Appeal No. EAT/0616/01

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 May 2002

Before
HIS HONOUR JUDGE PETER CLARK
MRS A GALLICO
MR G H WRIGHT MBE

SEGA EUROPE LTD	APPELLANT

MS A MICHITSCH	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MISS C CALLAGHAN 
(of Counsel)
Instructed by:
Messrs Herbert Smith
Solicitors 
Exchange House
Primrose Street
London
EC2A 2HS	
For the Respondent	MR T LINDEN 
(of Counsel)
Instructed by:
Messrs Pattinson & Brewer
Solicitors
71 Kingsway 
London
WC2B 6ST	

JUDGE PETER CLARK:
1.	This is an appeal by the Respondent before a Tribunal sitting at London (Central) sitting under the chairmanship of Miss A M Lewzey, against that Tribunal’s decision, promulgated with extended reasons on 10 April 2001, that on a preliminary issue as to jurisdiction the Applicant, Ms Michitcsh, had completed more than one year’s continuous service as an employee of the Respondent so as to qualify for unfair dismissal protection in accordance with section 108 (1) of the Employment Rights Act 1996 ERA.  

2.	The facts as found by the Tribunal may be shortly stated, evidence having been limited to the oral evidence given by the Applicant herself, coupled with her witness statement.  She commenced working for the Respondent as a translator on 14 June 1999.  She was initially engaged through an employment agency, Bilingua and her wages were paid by that agency.  

3.	During her time with the Respondent she took all instructions and directions from the Respondent’s head of testing, Mr Cumberbatch.  On 1 August 2000 she became what the Tribunal described as a permanent employee of the Respondent.  On 31 October 2000 that employment was terminated by dismissal.  She then presented a complaint of unfair dismissal to the Tribunal on 21 December 2000.  

4.	The issue, identified by the Tribunal, was whether the Applicant could count the period 14 June 1999 to 31 July 2000 as a period of continuous employment together with the admitted period of employment with the Respondent from 1 August to 31 July 2000.  If so, she qualified for “ordinary unfair dismissal protection,” if not, she did not and the claim for ordinary unfair dismissal failed for lack of jurisdiction.  

5.	Before considering the Tribunal’s reasoning and the authorities, it is important to begin with the relevant statutory provisions.  Continuous employment, for the purposes of section 108(1) ERA, is to be computed in accordance with part XIV, chapter 1 of the Act.  That chapter is concerned with employees.  An employee is defined, in section 230 (1), as an individual who has entered into or works under a contract of employment.

6.	That definition may be contrasted with the wider definition of ‘worker’, which by section 230 (3) includes not only employees as earlier identified, but also an individual who has been entered into or works under, or worked under, any other contract, whether express or implied and whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract, subject to an immaterial exception.  

7.	By section 230 (5) employment in relation to an employee means employment under a contract of employment and in relation to a worker means employment under his contract.  

8.	By section 230 (4) ‘employer’ in relation to an employee or a worker, means the person by whom the employee or worker is employed.

9.	Thus, in order to count as a period of continuous employment for the purposes of Part XIV Chapter 1 of the Act, there must be a contract of employment between an employee and an employer as defined above, governing the relationship between the parties, subject to various deemed continuity provisions with which we are not concerned in this case.

10.	This Tribunal found, paragraph 14 of their reasons, that: 

“Everything in this case is redolent of Ms Michitsch having a contract of employment with the Respondent from 14 June 1999 until 31 July 2000.”

How did they arrive at that conclusion?  

11.	Having referred to the classic three stage test in the judgment of Mr Justice McKenna in the Ready Mixed Concrete case (1968) 2 QB 497 and the recent Court of Appeal decision in Montgomery v. Johnson Underwood Ltd (2001) IRLR 269, they concluded that the Applicant was paid by Bilingua Employment Agency but they had a legal obligation to deduct tax and national insurance and that, “did not advance matters;” further, they were satisfied that the Respondent did have control over Ms Michitsch; they controlled everything that she did  (reasons, paragraph 12 – 13).  It was in these circumstances that they concluded that she was employed by the Respondent under a contract of employment during the relevant period, 14 June 1999 to 31 July 2000.  The Tribunal had jurisdiction to entertain her complain of ordinary unfair dismissal.  

12.	Two points should be noted about the cases cited about the Tribunal.  In the Ready Mixed Concrete case, there was no dispute but that the drivers and Ready Mixed Concrete had entered into a contract between them.  The question was whether it was a contract of service or a contract for services.  Mr Justice McKenna’s test was directed to that question.  

13.	In Montgomery the Applicant, Mrs Montgomery, brought a complaint of unfair dismissal naming two Respondents in the alternative.  The first was an employment agency, Johnson Underwood Ltd, the second, added by a member was a local company, (O & K) to whom she was supplied by the agency and for whom she did her work as a receptionist for some 2 ½ years until that engagement was terminated by the agency at the request of O & K.  The Employment Tribunal found that there was no basis on which they could hold that she had been an employee of O & K, but they went on to find that she was an employee of the agency.  On appeal the EAT unanimously upheld the Tribunal’s decision that the Applicant was not employed by O & K and by a majority (Mr Justice Charles dissenting) further upheld the Tribunal’s decision that she was employed under a contract of employment by the agency.  On the agency’s appeal only against the majority EAT finding the Court of Appeal upheld the appeal holding that she was not an employee of the agency.  

