Employee v Contractor
Cases
Market Investigations Ltd v Minister for Social Security
[1969] 2 QB 173
Cooke J
‘The fundamental test to be applied is this: ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account?’ If the answer to that question is ‘yes’, then, the contract is a contract for service. If the answer is ‘no’, then, the contract is a contract of service. No exhaustive list has been compiled and, perhaps, no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.’
Ready Mixed Concrete SouthEast Ltd v Minister of Pensions
[1968] 2 QB 497, [1968] 1 All ER 433, [1968] 2 WLR 775, [1967] EWHC QB 3
MacKenna J
‘A contract of service exists if these three conditions are fulfilled. (i) 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. (ii) 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 that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.’
As to (i): ‘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. Freedom to do a job either by one’s own hands or by another’s is inconsistent with a contract of service, though a limited or occasional power of delegation may not be . . As to (ii). Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted.’ and
”To find where the right resides one must look first to the express terms of the contract, and if they deal fully with the matter one may look no further. If the contract does not expressly provide which party shall have the right, the question must be answered in the ordinary way by implication.
The third and negative condition is for my purpose the important one, and I shall try with the help of five examples to explain what I mean by provisions inconsistent with the nature of a contract of service.
(i) A contract obliges one party to build for the other, providing at his own expense the necessary plant and materials. This is not a contract of service, even though the builder may be obliged to use his own labour only and to accept a high degree of control: it is a building contract. It is not a contract to serve another for a wage, but a contract to produce a thing (or a result) for a price.
(ii) A contract obliges one party to carry another’s goods, providing at his own expense everything needed for performance. This is not a contract of service, even though the carrier may be obliged to drive the vehicle himself and to accept the other’s control over his performance: it is a contract of carriage.
(iii) A contract obliges a labourer to work for a builder, providing some simple tools, and to accept the builder’s control. Notwithstanding the obligation to provide the tools, the contract is one of service. That obligation is not inconsistent with the nature of a contract of service. It is not a sufficiently important matter to affect the substance of the contract.
(iv) A contract obliges one party to work for the other, accepting his control, and to provide his own transport. This is still a contract of service. The obligation to provide his own transport does not affect the substance. Transport in this example is incidental to the main purpose of the contract. Transport in the second example was the essential part of the performance.
(v) The same instrument provides that one party shall work for the other subject to the other’s control, and also that he shall sell him his land. The first part of the instrument is no less a contract of service because the second part imposes obligations of a different kind: Amalgamated Engineering Union v Minister of Pensions and National Insurance [1963] 1 WLR 441, 451, 452.
I can put the point which I am making in other words. An obligation to do work subject to the other party’s control is a necessary, though not always a sufficient, condition of a contract of service. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract, and the person doing the work will not be a servant. The judge’s task is to classify the contract (a task like that of distinguishing a contract of sale from one of work and labour). He may, in performing it, take into account other matters besides control.’
Brook Street Bureau (UK) Ltd v Dacas
[2004] EWCA Civ 217
Lord Justice Mummery :
“The Authorities
The court was referred to a number of authorities on the issue of a contract of service in various contexts, including cases specifically involving employment agencies
The judgments of the Divisional Court in Construction Industry Training Board v. Labour Force [1970] 3 All ER 220 support the result in the Employment Tribunal that Mrs Dacas did not have a contract of service with Brook Street or the Council. The case was not, however, concerned with unfair dismissal or employment rights. It was an industrial training levy case in which there was an appeal on a point of law against the imposition of the levy on a company, Labour Force Limited, which was not an employment agency but was engaged in the supply of labour to contractors in the construction industry. The contractors paid Labour Force, who in turn paid the workers, but Labour Force exercised no control at all over the work done by them for the contractors, who had the right to terminate. As for the contractors, who took no part in the proceedings, it was simply said (at p 223c-d) that the Industrial Tribunal had come to the right conclusion in holding that there was no contract of any kind between the contractor and the workman. Implied contracts of service were not considered. As for Labour Force, it was held that the contracts between Labour Force, as principal, and the workers to do work for a third party, the contractor, were not contracts of service. They were described as contracts sui generis: see p225d-g.
McMeechan v. Secretary of State was not an unfair dismissal case. The applicant was a temporary worker on the books of an employment agency, which went into insolvent liquidation. He claimed that he had a contract of service with the agency. That formed the basis of his application to the Secretary of State under the relevant employment protection legislation for payment of money owing to him in respect of his last engagement. The Secretary of State disputed his entitlement on the ground that he was not an employee of the agency and was self employed. It was not contended that the client of the agency, to whom Mr McMeechan was specifically assigned for four days, was his employer. The end-user took no part in the proceedings. The case is helpful to Mrs Dacas to the extent that it held that, even if there was no umbrella contract of service, as was conceded to be the case here, a contract of service between the temporary worker and the employment agency could be inferred in respect of a single engagement or assignment of the temporary worker by the employment agency to an end user. Counsel for Mrs Dacas submitted that West Drive was a specific assignment or engagement-giving rise to a contract of service between Mrs Dacas and Brook Street.
The judgments of this court in Montgomery v. Johnson Underwood [2001] IRLR 264 support Brook Street on this appeal. The court held that the applicant was not employed by the employment agency, which exercised no control over the work to be done by the applicant as a part time receptionist/ telephonist for the end-user. Applying the criteria laid down in Ready Mixed Concrete the court held that, in the absence of a framework of control, direction or supervision by the agency, there was no contract of service with it. As for the client of the employment agency, it was joined as a party to unfair dismissal proceedings in the Employment Tribunal, which held that the applicant was an employee of the agency and not of the end-user. In the Employment Appeal Tribunal, the end-user, as well as the agency, took part and the appeal was dismissed. The end-user took no part in the appeal to the Court of Appeal, which was only concerned with the issue whether the applicant was employed by the agency. The appeal by the agency was allowed. It was held that the applicant had no contract of service with the agency, as there was no mutuality of obligation between her and the agency and there was no control of her by the agency. The question of an implied contract of service between the applicant and the end-user did not arise for consideration in the Court of Appeal.
