Appeal No. UKEAT/0132/08/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 26 August 2008

Before
HIS HONOUR JUDGE ANSELL
(SITTING ALONE)

MR E MUSCHETT	APPELLANT

HM PRISON SERVICE	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR E MUSCHETT
(Appellant in Person) 	
For the First Respondent	MR M PURCHASE 
(of Counsel)
Instructed by: 
The Treasury Solicitor (Employment   Team)
One Kemble Street
London WC2B 4TS	

SUMMARY

CONTRACT OF EMPLOYMENT:  Whether established
Tribunal Chairman correct not to imply contract between agency worker and end user.

HIS HONOUR JUDGE ANSELL
1.	This has been the hearing of an appeal from a decision of a Chairman, Mr Byrne, at a Reading Employment Tribunal, when at a pre-hearing review, held on 6 November 2007, he determined that Mr Muschett was not an employee for the purposes of either the Employment Rights Act 1996 or the various discrimination acts covering sex, race or religion, and accordingly the Tribunal had no jurisdiction to hear his claims of unfair dismissal, breach of contract and discrimination under those three discrimination statutes.  In addition, he also determined that Mr Muschett could not take advantage of the contract workers’ provisions that appear in the various discrimination acts.

2.	The background was to this matter that Mr Muschett had been supplied as a temporary worker by the Second Respondents, Brook Street (UK) Ltd, to work at the Feltham Remand Centre, one of the establishments run by HM Prison Service.

3.	The Chairman found that he was not an employee of either Respondent, and in particular as far as the First Respondent was concerned, he determined that there was no contract to be implied between Mr Muschett and the Prison Service, nor was there any mutuality of obligation between them.

4.	Mr Muschett appealed against both Respondents.  The case was initially sifted by Mrs Justice Cox, DBE who refused leave to appeal.  Mr Muschett then filed an amended Notice of Appeal, as was his right under rule 3, and that then came back before Mr Justice Elias, the President.  He determined that the appeal was still not made out against Brook Street, but did allow this hearing to go through against the First Respondents; the Prison Service.  He was particularly concerned in his sift notes in relation to whether or not the Tribunal Chairman had adequately considered the slightly wider definition of employment contained in the discrimination legislation. 

5.	The decision of Mr Justice Elias not to allow the appeal to go through against Brook Street was further challenged by Mr Muschett at a Rule 3(10) Hearing, but on 12 May his appeal was rejected by HHJ Serota QC.  The learned Tribunal Chairman had also given a ruling that if the matter had gone ahead, in other words if he were wrong in his views on jurisdiction, he would have imposed a requirement for a deposit of £500 under the Employment Tribunal Rules as a condition of being able to pursue claims based on what he perceived was a limited chance of success as far as the claim was concerned.

6.	The background facts, as found by the Chairman, were that Mr Muschett commenced work on 22 January 2007, with his working relationship ending on 10 May.  He had no written contract of any sort with the Prison Service, and the basis on which he carried out work for them at Feltham Remand Centre was in accordance with a contract for services for temporary workers entered into between him and Brook Street.

7.	The Chairman was satisfied that whilst at Feltham, Mr Muschett was under the control of the Prison Service, and further that he was required to carry out that work personally.  Before he was able to start work for them he had to undergo a Criminal Records Bureau check, and also subsequently he underwent an induction procedure, received a copy of the handbook that was issued to all its staff, and was subject to those conditions.

8.	The Chairman found that he was paid by Brook Street in accordance with the provisions of clause 4 of his contract with them.  There was no entitlement to receive any payment from the Prison Service.

9.	Clause 9(1) of the contract provided that:
“The Employment Business or the Client may terminate the Temporary Worker’s Assignment at any time without prior notice or liability.”

10.	And by clause 9(2): 
“The Temporary Worker may terminate an Assignment at any time without prior notice or liability”.

11.	The Chairman noted there was no contractual obligation on the part of Mr Muschett to provide services personally for Brook Street, and since ceasing to carry out work for the Prison Service, the Chairman noted that he had carried out work for other organisations under the terms of his contract with Brook Street and had been similarly remunerated.

