Knight v Fairway & Kenwood Car Service Ltd UKEAT/0075/12/LA

Appeal against an ET ruling that the claimant was not an employee so they could not hear his claim of wrongful dismissal. Appeal dismissed.

The claimant was a taxi driver working with the respondent company under written terms. Provided he paid the current rent and gave suitable notifications, he could work or not work as he wished with no adverse consequences under the contract.  He left the respondent company after being asked to carry out taxi jobs once they had been taken regardless of the behaviour of the particular client. He claimed wrongful dismissal at the ET but the ET ruled that he was not working under a contract of employment and so his claim could not be heard by them (although it could have been heard at the County Court). The claimant appealed.

The EAT dismissed the appeal. The written terms did not require any minimum or reasonable amount of work from the claimant; he was free to work or not work. Nor in the circumstances was there scope for inferring such an obligation from the fact that the claimant in fact worked 7 days a week.


Appeal No. UKEAT/0075/12/LA



At the Tribunal

On 10 July 2012






Transcript of Proceedings



For the Appellant
Bar Pro Bono Unit

For the Respondent
MR RICHARD REES (Representative)
Peninsula Business Services Ltd
The Peninsula
2 Cheetham Hill Road
M4 4FB


JURISDICTIONAL POINTS – Worker, employee or neither

The Claimant was a taxi driver working with the Respondent company under written terms. The Employment Tribunal decided he was not an employee. The EAT upheld the decision because the written terms did not require any minimum or reasonable amount of work from him; he was free to work or not to work. Nor in the circumstances was there scope for inferring such an obligation from the fact that the Claimant in fact worked 7 days a week.

**HIS HONOUR JUDGE SHANKS****Introduction**
  1. This is an appeal against a decision of Employment Judge Mordsley made on 29 September 2010 whereby he found that the Claimant was not working under a contract of employment and could not therefore bring a claim for wrongful dismissal in the Employment Tribunal.
  1. His total claim was for £1,188 and it seems clear to me that there could have been no objection to it being brought as a claim in the County Court where the jurisdictional issue that was troubling this Tribunal and troubled Employment Judge Mordsley would not have arisen. Nevertheless, having failed in front of Judge Mordsley, the Claimant has seen fit to appeal to this Tribunal on the point and there has been a two-hour hearing with both sides represented by lawyers.
**The background**
  1. The background to the appeal is as follows. The Claimant worked as minicab driver with the Respondent company, Fairway & Kenwood Car Service Limited. I use the word "with" as a deliberately neutral term. He worked from 16 June 2009 to 15 April 2010 when he left in response, he would say (though the issue has not been litigated at all) to impossible requirements being asked by the Respondent as to carrying out taxi jobs once they had been taken regardless of the behaviour of the particular client.
  1. There were written terms entered into by the Claimant at the outset of his involvement with the Respondent company which are before this Tribunal and were before Judge Mordsley. Before I recite the relevant terms, I note that in his ET1 the Claimant suggested that there were no written terms covering his relationship with the Respondent. He said under the heading "Background to Claim":

"There was no written contractual agreement covering the relationship"

  1. In fact it is apparent that there was such an agreement. The primary document is page 39 of my bundle which is headed "Agreement" and is signed by the Claimant and it says at the very first line:

"I understand I am self-employed and not employed by Fairway & Kenwood Car Service Ltd and responsible for paying my own tax and National Insurance contributions."

It continues:

"I will make weekly payments of rent/circuit fee to Fairway & Kenwood Car Service Ltd. Payment can be made by cash, credit or debit cards.

My credit sheet will be produced for me every Monday and that if I am not going to work due to holiday, sickness or any other time off then I must notify the Accounts Department.

I understand that where jobs are paid cash directly to me, I am acting as principal and will charge accordingly and the price given on my job and will be liable to account to Customs and Excise for VAT if I am VAT registered.

I will not overcharge any customer. Any query I have regarding a price I will ask the controller and understand my Agreement may be terminated if found deliberately overcharging or any other complaint is made against me.

I am responsible for providing all other equipment and undertaking the necessary risk assessment needed to properly carry out my duties."