14.	At all levels in that case, Employment Tribunal, EAT and Court of Appeal, (see Mr Justice Buckley paragraph 43 and Lord Justice Brooke paragraph 48) observations were made as to the desirability of the relevant Government department and Parliament, giving consideration to extending the statutory protection against unfair dismissal to agency workers, pursuant to the express power contained in section 23 of the Employment Relations Act 1999.  

15.	There is a ready-made template in the race, sex and disability discrimination legislation; for example section 12 of the Disability Discrimination Act 1995 renders it unlawful for a principal in relation to contract work, to discriminate against a disabled person;  Section 7 of the Race Relations Act 1976 renders discrimination on racial grounds against a contract worker unlawful; similarly section 9 of the Sex Discrimination Act 1975 in relation to sex discrimination.  The definition of contract workers overcomes two hurdles presently faced by unfair dismissal complainants; it applies to workers, not just employees, and it covers those workers supplied by an agency who are not in a contractual relationship with a customer of the employment agency for whom they actually do their work.

16.	However, that is or may be for the future.  We are concerned with the present.  In this appeal it is common ground between counsel that the Employment Tribunal must first find that a contract existed between the Applicant and the Respondent during the relevant period.  Mr Linden in particular accepts that proposition, notwithstanding the EAT decision in Motorola v. Davidson (2001) IRLR 4, a case which we think is capable of being misunderstood.  As appears from paragraph 16 of the President’s judgment in that case, the EAT were dealing only with the issue of ‘control’ because that is how the appeal was advanced by and on behalf of the Respondent employer below.  There is a clear indication that the result might have been different if the attack had been directed to the Tribunal’s finding that there was a contract between the customer and agency worker.

17.	No such limitation applies in the present case.  It was made clear in the Respondent’s notice of appearance and submissions below and is in the forefront of Miss Callaghan’s submissions to us, that there was and remains an issue as to whether any contract existed between these parties during the relevant period.

18.	As to that issue, we are quite unable to say from the Tribunal’s reasoning, whether they have specifically addressed the point as they were bound to do.  If they did, they made no findings on the point.  

19.	In these circumstances a consensus has emerged during the debate before us.  It is now common ground that the appeal must be allowed and the case remitted for rehearing before a fresh Employment Tribunal.  We endorse that agreement.  There are insufficient findings of fact to allow us to determine the question whether or not a contract existed between these parties.  There remains one further issue.  Ought the case to be remitted for a further preliminary hearing, or should it be remitted for determination on the merits generally?

20.	Mr Linden, in contending for the latter course, draws our attention to the Tribunal’s ruling at paragraph 16 of their reasons, that the Applicant’s case is put in 2 ways; ordinary unfair dismissal under section 98 Employment Rights Act, for which 1 years qualifying service is required under section 108 (1) and, in the alternative, automatic unfair dismissal under sections 57A and 99 ERA, for which there is no qualifying period of service (section 108(3)(b)).

21.	Miss Callaghan asks us to remit the case for a repeat of the preliminary issue as to the qualifying period under section 108(1) in the first instance.  She submits that the section 57(A) claim is hopeless and that no particulars of that claim have been delivered despite a direction by the Tribunal for the Applicant to do so by 12 April 2001.

22.	We prefer Mr Linden’s approach.  It is clear that there is a live section 57(A) issue; whether or not it is a case that is made out, will be a matter for the Employment Tribunal.  The Employment Tribunal’s directions were effectively suspended by both parties pending the outcome of this appeal.  We shall in these circumstances remit the case for a full hearing before a fresh Employment Tribunal.  The issues for that Tribunal will be, it seems to us:

(1)	was the Applicant employed by the Respondent under a contract of employment during the relevant period.  That will involve deciding, first whether there was any contractual relationship between these parties during that time and if so, whether it was a contract of service or a contract for services, applying the Ready Mixed Concrete test.
(2)	If not, was the Applicant dismissed for an inadmissible reason.  As to this potential issue we draw attention to the Court of Appeal decision in Smith v. Hayle Town Council (1978) ICR 996 (CA), for the proposition that where the employee has less than the ordinary unfair dismissal qualifying period service then the onus lies on him or her to establish that reason for dismissal.
(3)	If so, was the reason for dismissal either the inadmissible reason alleged or, if not, a potentially fair reason under section 98.  In either event the onus of establishing the reason in these circumstances will lie on the Respondent.  If the finding is that there was a dismissal for a potentially fair reason, then the question will arise as to whether that dismissal was fair or unfair applying section 98(4) ERA.

23.	Finally, directions.  Within 14 days of today’s date, the Applicant will provide particulars of her complaint under sections 57(A) and 99 ERA as originally directed by the Lewzey Tribunal in paragraph 18 of their reasons.  Thereafter, the identical timetable to that set out in the following paragraphs of the Tribunal’s reasons will apply, taking as the start date today’s date and moving forward consequentially.