12.	The first issue that arises on this appeal is a procedural one, and is a complaint that only on the morning of the hearing was Mr Muschett handed some documents.  This complaint does not appear in his Notice of Appeal, but is an allegation that he has raised in a number of his submissions in relation to a so-called unfair hearing due to the late production of material.  The issue was not raised in the Notice of Appeal, nor it seems was it raised at the hearing below, even though the Chairman spent some time before the hearing proper discussing the process with him.  There is of course a principle that normally matters cannot be raised at this hearing which are not raised at the court below; see Jones v The Governing Body of Burdett Coutts School [1999] ICR 38.  Even, however, if it is incumbent on us with our overarching duty to consider issues of unfairness at the hearing below it does not seem to me that there was any unfairness in relation to the documents that were produced late.  On the morning of the hearing the Appellant was given a copy of the witness statement of Barry Smith, attached to which was firstly general contract information about agency staff issued by the Prison Service, and then the contract between Brook Street and Mr Muschett, which Mr Muschett concedes that he was aware of because he had seen it obviously when he originally signed it.

13.	As regards the general contract information it does not seem to me, indeed this was confirmed by Mr Muschett at this hearing, that that document figured in any important way in the hearing or the Chairman’s determination.  Secondly, there was a small bundle of documents relating to the investigation into the allegations of inappropriate behaviour made against the Appellant, which led to the termination of his relationship in May.  Again, there is no reference to those documents within the Chairman’s conclusions.  His conclusions as regards the imposition of a deposit appeared to follow from a paper analysis of the allegations that were being made by the Appellant.

14.	Thirdly Mr Muschett was given a copy of the decision in James v London Borough of Greenwich [2007] IRLR 168.  Mr Purchase for the Respondent assures me today that Mr Muschett had the opportunity of considering the relevant parts of that decision, and I am quite satisfied that again there was no procedural unfairness in relation to that aspect of the case.

15.	The second area of grounds of appeal which I explore really go to the nub of the appeal, which is that the Chairman came to the wrong conclusions as regards the issue of whether Mr Muschett was an employee for the purposes of the Employment Rights Act 1996 or the discrimination legislation, and in the alternative the Chairman came to a wrong view as regards the provisions for contract workers.  The relevant provisions are as follows: as regards the Employment Rights Act in Section 230 a contract of employment is defined in subsection 2:
“… a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.”

16.	As regards the discrimination legislation I take as an example Section 78 of the Race Relations Act 1976, which is the definition section, and under the heading employment there is this definition:
“… ’employment’ means employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour, and related expressions shall be construed accordingly.”

17.	This slightly wider definition includes those words “contract personally to execute any work or labour”, which creates a wider definition than that is required under the Employment Rights Act.

18.	The third area to be considered is in relation to contract workers, and again I take as an example, Section 7 of the Race Relations Act, which provides in subsection 1:
“This section applies to any work for any person (“the principal”) which is available for doing by individuals (“contract workers”) who are employed not by the principal himself but by another person, who supplies them under a contract made with the principal”.

19.	Turning first the issue of whether Mr Muschett was an employee for the purposes of the Employment Rights Act legislation, the conclusions as to that are dealt with by the Chairman in paragraph 12.  His conclusions were as follows: 

“The first question was the Claimant employed at any time by the First Respondent? “The three key ingredients that must subsist in order for there to be a contract of employment are control, personal performance and mutuality of obligation.  I am satisfied on the evidence heard that the Claimant has shown that he was under the control of the First Respondent whilst carrying out work.  Further it was a requirement that he carry out that work personally.  However he was not paid by the First Respondent and there was no obligation on the First Respondent to pay him.  Crucially he was under no obligation to the First Respondent to work for them and in accordance with the terms of contract for services could terminate the working arrangement at any time by giving notice to the Second Respondent.  The First Respondent was under no obligation to provide him with work.  Accordingly in the absence of mutuality of obligation he was not an employee of the First Respondent.”