The decision of the Employment Appeal Tribunal in Stephenson v. Delphi Diesel Systems Ltd supports the Council’s contention that Mrs Dacas had no express or implied contract of service with it. The applicant in that case was an agency worker with an employment agency. It was held that the end-user was under no legal obligation to pay the applicant and the applicant was under no legal obligation to work for the end-user. Control over the applicant by the end-user was explicable by virtue of the contract between the applicant and the agency, which made it unnecessary to imply a contract between the applicant and the end-user.
Munby J, whose judgment I have read in draft, quotes and relies on the key passages in paragraphs 12-14 of the judgment given on behalf of the Appeal Tribunal by Elias J. The judgment is certainly the most fully reasoned to be found in the authorities on this point. The reasoning supports the Council’s submission that it would be impossible in this case to imply a contract of service between the Council and Mrs Dacas. I do not, however, find all of the submissions of counsel (Mr Mansfield) for the end-user in that case as persuasive as the Employment Appeal Tribunal found them or as Munby J finds them.
Some of the Council’s arguments on this point, which are based on Stephenson, are clearly correct. The arrangements were not a sham. The parties would have realised that the triangular arrangements were not “normal” for a contract of service. Brook Street was acting as “an independent party” in incurring certain obligations and was not simply acting as agent finding work for Mrs Dacas or finding workers for the Council. As for the subjective intentions of the parties, it is probably correct to say that there was no intention on the part of the Council or on the part of Brook Street that the Council should enter into a direct contractual relationship with Mrs Dacas. I am not, however, persuaded without the benefit of relevant findings of fact made by an Employment Tribunal which has addressed the question of implied contract, that no contract of service can be implied between Mrs Dacas and the Council because such a contract is “simply not compatible with the documents” or because the fact of control by the Council is wholly explicable by virtue of the contractual obligation that exists between Mrs Dacas and Brook Street. Before reaching a conclusion on those points I would like to know what in fact went on between the Council and Mrs Dacas during the years when she was working at West Drive. What is lacking in this case is any finding by the Employment Tribunal about the facts of the daily contact between Mrs Dacas and the Council at West Drive and the nature and extent of the dealings between them. This information is lacking because the Employment Tribunal did not address the possibility of an implied contract, which it should have addressed and should have been asked to address.
Carmichael v. National Power Plc was not an employment agency case and did not deal with the question of an implied contract of service. The reasoning of the speeches is important, however, on two points of principle: first, on the point that, if mutuality of obligation is lacking, as it was held to be in a casual, “as required” arrangement, there could be no contract of service; and, secondly, even where there are documents evidencing the arrangements between the parties, if the documents were not intended to constitute an exclusive record of the agreement, the Employment Tribunal are entitled, in deciding whether there was a contract of service, to make inferences from what the parties said and did both at the time when the applicant was engaged and subsequently.
Franks v. Reuters [2003] IRLR 423, a decision of this court, was an employment agency case. The result in the Employment Tribunal, which heard the applicant’s claim against both the employment agency and the end-user, was that the applicant did not have a contract of service with either of them. The Employment Appeal Tribunal dismissed the appeal by the applicant. In the Court of Appeal the employment agency took no part as Mr Franks only pursued his appeal against the decision that he had no contract of service with the end-user, Reuters, for whom he had, through the employment agency, done work for six years. The case was remitted to a differently constituted Employment Tribunal to determine whether there was an implied contract of service between the applicant and the end-user.
Position of Brook Street
On Brook Street’s appeal I would hold that the Employment Tribunal correctly concluded that the express contract between the employment agency and Mrs Dacas was not a contract of service. Brook Street was under no obligation to provide Mrs Dacas with work. She was under no obligation to accept any work offered by Brook Streetto her. It did not exercise any relevant day to day control over her or her work at West Drive. That control was exercised by the Council, which supplied her clothing and materials and for whom she did the work. The fact that Brook Street agreed to do some things that an employer would normally do (payment) does not make it the employer. Nor am I able to find that although, as was conceded on behalf of Mrs Dacas, there was no “umbrella” contract of service between Brook Street and her, she had a contract of service with Brook Street governing the specific assignment at West Drive and separate from the Temporary Worker Agreement. There was only one contract. There was no basis in the documents or in the evidence for finding another contract between Brook Street and Mrs Dacas governing her work at West Drive and holding it to be a contract of service. The role of Brook Street was not that of an employer of Mrs Dacas. Rather it was that of an agency finding suitable work assignments for her and, so far as the Council was concerned, performing the task of staff supplier and administrator of staff services. The real control over the work done by Mrs Dacas at West Drive and over her in the workplace was not exercised by Brook Street. Although contractual labels are not, of course, conclusive, the Employment Tribunal did not err in law in taking account of the express provision in the Temporary Worker Agreement that the contracts between Brook Street and Mrs Dacas in respect of specific assignments were to be contracts for services. The Employment Tribunal found as a fact that there was no other contract between Brook Street and Mrs Dacas. I would allow the appeal by Brook Street.
Position of the Council
This court is not entitled to overturn the decision of the Employment Tribunal dismissing the claim by Mrs Dacas against the Council. She did not appeal against it. She is out of time for doing so. What I have already said about the position between Mrs Dacas and the Council can only be relevant to similar cases in the future.
To sum up: in holding that there was no contract between Mrs Dacas and the Council the Employment Tribunal failed to address the possibility of an implied contract of service between them. That possibility required consideration. She was working at West Drive as a cleaner under the day-to-day control of the Council. That pointed away from the probability of her employment by Brook Street and of her being a self-employed person.
I should state that Mr Swift argued strongly against a possible contract of service between the Council and Mrs Dacas, emphasising the unchallengeability of the finding of fact by the Employment Tribunal that there was no contract between them. There could not be a contract, let alone a contract of service, as there was no offer and acceptance. There was no mutuality of obligation: the Council had no right to require her to do work and no obligation to pay her for work done. She had no obligation to the Council to work for it. She had to look to Brook Street for payment, which was fixed by Brook Street. It was not conditional on payment by the Council to Brook Street. She also looked to Brook Street for sick pay and arrangements for holidays. She was not entitled to claim her pay from the Council. Any control over her by the Council was not free-standing, but was through and was explicable by reference to the contract with Brook Street, which required her to accept directions from the Council, not through any contract between the Council and her. There was no basis, he submitted, for the implication of a further contract between the Council and Mrs Dacas. It was not the intention of any of the parties that Mrs Dacas should have a contract of service with the Council. Such a contract could not be implied so as to re-write or re-define the obligations in the express freestanding contracts, which the parties had in fact made. If the case raised policy issues as to the working conditions of people in the position of Mrs Dacas, that was a matter for legislation by Parliament and not for the courts.
