the sponsorship contract and submitted that it was to be interpreted as showing that the Respondent "expected" the Claimant to work for the Respondent during the summer breaks between academic sessions. Although pressed, he put his submission no higher than that the Claimant was "expected" to work for the Respondent each summer. He at no point suggested that he was obliged to do so. He submitted that the Claimant was an employee during the summer periods, given that he received pay, holiday and holiday bonuses. Mr Macmillan's approach was to submit that there were two contractual relationships. One was the relationship between the Respondent and the Claimant qua student. The other was that the Respondent was the employer of the Claimant during the summer periods. That, he submitted, was what the Tribunal had concluded at paragraph 27. Nor was that an unusual situation. It was comparable to seasonal work. The Respondent had committed to employing the Claimant each summer in the hope that he would return to work for them for two years at the end of his degree course. Mr Macmillan accepted that, during university terms, the Claimant was free to work elsewhere, including for a competitor of the Respondent.

1. Mr Macmillan referred to a letter dated 2 October 2009 from the Respondent's Mr Dreghorn, in response to various questions raised by the Claimant. It referred to him having had 'paid employment placements' during the summer. The language was, he submitted, strongly suggestive of a continuing contractual relationship.

1. Mr Macmillan sought to distinguish Ellis on the basis that it involved a different set of facts. He did not demur from Mr Napier proposed means of disposal. In particular, he did not submit that there should be a remit.

1. The Tribunal ought to have recognised that jurisdiction was an issue in this case and, before turning to the s.98(2) and 98(4) issues, asked themselves what was the objective of the contractual relationship between the parties? In particular, given the stance adopted by the Respondent, they required to ask whether it was for training because if it was then it was not a contract of employment (Wiltshire Police Authority; Ellis).

1. We are satisfied that the clear purpose and objective of the 'University Sponsorship' contract was to provide training and education to the Claimant. The arrangement that is set out is that he was to attend at university for academic education during the two university semesters – for which he would receive a monetary award of a total of £2,400 each year – and he could, but was not obliged to, take up practical industrial training with the Respondent during the long summer break. Whilst there was an expectation that he would take up an industrial training placement with the Respondent each summer, it was not a matter of him being obliged to do so. If he did, then he would be paid and receive pro rata holiday leave during the summer period. Then, at the end of his degree course, he was obliged to offer his services to the Respondent for two years. The Respondent was under no obligation to offer him a job. If they accepted his offer to work for them, he required to do so for a minimum of two years if he was to avoid having to repay his sponsorship award. That arrangement bore all the hallmarks of a training contract. The overarching and primary purpose was, plainly, to advance the Claimant's training and education all with a view to him obtaining a further qualification, namely a university degree. Whilst the phrase 'continued employment' seems inappropriate and the reference to terms and conditions of employment may be ambiguous, we do not see that they, in any way, detract from what was the clear and plain objective of the contract. To focus on them, as did the Tribunal in paragraph 27, is to fall into the trap for the unwary adverted to by Elias P in the case of Ellis.

1. On the facts found by the Tribunal, we do not consider that there is sufficient to enable us to conclude that the Claimant was employed under a contract of employment during the summer industrial training placements – the question of the nature and extent of any mutuality of obligation during those periods was not, for instance, addressed. Even if we are wrong about that, however, at best for the Claimant, that would demonstrate that he worked under short fixed term contracts during the summers of 2007, 2008 and 2009. That of itself could not, in law, demonstrate that the sponsorship contract amounted to continuous employment so as to show that the Tribunal had jurisdiction.

1. In these circumstances we will pronounce an order upholding the appeal, finding that the Employment Tribunal had no jurisdiction to entertain the Claimant's complaint and dismissing his claim.

1. Mr Thomson disagreed with the majority. He would have refused the appeal for the reasons given by the majority of the Employment Tribunal. In particular, he did not accept that the term "continued employment" in the Student Contract was "otiose" or "ambiguous". That term, together with the terms "Should you resign from the Company within this period" and "All other terms and conditions of employment will apply" were, he considered, clear, unambiguous and express terms constituting a continuing contract of employment throughout and after his course of study. The facts in Ellis were, he said, not comparable.