It says "all other equipment" because the data equipment which is what allowed the Claimant to communicate with the controller was put in his cab by the Respondents. Then the contract goes on:

"It is my responsibility to insure the vehicle I use is properly taxed, has a current MOT certificate, Private Hire and Reward Insurance.

If I am disqualified for driving I will inform you immediately and return all equipment. I guarantee that I will not work if disqualified."

And then perhaps most significantly:

"I have read and understand Handbook and I have read and understand Company Code of Conduct and I have read and understand Company Accounts Procedure."

  1. The company handbook is also before this Tribunal and I take it that it was before Judge Mordsley. The significant page in the handbook is at page 41 dealing with rent. It says:

"The rent is calculated on a Monday for the oncoming week and entitles you to work an "open shift" system, this means you may work as and when you like. Our offices are permanently staffed 24 hours a day, 7 days a week. You have the option to sign on and off any time that suits you.

Allowances will be made in the event of unforeseen circumstances, i.e. car breakdown, illness etc. Drivers who choose not to work a regular week for their own reasons can expect no allowance against their rent.

The rent is based on five days work out of seven in the event of rebate.

If you are going on holiday or going off road for a week or more then you must inform the office and hand back all the equipment that you have signed for. Should you be off work for more than a week without notifying the office and handing back your equipment you will be charged a rent of £25.00 per week."

And then the other page that is significant is page 51 of my bundle which talks about starting work and it tells the taxi driver what to do to sign in and then paragraph 4 of that page says:

"4. When the system gives you a job you will hear your XDA beeping, you will see two options saying Accept or Reject, together with the driver notes if any applicable to the job.

5. You will have 20 seconds to accept the job before it is offered to the driver next in the queue, please accept all jobs and try not to reject any."

  1. Those, it seems to me, are the most relevant terms. There was also a finding of fact by the Employment Tribunal that he was working on a 7-day a week basis while he was a taxi driver with Fairway & Kenwood Cars and he was working many hours each day; and that is at paragraph 14 of the Judgement.
**The appeal**
  1. The Employment Tribunal found that this arrangement was not a contract of employment in a nutshell because there was no legal obligation on the Claimant to work the hours and days that he did. The Appellant, justifiably in my view, criticises the sparsity of facts found by the Employment Tribunal Judge and says that in any event he was wrong to find for the Respondent on the grounds as it is put in the Judgment of lack of mutuality. Both sides agree that whilst in principle the lack of fact finding by the Tribunal would mean that if this appeal succeeded it ought to be sent back to the Employment Tribunal, the Appellant invites me to decide on the material I have that there was an employment contract thereby saving further expense on what I have already indicated is a relatively small claim.
  1. It seems to me that so long as the Claimant was signed on for work, it is very likely that he was working as an employee of the Respondent, either from beginning to end of the specific shift or at the very least from beginning to end of the individual job. It also seems clear to me that the overall relationship between the parties was governed by a contract and that contract, it seems to me, is recorded in writing and includes the sections of the handbook that I have referred to.
  1. The question for the Employment Tribunal and for this Tribunal seems to me to be: was that contract (the umbrella contract) a contract of employment? Miss Rayner agreed with this characterisation of the issue. The law on this issue is contained in a number of decisions to which I was taken. The most helpful decision which contains a lot of the previous learning is a decision of the current President called Cotswold Development Construction Ltd v Williams [2006] IRLR 181. Langstaff J went back to first principles in quoting passages from a case called Chadwick v Pioneer Private Telephone Company Ltd [1941] 1 All ER 522 and Ready Mixed Concrete (SE) Limited v Minister of Pension and National Insurance [1968] 2 QB 497. So far as Chadwick is concerned, the relevant sentence reads as follows:

"A contract of service implies an obligation to serve and it compromises some degree of control by the master."

And then McKenna J in the Ready Mixed Concrete case, in a passage that is extremely familiar said this:

"A contract of service exists if these three conditions are fulfilled; 1) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master; 2) He agrees expressly or impliedly that in the performance of that service he will be subject to the other's control in a sufficient degree to make him the master; 3) The other provisions of the contract are consistent with its being a contract of service."