20.	The complaint made by Mr Muschett is that as a result of the way in which his working relationship developed with the First Respondent, that the Chairman should have found that there was at least an arguable case that there was to be implied between Mr Muschett and the end user a contract of employment.  This area of law has, of course, been the subject of considerable litigation both at the Employment Appeal Tribunal and the Court of Appeal as a result of dicta in various authorities primarily Dacas v Brook Street Bureau (UK) Ltd [2004] EWCA Civ 217 and Cable & Wireless PLC v Muscat [2006] EWCA Civ 220.  There was conflicting guidance as to the circumstances in which a court should consider in an agency situation implying that there was a contract of employment between the worker and the end user.

21.	The conflict has it seems been resolved as a result of the recent Court of Appeal authority of James v London Borough of Greenwich [2008] EWCA Civ 35.  That decision approved guidance that had been given by the learned President, Mr Justice Elias in determining whether or not a contract of employment could be spelt out, as he put it, in a relationship between either the agency and the worker or the worker and the end user.  It is not necessary for me to rehearse the facts of those various cases that I have referred to, in particular James, but I cite two passages; firstly at paragraph 22 to deal with the agency worker situation and then later paragraphs 58 and 59 dealing with the end user position.

22.	Paragraph 22 reads as follows:
“It is not necessary to rehearse all the agency cases which have been the subject of consideration by the courts.  It is plain that whilst of course every case turns on its own particular facts, it would be an exceptional case where a contract of employment can be spelt out in the relationship between the agency and worker: see Montgomery -v- Johnson Underwood [2001] IRLR 269; Bunce -v- Posworth Ltd [2005] IRLR 57; and Dacas -v- Brook Street Bureau (UK) Ltd [2004] ICR 1437 at para. 64 per Mummery LJ.  Typically, the agency does not have the day to day control which would establish such a contract.  Nor, indeed, is the worker carrying out the work directly for the benefit of the agency, and there is usually no obligation on the agency to find work or on the worker to accept it, let alone personally to do it.  In any event, it has not been suggested in this case that there is an employment contract with the agency.”

23.	Turning to the end user conclusions, paragraph 58 and 59, Elias J said this:
“When the arrangements are genuine and when implemented accurately represented the actual relationship between the parties - as is likely to be the case where there was no pre-existing contract between worker and end user - then we suspect that it will be a rare case where there will be evidence entitling the Tribunal to imply a contract between the worker and the end user.  If any such contract is to be inferred, there must be subsequent to the relationship commencing be some words or conduct which entitle the Tribunal to conclude that the agency arrangements no longer dictate or adequately reflect how the work is actually being performed, and that reality of the relationship is only consistent with the implication of the contract.  It will be necessary to show that the worker is working not pursuant to the agency arrangements but because of mutual obligations binding worker and end user which are incompatible with those arrangements.
Typically the mere passage of time does not justify any such implication to be made as a matter of necessity, and we respectfully disagree with Sedley LJ’s analysis in Dacas on this point.  It will no doubt frequently be convenient for the agency to send the same worker to the end user, who in turn would prefer someone who has proved to be able and understands and has experience in the systems in operation.  Many workers will also find it advantageous to work in the same environment regularly, at least if they have found it convivial.  So the mere fact that the arrangements carry on for a long time may be wholly explicable by considerations of convenience for all parties; it is not necessary to imply a contract to explain the fact that the relationship has continued perhaps for a very extensive period of time.  Effluxion of time does not of itself establish any mutual undertaking of legal obligations between the worker and end user.  This is so even when the arrangement was initially expected to be temporary only but has in fact continued longer than expected.  Something more is required to establish the tripartite agency analysis no longer holds good.”

24.	Mr Muschett argues that there was more in this case, and the Chairman failed to give proper recognition to what was happening to his working relationship with the Prison Service.  He points to the length of time that he was working for them.  As far as that is concerned James makes it clear that that taken by itself does not give rise to the inference of a fresh contract.  He points to the further training, extra responsibilities, security arrangements, provision of handbook, and in particular that discussions had started as regards him applying for a permanent position, and indeed he had made that application, he says, at the suggestion of the Prison Service.