I recognise the force of Mr Swift’s submissions, but in future cases of this kind the Employment Tribunal should, in my judgment, at least consider the possibility of an implied contract of service. The result of the consideration will depend on the evidence in the case about the relationship between the applicant and the end-user and how that fits into the other triangular arrangements. In general, it would be surprising if, in a case like this, the end-user did not have powers of control or direction over such a person in such a working environment. The end-user is the ultimate paymaster. The arrangements were set up and operated on the basis that the end-user was paying the agency. What was the Council paying for, if not for the work done by Mrs Dacas under its direction and for its benefit?”
James v London Borough of Greenwich
[2008] EWCA Civ 35
Lord Justice Mummery :
“The state of the authorities
The citations to the court on agency workers provide a welcome opportunity to make a few comments on the state of the authorities. I agree with Mr Cohen that there is no significant difference between the law stated and applied in the decisions of this court and in those of the EAT. It is apparently thought in some quarters that they are in conflict. I do not think so. As for the judgment of the EAT in this case I agree with it. I have been unable to find conflict in any of the other cases.
Dacas was the first case in this court to confront head on the question whether a contract of service with the end user could be implied in the tripartite setting of an agency worker under contract with an agency, which also has a contract with the end user. I agree with Mr Cohen that there was no appeal before the Court of Appeal in that case against the decision of the ET that the claimant was not an employee of the end user. I also agree with him that the majority judgments raised the possibility, which had not been considered by the ET in that case when holding that the claimant was not an employee of the agency or of the end user, whether a contract of service might by necessary inference be found to exist with the end user. I did not expand on the possibilities, let alone decide the implied contract issue, in the absence of the relevant findings of fact. Dacas is not authority for the proposition that the implication of a contract of service between the end user and the worker in a tripartite agency situation is inevitable in a long term agency worker situation. It only pointed to it as a possibility, the outcome depending on the facts found by the ET in the particular case. I would add that, having regard to the nature and constitution of the proceedings before the Court of Appeal in that case, it was not the most suitable occasion for offering more detailed guidance on the circumstances in which a contract of service could be implied.
Muscat was a case in which a contract of service was implied, but it was not a tripartite agency case. Its importance is in the extent of approval given to the legal analysis in the majority judgments in Dacas and in the guidance given on the applicable legal principles, in particular emphasis on the requirement that the implication of a contract of service must be necessary to give effect to the business reality of a relationship between the worker and the end user.
The decision of the House of Lords in Carmichael v. National Power [1999] ICR 1226 was cited by Mr Cohen for the proposition that, for a contract of service to exist, mutuality of obligation must be found. The ET found that there was no such mutuality of obligation between Ms James, who was under no obligation to the Council to do work for it, and the Council, which was under no obligation to Ms James to provide her with work and therefore no employment relationship between them. Mr Cohen accepted that in Carmichael the issue was different from the tripartite agency worker cases. No employment agency was involved. There was a direct express contract between the workers and the user of their services and the dispute was whether or not it was a contract of service or whether they were casual workers working under a contract of another kind, there being periods in the relationship when no work was being performed or paid for. In the agency worker cases the issue is whether a third contract exists at all between the worker and the end user. The relevant question in such cases is whether it is necessary, in the tripartite setting, to imply mutual contractual obligations between the end user to provide the worker with work and the worker to perform the work for the end user.
The EAT added observations (paragraphs 53 to 61) which are intended to assist tribunals in the task of deciding whether a contract of employment with the end user should be implied. ETs would be well advised to follow the guidance given by the EAT, which I would expressly approve.
In conclusion, the question whether an “agency worker” is an employee of an end user must be decided in accordance with common law principles of implied contract and, in some very extreme cases, by exposing sham arrangements. Just as it is wrong to regard all “agency workers” as self-employed temporary workers outside the protection of the 1996 Act, the recent authorities do not entitle all “agency workers” to argue successfully that they should all be treated as employees in disguise. As illustrated in the authorities there is a wide spectrum of factual situations. Labels are not a substitute for legal analysis of the evidence. In many cases agency workers will fall outside the scope of the protection of the 1996 Act because neither the workers nor the end users were in any kind of express contractual relationship with each other and it is not necessary to imply one in order to explain the work undertaken by the worker for the end user.
I have already expressed my agreement with the EAT that, in this case, the mutuality of obligation approach in the Carmichael case and adopted by the ET in this case is not particularly helpful. As I have explained the issue in Carmichael, which was not a tripartite situation, was whether there was an overarching employment contract or a series of contracts that were not contracts of employment. This case presents a tripartite situation with two express contracts, which are not contracts of employment, (1) between Ms Jamesand the agency and (2) between the agency and the Council. The issue here is whether, having regard to the way in which the parties have conducted themselves, it is necessary to imply (3) a contract of employment between Ms James as worker and the Council as the end user.”
Carmichael and Another v. National Power Plc
1999] UKHL 47; [1999] 1 WLR 2042; [1999] 4 All ER 897 HOUSE OF LORDS
LORD IRVINE OF LAIRG L.C.
My Lords,
he tribunal made this finding on the basis of (a) the language of the March 1989, documentation; (b) the way in which it had been operated; and (c) the evidence of the parties as to how it had been understood. For reasons I will amplify later, this was in my judgment the correct approach. In substance it held that the documents did no more than provide a framework for a series of successive ad hoc contracts of service or for services which the parties might subsequently make; and that when they were not working as guides they were not in any contractual relationship with the C.E.G.B. The parties incurred no obligations to provide or accept work but at best assumed moral obligations of loyalty in a context where both recognised that the best interests of each lay in being accommodating to the other.