And then Langstaff J went onto quote another sentence from McKenna J, who said this in respect of the first two conditions:

"There must be a wage or other remuneration otherwise there will be no consideration and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill."

I stress the word "obliged" as well as the words "own", "work" and "skill". The question of mutuality is discussed in the authorities that I have been shown and in Cotswold it seems to me in two senses. First of all, there must of course be mutual obligations in order for there to be any contract at all, and if a Tribunal finds that there was no mutuality of obligation, then of course there will be no contract of employment. But there is a second sense, it seems to me, in which the phrase has been used and that is in relation to the question, "Is there a contract of employment?" That latter sense is discussed in paragraph 55 of the Cotswold case where Langstaff J said this:

"We are concerned that Tribunal's generally, and this Tribunal in particular, may, however, have misunderstood something further which characterises the application of mutuality of obligation in the sense of the wage/work bargain. That is that it does not deprive an overriding contract of such mutual obligations that the employee has the right to refuse work. Nor does it do so where the employer may exercise a choice to withhold work. The focus must be upon whether or not there is some obligation upon an individual to work and some obligation upon the other party to provide or pay for it. Stevenson LJ in Nethermere put it as '… an irreducible minimum of obligation…" He did so in the context of a case in which home workers were held to be employees. Mrs Taverna refused work when she could not cope with any more. She worked in her own time. It is plain, therefore, that the existence and exercise of a right to refuse work on her part was not critical, providing that there was at least an obligation to do some. The tribunal had accepted evidence that home workers such as she could take time off as they liked. Although Kerr LJ dissented in the result, he too expressed the 'inescapable requirement' as being that the purported employees '… must be subject to an obligation to accept and perform some minimum, or at least reasonable, amount of work for the alleged employer.' Dillon LJ said, "The mere facts that the outworkers could fix their own hours of work, take holidays and time off when they wished and could vary how many garments they were willing to take on any day or event to take none on a particular day were undoubtedly factors for the industrial tribunal to consider in deciding whether or not there was a contract of service, do not as a matter of law negative the existence of such a contract. I find it unreal to suppose that the working in fact done by the Applicants for the company over the not inconsiderable periods which I have mentioned was done merely as a result of the pressure of market forces on the Applicants and the company and under no contract at all."

  1. So, it seems to me, taking account of that paragraph and taking account of the distinction I have drawn between the two types of lack of mutuality, the question I must ask myself first is whether under the terms of the written contract to which I have referred there was an obligation on the Claimant to accept some minimum or reasonable amount of work. It is clear that the Employment Tribunal Judge was wrong when he posed the question in paragraph 14 in this way: "Was the Claimant legally obliged to work on a certain number of days per week, for a certain number of hours? Was the Employer legally obliged to provide a number of days and hours?" That was not the right question as is clear from the paragraph I have quoted from the Cotswold case; the right question was whether the Claimant was obliged to accept some minimum or reasonable amount of work, as I have already said.
  1. On my reading of the agreement as recorded in writing there was no obligation on the Claimant to work at all. Provided he paid the current rent and gave suitable notifications, he could work or not work as he wished with no adverse consequences under the contract. Looking only at the written terms, in my judgment he was not employed under a contract of employment and for that reason his appeal would fail. There was a contract which had mutual terms but one of those terms did not involve an obligation on the Claimant to do any amount of work at all.
  1. Ms Rayner has a further argument. She says that the Employment Tribunal should have gone beyond the written terms and should have inferred a legal obligation on the part of the Claimant to work and that they should have inferred that from the fact that he did, in fact, work, as I have already recorded, seven days a week and from the further fact which is recorded in paragraph 14 of the Judgment that it would have been economically difficult for him had he not done that work. In this connection she relies in particular on a case heard by Elias J called St Ives Plymouth Limited v Mrs D Haggerty (UKEAT/0107/08/MAA, 22/8/08, unreported). At paragraph 8 of that decision the EAT recorded what the Employment Tribunal had found and it was in these terms:

"It is accepted by the parties that whilst she [the Claimant] was actually working a shift for the Respondent, the Claimant was working under a contract of employment. There are in my judgement two significant factors. First of all I am reminded that the intention of the parties may be deduced from their conduct over a long period of time. In this situation there was an expectation that the Claimant would be available for a reasonable amount of work, her services were valued and frequently called upon. I entirely accept there was no obligation upon her to accept any particular offer, but I am satisfied that had she persistently declined offers of work her name would be removed from the list of casuals. Equally, although there was no guaranteed minimum amount of work, the Claimant had an expectation that she would be offered a reasonable amount of work. If the flow of work had dried up she would undoubtedly have sought work elsewhere.