25.	It seems to me, however, that those matters are no more than would normally arise from his working at those particular premises.  Whilst the Chairman did not deal with all those features, he did in paragraph 9 mention the induction procedure and the provision of the staff handbook.  The fact that there was an intention to become a permanent employee does not, in my view, help Mr Muschett; the application had to go through the normal process, and the issue for the Chairman was not whether a contract might have materialised in the future, but whether he worked under such a contract at the material times.

26.	It seems to me that in the words of Elias J these were genuine relationships, genuine arrangements which had not arisen from a pre-existing contract between the worker and the end user”, and therefore, again quoting his words:
“It would be a rare case where a contract with the end user would be implied, and would only be because of obligations which were incompatible with the agency arrangements.”

27.	There was nothing incompatible with the agency arrangements at the time of these events, for example, had Mr Muschett not turned up for work or gone on sick or holiday leave, the agency would clearly have been under obligation to provide alternative staff.  That seems to me to be incompatible with the suggestion that he had a contract with the Prison Service, and indeed if he chose to, he could simply not turn up for work the next day.  I see nothing in the Chairman’s decision that can be criticised in terms of his approach as regards this issue.

28.	The decision that there was no contract between the end user and Mr Muschett really also deals with the wider definition in the discrimination legislation.  The Chairman dealt with that in paragraph 15; he found that there was no mutuality of obligation as between him and either the First or Second Respondents.  For the purposes of discrimination legislation it may well be that it is not strictly necessary for him to find a mutuality of obligation since the only requirements are for there to be firstly a contract, and secondly that it has to be a contract for provision of personal services.  But he goes on to say this:
“He did not have a contract with the Second Respondent to personally to do any work for them, nor was there a contract with the First Respondent.”

29.	That is clear from his conclusions in paragraph 12.  The absence of a contract is therefore fatal to claims being raised under either employment or discrimination legislation.

30.	As regards the contract worker provisions, again Mr Muschett’s claims are defeated if one looks carefully at the provisions.  It requires that the person who is providing the contract worker to the principal has to be in a relationship with an employment contract with the worker.  The words are: “Who are employed not by the principal himself but by another person”.  In other words, in the circumstances of this case Mr Muschett would have to show that he was employed by Brook Street.  The Chairman has found in his conclusions that he was not employed; that is dealt with in paragraph 13, and again in paragraph 15.  The aspect of that appeal has not been permitted to proceed.  In any event, the Appellant’s work through the agency was done under a single contract for services for temporary workers between him and Brook Street rather than a series of separate contracts for each assignment, such as one sees in the authority of Bunce v Postworth [2005] IRLR 557, where the existence of those series of separate contracts was held to be a sufficient contract of personal services to fall within the scope of the temporary worker provisions.  Again I can find no error in the Chairman’s conclusions.

31.	Finally on the issue of deposit, the Chairman had a discretion to require the payment of deposit under rule 20, schedule 1 of the Rules of Procedure, if he considered that the claim being advanced had little prospect of success.  In paragraph 16 the Chairman carried out a paper analysis of the allegations.  In relation to the Race Discrimination claim he notes that the claim was over a month out of time.  He was in fact incorrect as regards to that analysis.  The correct period should have been one of 14 days.  Leaving that to one side it seems to me that there was more than sufficient material in paragraph 16 to show that the Chairman did carry out a proper analysis and exercised his discretion in a correct manner.  This Court is always loathe to interfere with a decision, which is a matter of discretion for a chairman, provided it can be shown that that discretion has been exercised within reasonable bounds.  It seems to me that the analysis that the Chairman carried out of the various allegations, albeit on the basis only of a paper analysis at that stage, was one that was open to him and therefore is not one which I would seek to interfere.

32.	Accordingly, for the reasons that I have indicated this appeal is dismissed.