The decision therefore was: that by accepting an “offer of employment as a station guide on a casual as required basis,” Mrs. Leese and Mrs. Carmichael were doing no more than intimate that they were ready to be invited to attend for casual work as station guides as and when the C.E.G.B. required their services. Just as the C.E.G.B. was not promising to offer them any casual work, but merely intimating that it might be offered, so also they were not agreeing to attend whenever required.
The contrary, however, was argued by Mr. Langstaff Q.C. He maintained that, once appointed, they became employees under contracts of employment which obliged the C.E.G.B. to provide them with such guide work as might become available in future, which they in turn were obliged to undertake when made available.
This submission construes the words, “Employment will be on a casual as required basis,” as empowering the C.E.G.B. to require Mrs. Leese and Mrs. Carmichael to undertake guide work as need for it arose.
If the issue were to be determined solely by reference to the documentation, I would, as a matter of construction, reject it. The words imposed no obligation on Mrs. Leese and Mrs. Carmichael, but intimated that casual employment on the pay terms stated could ensue as and when the C.E.G.B.’s requirements for the services of guides arose. Thus, the documents provided no more than a framework for ad hoc contracts of service or services which Mrs. Leese and Mrs. Carmichael might make with C.E.G.B. in the future.
The decision of the majority of the Court of Appeal to allow their appeals turned on two constructions of the documents which gave them immediate contractual effect.
Ward L.J. declined to hold that there was a contract in terms that Mrs. Leese and Mrs. Carmichael were obliged to provide their casual labour as guides as and when required, with the C.E.G.B. under no obligation to provide any casual work at all. He was, however, of the opinion that that might be the ordinary and natural meaning of the words; that is, that the C.E.G.B. would not be required to make any work available except as and when need arose; and that “whenever such a need arises the guide will be required to meet that need and perform the services as a guide” (p. 1187D). That imbalance of obligation, however, he avoided by holding that these obligations were subject to implied terms imposing “an obligation on the company to provide a reasonable share of work for each (guide) whenever the company had . . .work available” and “on the (guides) to take a reasonable amount of work once they have agreed to act as (guides) for the company . . .” (p. 1187E)
Chadwick L.J., however, was more restrictive. The words, “as required” meant that the guide’s duties were “to be performed when there is a need for the services of a guide.” Subject only to reasonable notice, the C.E.G.B. could “require the appointee to attend and to carry out the duties for which she has been engaged.” ( p. 1194D). Chadwick L.J. further held: “There is no basis upon which it could be held that the C.E.G.B. were under any obligation to arrange tours in order that the station guides should have work to do.” (p. 1195D); but they were, in order to give the contract business efficacy, obliged “to ensure that work of the nature described in the notice of 15 November 1988, when available and in so far as it cannot be performed by full time employees of the C.E.G.B., will be offered to those who have been recruited and trained as part-time station guides before being offered to anyone who has not been so trained.” (p. 1196D). The contract therefore obliged “the C.E.G.B. and the applicants to offer and to undertake the work which was available.” (p. 1196H).
If this appeal turned exclusively – and in my judgment it does not – on the true meaning and effect of the documentation of March 1989, then I would hold as a matter of construction that no obligation on the C.E.G.B. to provide casual work, nor on Mrs. Leese and Mrs. Carmichael to undertake it, was imposed. There would therefore be an absence of that irreducible minimum of mutual obligation necessary to create a contract of service (Nethermere (St. Neots) Ltd. v. Gardiner [1984] I.C.R. 612, 623C-G per Stephenson L.J., and Clark v. Oxfordshire Health Authority [1998] 1.R.L.R. 125, 128 per Sir Christopher Slade, at paragraph 22).
In my judgment it would only be appropriate to determine the issue in these cases solely by reference to the documents in March 1989, if it appeared from their own terms and/or from what the parties said or did then, or subsequently, that they intended them to constitute an exclusive memorial of their relationship. The industrial tribunal must be taken to have decided that they were not so intended but constituted one, albeit important, relevant source of material from which they were entitled to infer the parties’ true intention, along with the other objective inferences which could reasonably be drawn from what the parties said and did in March 1989, and subsequently.
The documents contained no provisions governing when, how, or with what frequency guide work would be offered; there were no provisions for notice of termination on either side; the sickness, holiday and pension arrangements for regular staff did not apply; nor did the grievance and disciplinary procedures. Significantly, as Kennedy L.J. in his dissenting judgment with which I agree emphasised, in 1994, for example, Mrs. Carmichael was not available for work on 17 occasions nor Mrs. Leese on 8. (p. 1174D). No suggestion of disciplining them arose. The objective inference is that when work was available they were free to undertake it or not as they chose. This flexibility of approach was well suited to their family needs. Just as the need for tours was unpredictable so also were their domestic commitments. Flexibility suited both sides. As Mrs. Carmichael said in her application form, “the part-time casual arrangement would suit my personal circumstances ideally!” The arrangement turned on mutual convenience and goodwill and worked well in practice over the years. The tribunal observed that Mrs. Leese and Mrs. Carmichael had a sense of moral obligation to the C.E.G.B., but would infer no legal obligation. Mr. Lovatt also gave evidence for the C.E.G.B. that “neither ladies are required to work if they do not wish to do so.” In my judgment, therefore, the industrial tribunal was well entitled to infer from the March 1989, documents, the surrounding circumstances and how the parties conducted themselves subsequently that their intention neither in 1989 nor subsequently was to have their relationship regulated by contract whilst Mrs. Leese and Mrs. Carmichael were not working as guides. The industrial tribunal correctly concluded that their case “founders on the rock of absence of mutuality.” I repeat that no issue arises as to their status when actually working as guides.
Thus, even if the words, “employment will be on a casual as required basis” in the March 1989 documentation were, as Mr. Langstaff Q.C. contends, capable of imposing an obligation to undertake guide work when required – and in my judgment they are not – that interpretation is negated by the findings of the industrial tribunal. So also, even if the March 1989 documentation were capable of bearing the primary constructions which found favour with Ward L.J. and Chadwick L.J. – and in my judgment they are not – the terms which each implied, by invoking business efficacy may not be implied because there may be no implication on that ground unless into a relationship itself contractual.