I find those circumstances are sufficient - just sufficient - to amount to the minimum of mutual obligation between the parties to enable me to find that there was an overarching contract of employment. I was supported in this conclusion by the fact that the Respondents took disciplinary action against the Claimant. It might have been argued that disciplinary action was an incident of a single contract relating to a specific period during which the Claimant worked. Were that to be the case, it is surprising that it continued following the termination of that particular work period when the Claimant left early. In my judgement, that is supporting evidence of a continuing obligation between the parties."

  1. The main reasoning of the EAT starts at paragraph 25 at tab 11 and it says as follows:

"In our judgment it follows that a course of dealing, even in circumstances where the casual is entitled to refuse any particular shift may in principle be capable of giving rise to mutual legal obligations in the periods when no work is provided. The issue for the Tribunal is when a practice initially based on convenience and mutual cooperation - an alternative if less personal description may be market forces - can take on a legally binding nature."

  1. It then quotes from the Kelly case and paragraphs 27, 28 and 29 say this:

"27. On this analysis, the only issue is whether the Tribunal in this case was entitled to find that there was a proper basis for saying that the explanation for the conduct was the existence of a legal obligation and not simply good will and mutual benefit. The majority consider it is important to note that the test is not whether it is necessary to imply an umbrella contract or whether efficacy leads to that conclusion, it is simply whether there is a sufficient factual sub-stratum to support a finding that such a legal obligation has arisen. It is a question of fact not law.

28. It is in truth a highly artificial exercise for a Tribunal, not least because there are no clear criteria, for determining when it is the one rather than the other or indeed both (which we suspect will frequently be the case) However, in the judgment of the majority, there was a sufficient basis here. We recognise that in part it may be said the Tribunal is finding the legal obligation arising out of the practical commercial consequences of not providing work on the one hand or performing it on the other, but we do not see why such commercial imperatives may not over time crystallise into legal obligations.

29. Furthermore, there were other factors which were taken into account, including the lengthy period of employment, the fact that the work was important to the employers, and the work was regular even if the hours varied. One might also readily infer, although it was not spelt out, that the employers felt under obligation to distribute the casual work fairly, rather than as did the allocator in the Nethermere case."

Paragraph 20 in this numbering (it should be 30), says:

"Mr Welch [one of the lay members] takes a different view. He considers there is no proper basis for distinguishing this case from Carmichael. He accepts the argument to the effect that the relationship can be wholly explained by the sense of mutual support falling short of legal obligations. There is no necessity to infer a contract and no justification for doing so."

I note both the tentative nature of the decision by the Employment Tribunal, the tentative support for it from the two in the majority in the EAT and the fact that there was a dissent by one of the members.

  1. It seems to me that the St Ives decision is quite distinguishable from the one I am concerned with. The first very important thing to note is that in that case there were, as far as I can see, no written terms governing the overall relationship. Here there were terms governing the relationship and no-one has suggested they were not genuine terms; they enabled the Claimant to sign on at any point in the week as and when he wished or not to do so as and when he wished, and if he signed on the obligations of the Respondent company were clear. In the St Ives case, as I say, it appears there were no written terms to start with.
  1. So in this case, if a term was to be implied the effect that the Claimant was under obligation to work, then that implication would really require some finding that went as far as altering the terms of the written agreement, which I have already construed in a way that comes to the conclusion that there was no requirement, no obligation, on the Claimant to work. The fact that he did seven days a week because he needed to, on its own just does not seem to me sufficient as a basis for implying an obligation which is not to be found in the written terms.
  1. I therefore reject Ms Rayner's second argument based on implication and it seems to me that it follows from that that it is not arguable that the overarching contract was a contract of employment and in those circumstances I must dismiss the appeal.

Published: 03/09/2012 17:15

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