For all these reasons I would allow this appeal and reinstate the industrial tribunal’s reserved decision of 11 September 1995.”
Minister for Agriculture & Food -v- Barry & Ors
[2008] IEHC 216 (07 July 2008)
“The EAT adopted a two stage process in reaching its decision as to the nature of the relationship between the parties. In the first instance the tribunal applied a mutuality of obligation test, and thereafter it applied the so-called enterprise test. The appellants have no difficulty with the fact that the mutuality of obligation test was applied but they vehemently dispute the purported finding of mutuality of obligation on the evidence that was before the tribunal. They also say that the EAT was incorrect to apply the so-called enterprise test as it is not determinative of the issue, and the EAT’s belief to the contrary is grounded in a misconstruction of Keane J’s judgment in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare [1998] 1 IR 34.
Mutuality of Obligation
Although it has been conceded by the appellants that the EAT correctly identified that the requirement of mutuality of obligation has to be satisfied if a contract of service is to exist, I think that it is appropriate nonetheless to elaborate just a little on what this test involves, having regard to the fact that the purported finding of mutuality of obligation is disputed.
The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer. If such mutuality is not present, then either there is no contract at all or whatever contract there is must be a contract for services or something else, but not a contract of service. It was characterised in Nethermere (St Neots) Ltd v Gardiner,[1984] ICR 612 as the “one sine qua non which can firmly be identified as an essential of the existence of a contract of service”. Moreover, in Carmichael v. National Power PLC, [1999] ICR, 1226 at 1230 it was referred to as “that irreducible minimum of mutual obligation necessary to create a contract of service.” Accordingly the mutuality of obligation test provides an important filter. Where one party to a work relationship contends that that relationship amounts to a contract of service, it is appropriate that the court or tribunal seized of that issue should in the first instance examine the relationship in question to determine if mutuality of obligation is a feature of it. If there is no mutuality of obligation it is not necessary to go further. Whatever the relationship is, it cannot amount to a contract of service. However, if mutuality of obligation is found to exist the mere fact of its existence is not, of itself, determinative of the nature of the relationship and it is necessary to examine the relationship further.
The EAT’s ruling on the issue of mutuality of obligation was in the following terms:
“…in the case herein the five TVI’s have an implied agreement reached with the Department of Agriculture & Food and the TVI’s to carry out inspection of meat and certification of same on behalf of the Department of Agriculture & Food on an ongoing basis, hence the majority finds there is mutuality of obligation.”
The appellant contends that there was no evidence before the EAT upon which it could conclude that any “implied agreement” had been reached between the appellant and the respondents to carry out inspection of meat and certification of same on the appellant’s behalf on an ongoing basis. Nothing in the arrangements that existed as between the parties, which had been reduced to writing, indicates that this was in fact the case. Moreover they say there was significant and uncontested evidence to the contrary before the EAT which it inexplicably chose to overlook. This was to the effect that the appellant had no control over the level of work that was available for TVI’s as this was a matter entirely within the control of the processing plants, here Galtee. The appellant was thus unable to give, and did not give, a commitment to the respondents at any stage as to the level of work available to them, and the respondents were at all times well aware of this. Furthermore, the uncontested evidence concerning the arrangements entered into between the appellant and the respondents was that the latter were entitled to decline to work at the very least 16% of the shifts offered to them without that refusal having any consequences for their contracts.
In the Court’s view these points are well made. Moreover, the tribunal’s belief as to the nature of the contractual arrangements between the parties is wholly unclear. The determination speaks not of the implication of a term into a clearly indentified contract (whether that contract be one of service or for services), but rather of “an implied agreement” which could either connote such a contract or, alternatively, an overarching umbrella contract. The case of O’Kelly and others v Trust House Forte Plc, [1983] I.C.R.728 provides an example of where the latter type of contract was contended for. In that case the banqueting department of a hotel company kept a list of some 100 casual catering staff who were known as “regulars” because they could be relied upon to offer their services regularly and in return were assured of preference in the allocation of available work. These workers claimed to be entitled to unfair dismissal compensation on the basis that they had been employees employed under a contract of service but the hotel disputed this and contended that they were independent contractors supplying services and not employees. The issue went before an industrial tribunal and the claimants lost on the basis that the important ingredient of mutuality of obligation was missing. The claimants appealed successfully to an appeals tribunal. The appeals tribunal’s decision was in turn appealed to the Court of Appeal. In the course of his judgment Sir John Donaldson M.R. said
“Although I, like the appeal tribunal, am content to accept the industrial tribunal’s conclusion that there was no overall or umbrella contract, I think that there is a shorter answer. It is that giving the applicants’ evidence its fullest possible weight, all that could emerge was an umbrella or master contract for, not of, employment, It would be a contract to offer and accept individual contracts of employment and, as such, outside the scope of the unfair dismissal provisions.”
Even if the Court were certain (which it is not) that the EAT considered that a single contract existed, said to be a contract of service, and that a term was to be implied into that contract committing the appellant to offer, and the respondents to accept, work on an on-going basis, one would have to query the basis for implying such a term. The classical situation wherein a term may be implied at common law was identified in the well known Moorcock case (1889) 14 PD 64 as being one in which a term not expressly agreed upon by the parties is to be inferred on the basis of the presumed intention of the parties. The proposition received a somewhat wider formulation in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 wherein McKinnon J said at p227:
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course’.”
The Irish Courts have approved the so called “official bystander test” many times and McKinnon J’s formulation has been interpreted so that a term may be implied if it is necessary to give business efficacy to the contract. However, there was nothing in the evidence before the EAT that would have entitled it to presume an intention on the part of the parties that the appellant should be obliged to offer, and the respondents should be obliged to accept, work on an on-going basis, so as to justify the implication of the term contended for on the basis of the presumed intention of the parties. Neither would implication of the term be regarded as necessary to give business efficacy to the agreement. In the circumstances I cannot see how the term contended for might legitimately have been implied.
Moreover, if as is possible, the EAT’s ruling were to be interpreted as supporting the implication of an overarching umbrella agreement in a situation where individual contracts, either of service or for service, also existed, it is difficult to see how in any case the tribunal could ultimately reach a conclusion other than that arrived at by Sir John Donaldson MR in the O’Kelly case.
In all the circumstances I regard the EAT’s finding that there was an implied agreement reached between the Department of Agriculture & Food and the TVI’s to carry out inspection of meat and certification of same on an ongoing basis to be untenable. Their finding of mutuality of obligation was predicated on the existence of this implied agreement and, accordingly, must be regarded as flawed.
The so-called Enterprise Test
Having decided that there was mutuality of obligation the tribunal proceeded to what it characterised as “the second stage in the process” and stated:
“The second stage of the test in the process requires a determination as to whether the contract binding the parties is one of service or one for service. The fundamental test for determining this question was set down in the English decision of Market Investigations v. Minister for Social Welfare (1969) 2 QB 173. Here it was held that the Court should consider if the person was performing the service as a person in business on his own account. If the answer to that question is yes then the contract is one for service. If the answer is no then the contract is one of service.
This approach was adopted in this jurisdiction by the Supreme Court in the case of Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare, [1998] 1 IR 34”
At a later stage in its ruling the Tribunal further stated:
“Following the decision in the Supreme Court in the case of Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare and Tierney v. An Post there is now a single composite test for determining if a person is engaged on a contract of service or a contract for service. It involves looking at the contract as a whole and asking is the person in business on his or her own account? If the answer is yes then the contract is one for service. If the answer is no then the contract is one of service.
The question of control and integration should no longer be regarded as conclusive tests in themselves but as elements to be taken into account in applying the enterprise test.”
(The Tierney case is reported at [2000] 1 IR 536.)
It is clear from a consideration of the case law cited to the Court by the parties that the summary statement of principle as formulated in the latter quotation did not originate with the tribunal, but rather was borrowed without attribution from an earlier determination of the Labour Court in a case of Western People Newspaper v. A Worker, EDA047, 24th May 2004 and reproduced verbatim by the EAT.
The appellant contends that the EAT misconstrued Keane J’s judgment in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare. It is therefore necessary to scrutinise that judgment with great care with a view to identifying precisely what is the ratio decidendi of it. It may also be of assistance in that regard to examine how it was applied by the Supreme Court in the Tierney case in 1999, and again in 2004 in the case of Castleisland Cattle Breeding Society Ltd v. The Minister for Social and Family Affairs [2004] 4 IR 150, and also most recently by Gilligan J in the High Court in Electricity Supply Board v The Minister for Social Community and Family Affairs & Others [2006] IEHC 59.
The principal judgment in the Supreme Court appeal in the Henry Denny case was delivered by Keane J with whom Hamilton C.J. and Murphy J agreed. The ratio decidendi of the case (about which I will say more in a moment) is to be found in the following passages from that judgment.
“The criteria which should be adopted in considering whether a particular employment, in the context of legislation such as the Act of 1981, is to be regarded as a contract “for service” or a contract “of services” have been the subject of a number of decisions in Ireland and England. In some of the cases, different terminology is used and the distinction is stated as being between a “servant” and “independent contractor”.However, there is a consensus to be found in the authorities that each case must be considered in the light of its particular facts and of the general principles which the courts have developed: see the observations of Barr J., in McAuliffe v. Minister for Social Welfare [1995] 2 I.R. 238.
At one stage, the extent and degree of the control which was exercised by one party over the other in the performance of the work was regarded as decisive. However, as later authorities demonstrate, that test does not always provide satisfactory guidance. In Cassidy v. Ministry of Health [1951] 2 K.B. 343, it was pointed out that, although the master of a ship is clearly employed under a contract of service, the owners are not entitled to tell him how he should navigate the vessel. Conversely, the fact that one party reserves the right to exercise full control over the method of doing the work may be consistent with the other party being an independent contractor: see Queensland Stations Property Ltd. v. Federal Comissioner of Taxation [1945] 70 C.L.R. 539.
In the English decision of Market Investigations v. Min. of Soc. Security [1969] 2 Q.B. 173, Cooke J., at p. 184 having referred to these authorities said:-
“The observations of Lord Wright, of Denning L. J. and of the judges of the Supreme Court suggest that the fundamental test to be applied is this: ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account?’. If the answer to that question is ‘yes’, then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.”
It should also be noted that the Supreme Court of the Irish Free State in Graham v. Minister for Industry and Commerce [1933] I.R. 156, had also made it clear that the essential test was whether the person alleged to be a”servant” was in fact working for himself or for another person.
It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.”
(For cross referencing purposes, the passages just recited are reproduced at paras 5.1 and 5.2 of the appellant’s written legal submissions, and on pages 10 and 11 of the respondents’ written legal submissions)
In the course of their written legal submissions, amplified by oral submissions in court, Counsel for the appellant submitted (at paras 7.6 to 7.8 thereof):
“7.6 … at what it described as the second stage of the process, the EAT applied an incorrect test to establish the existence of a contract of service/contract for services.
7.7 Contrary to what is expressly stated in its decision, the so-called enterprise test is not determinative of the issue. That conclusion appears to be grounded in a misconstruction of the passages from the judgment of Keane J in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare [1998] 1 IR 34 set out at paragraph 5.2, above. Moreover it is incorrect to assert that questions of control and integration are to be regarded merely as elements to be taken into account in applying the enterprise test.
7.8 Far from relying principally upon what the EAT describes as “the enterprise test”, that described by Keane J contains the following four elements at least:
· “each case must be determined in the light of its particular facts and circumstances,”
· “…in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself.”
· “The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive.”
· “The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.”
In their submissions Counsel for the respondents did not engage directly with the appellant’s contention that the EAT was incorrect to apply the so-called enterprise test as it is not determinative of the issue, and that the EAT’s belief to the contrary is grounded in a misconstruction of Keane J’s judgment in the Henry Denny case. Rather, their written submissions are primarily addressed to the merits of the substantive issue as to whether the respondents were employed under contracts of service or contracts for services. In so far as they seek to address at all the issue as to what precisely is the state of the law post Henry Denny, they rely on recently published views of the eminent Solicitor, Dr Mary Redmond, a renowned employment law specialist. They state:
“Redmond, in her book, ‘Dismissal Law in Ireland’, 2nd Edition, 2007, sets out at Page 35 that “In Ireland the criterion traditionally applied by the Civil Courts to determine the relationship of employee was that of control, whereby the subordinate nature of the relationship is regarded as central to the contract of employment: Roche. v. Kelly & Co., Limited, [1969] I.R. 100”.
Redmond sets out that the ‘control test’ then gave way to the so-called ‘integration test’ which asked “Did the servant form part of the alleged master’s organisation?”. She sets out that likewise, this failed to provide a clear answer and a ‘mixed test’ was then developed. Redmond sets out that “This is applied in two stages. The first question to ask is whether there is control. This is a necessary but not a sufficient test. It must then be determined whether the provisions of the contract are consistent with it’s being a contract of service. There may be indications, for example, that a worker is an entrepreneur rather than an employee. In this event the fundamental test to be applied is whether the person who has engaged himself to perform particular services is in business on his own account”. Having reviewed the case law, Redmond concludes at Page 40, that “Each case must depend on its own facts”.
The ratio decidendi in any particular case consists of the general reasons given for the decision or the general grounds upon which it is based, detached or abstracted from the specific peculiarities of the particular case which gives rise to the decision. I have considered with great care the judgments in the Henry Denny case and I consider the ratio decidendi of it to be encapsulated in the statement of Keane J that in considering whether a particular employment is to be regarded as a contract “for service” or “of service” …“each case must be considered in the light of its particular facts and of the general principles which the courts have developed”. I believe that the general principles referred to are those which have been identified as potentially being of assistance to a court or tribunal in the drawing of appropriate inferences.
In the course of his judgment Keane J sought to elucidate some of the general principles that the courts have developed, of particular relevance to the case then before him. It was in the course of him doing so that the oft quoted passage (which for identification purposes bears reiteration) appears. He said:
“It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.”
This particular passage was subsequently quoted, and relied upon, in the judgments in the Tierney, Castleisland, and ESB cases respectively. However, although it represents an important summary of some of general principles that the courts have developed, it cannot be said to fully encapsulate the ratio decidendi of the Henry Denny case. It doesn’t do so it because it omits one very important general principle developed by the courts which assumed a significant importance in that case and also, coincidentally, in the Tierney, Castleisland, and ESB cases respectively. A very important “particular fact” common to the Henry Denny, Tierney, Castleisland, and ESB cases, respectively, was that in all of those cases there existed a contractual document which purported to contain the expression of an agreed intention of the parties that their relationship should be governed by a contract for services. The existence of that particular fact brought into play the “general principle” that a characterisation or description as to the status of a party contained in a contract intended to govern a work relationship is not to be regarded as decisive or conclusive of the matter. That principle was uncontroversial in the Henry Denny case, having been accepted by parties from the outset. Although it was referred to by Keane J elsewhere in his judgment, it is not referred to in the passage under consideration. It is in fact dealt with in greater detail in the judgment of Murphy J who points out that the principle in question was first enuciated in the judgment of Carroll J in In re Sunday Tribune Ltd [1984] IR 505. Accordingly, the celebrated passage from the judgment of Keane J contains only part of the ratio for the court’s decision. However, the earlier statement that “each case must be considered in the light of its particular facts and of the general principles which the courts have developed” can be regarded as the true ratio, though admittedly it lacks specificity with respect to identification of the general principles referred to.
Contrary to a misapprehension held in some quarters, I do not believe that it is a correct interpretation of the passage in question to regard it as the formulation by Keane J of “a single composite test” either for determining the nature of the work relationship between two parties, or even for determining whether a particular employment is to be regarded as governed by a contract for service or a contract of service which is a somewhat narrower issue. To the extent that this passage from his judgment has given rise to a degree of confusion, I believe that this confusion derives primarily from misguided attempts to divine in the judgment the formulation of a definitive, “one size fits all”, test in circumstances where the learned judge was not attempting to formulate any such test. In relation to the rush to discern a test, and to label it, it seems to this Court that this is a classic example of the type of situation where a particular approach that has been advocated is subsequently labelled conveniently, but mis-characteristically, as the “such and such test”, a step that is taken with the intention that it should be helpful, but which proves to be ultimately unhelpful, because the so called test turns out to be insufficiently discriminating. Put simply, such loose labelling can often create more problems than it solves. In the context of trying to correctly characterise the nature of a work relationship between two parties I think it can sometimes be unhelpful to speak of a “control test”, or of an “integration test”, or of an “enterprise test”, or of a “mixed test”, or of a “fundamental test” or of an “essential test”, or of a “single composite test” because, in truth, none of the approaches so labelled constitutes a “test”, in the generally understood sense of that term, namely, that it constitutes a measure or yardstick of universal application that can be relied upon to deliver a definitive result.
Although it is true that various Courts, both here and in England, have from time to time characterised as “tests” a variety of approaches to be employed as aids to discerning the nature of the work relationship between two parties, there has in recent years been a move away from this. It is, I think, telling that Keane J did not at any stage seek to characterise any of the general principles identified by him as tests. However, the seeds of confusion may well have been sown by the reference to “the fundamental test” in the passage from the judgment of Cooke J in Market Investigations v. Min. of Soc. Security cited by Mr Justice Keane, and then watered in by his subsequent reference to the judgment of the Supreme Court of the Irish Free State in Graham v. Minister for Industry and Commerce, wherein that Court spoke of what it characterised as “the essential test”.
In Market Investigations v. Min. of Soc. Security, Cooke J, advocated applying what he characterised as “the fundamental test” by posing the question ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account?’ He contended that if the answer to that question is ‘yes’, then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service. (This is in fact the so-called enterprise test, although Cooke J did not use that label.) The characterisation of this approach as “the fundamental test” was subsequently criticised by Stephenson L.J in the Court of Appeal in Nethermere (St Neots) Ltd v Gardiner. In that case the Court of Appeal was involved in reviewing the decision of an appeal tribunal that had, in turn, upheld the earlier decision of an industrial tribunal that certain home workers were employed by the appellant company under contracts of service. Referring to the conclusion reached by the industrial tribunal Stephenson L.J. said:
“This conclusion is open to criticism. It adopts what Cooke J in Market Investigations v Minister of Social Security, (1969) 2 QB 173, 184G had called ‘the fundamental test’. Megaw and Browne L.JJ had found that test ‘very helpful’ in Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213. In Young & Woods Ltd v. West [1980] IRLR 201 I adopted it and Ackner L.J., at p.208, obtained much assistance from it. But to accept it as the ‘fundamental’ test is I think misleading, for it is no more than a useful test. Furthermore, it can only be applicable at all where there is nothing but a choice between the two kinds of contract, of service or for services. Here the form of the preliminary issue made the test apposite, though not fundamental; but, as I have indicated, it ruled out the question whether on the evidence there was a third kind of contract or even no contract at all, which would be as effective to deprive the industrial tribunal of jurisdiction as a contract for services.”
Dillon L.J. agreed with Stephenson L.J in the Nethermere (St Neots) case and had this to say in his judgment (at p.633):
“I do, however, for my part, find the use of the word ‘fundamental’ somewhat misleading. In some cases, as for instance, with a jobbing gardener or a carpenter or a music teacher, who is found to be carrying on the activities in question for several customers or clients as part of his or her own business, the test may be very helpful indeed, but in many other cases the answer to the question whether the person concerned is carrying on business on his or her own account can only come as the corollary of the answer to the question whether he or she was employed under a contract of service. I note that in the Market Investigations case Mr Justice Cooke had referred to a statement by Lord Wright in Montreal v. Montreal Locomotive Works Ltd, (1947) 1 D.L.R. 161, 169 that
‘ . . . it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior’.
It is important to have in mind that each case must depend on its facts, and the same question, as an aid to appreciating the facts, will not necessarily be crucial or fundamental in every case.”
This Court finds itself in complete agreement with the criticisms articulated by Stephenson L.J. and Dillon L.J respectively. Moreover, I am satisfied that it was not Keane J’s intention to endorse Cooke J’s approach as being “the fundamental test”. That is quite clear from his statement that:
“…., while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself.” (my emphasis)
The words “in general” constitute a caveat that the approach in question is not one of universal application. By definition they contemplate the possibility of exceptions to what is generally true, even when the issue for determination is the narrower one represented by a choice between a contract of service and a contract for services. Quite apart from that, the approach advocated cannot treated as being of universal application where the issue for determination involves the broader question as to what is the nature of a particular work relationship between two parties, because in certain cases a work relationship is not capable of being defined in terms of a simple choice as to whether it is governed by a contract of service or a contract for services, for example in the case of a statutory office holder. As Stephenson L J has correctly pointed out, the relationship may be governed by a third kind of contract or even by no contract at all.
Having said all of that, once it is recognised that the approach advocated by Cooke J in Market Investigations v. Min. of Soc. Security does not represent a fundamental or definitive test, it may be considered apposite to use it in the circumstances of a particular case as an aid to drawing the correct inferences. In that situation a court or tribunal should not be criticised for doing so. As Stephenson L.J said, that approach has been found helpful and useful in many cases. It is likely to be particularly helpful and useful in most cases that come down to a choice between a contract of service and a contract for services. The important thing to remember, however, is that every case must be considered in the light of its particular facts and it is for the court or tribunal considering those facts to draw the appropriate inferences from them by applying the general principles which the courts have developed. That requires the exercise of judgment and analytical skill. In my view it is simply not possible to arrive at the correct result by “testing” the facts of the case in some rigid formulaic way, and I do not believe that the Supreme Court ever envisaged, or intended to suggest, that it could be.
In the circumstances, I find myself in agreement with the applicant that the tribunal misdirected itself on the law in the following respects:
1. They were incorrect in their belief that the Supreme Court in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare approved “a single composite test”;
2. They were incorrect in regarding the so-called enterprise test as determinative of the issue. It was not necessarily going to be determinative of the issue, and they were wrong in proceeding on the assumption that it would be. In the circumstances of the case it might legitimately have been applied as an aid to the drawing of appropriate inferences, and it was likely to be useful in that regard, but they were incorrect to apply it in a formulaic way for the purpose of determining the issue;
3. It was incorrect to assert that questions of control and integration are to be regarded merely as elements to be taken into account in applying the enterprise test. They are not. Like the question of enterprise, questions of control and integration may also provide a court or tribunal with valuable assistance in drawing the appropriate inferences. All potential aids to the drawing of the appropriate inferences from the primary facts as found stand in their own stead, and no one is subsumed by another. Moreover, those mentioned do not represent an exhaustive list. There could be other factors that might also assist. However, depending on the circumstances of the particular case, some aids may prove more helpful or more useful than others. In the words of Dillon L.J., “the same question, as an aid to appreciating the facts, will not necessarily be crucial or fundamental in every case”. It is for a court or tribunal seized of the issue to identify those aids of greatest potential assistance to them in the circumstances of the particular case and to use those aids appropriately.
Conclusion
In my view the EAT fell into error from the very outset in formulating the preliminary question in the way that it did, and in failing to have regard to all possibilities in determining the nature of the work relationship between the parties. That initial error was compounded by a finding of mutuality of obligation on a flawed and untenable basis. Further, the EAT misdirected itself in law in the manner outlined at some length above, based upon a misinterpretation of Keane J’s judgment in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare [1998] 1 IR 34. in all the circumstances I must allow the appeals under s. 40 of the Redundancy Payments Acts 1967-2003 and s. 11 (2) of the Minimum Notice and Terms of Employment Act 1973 – 2001, respectively. I will hear submissions as to what orders may be appropriate in the circumstances.
Henry Denny & Sons (Ireland) Ltd. v. Minister for Social Welfare
[1998] IR 49
Keane J. S.C.
The criteria which should be adopted in considering whether a particular employment, in the context of legislation such as the Act of 1981, is to be regarded as a contract “for service” or a contract “of services” have been the subject of a number of decisions in Ireland and England. In some of the cases, different terminology is used and the distinction is stated as being between a “servant” and “independent contractor”.However, there is a consensus to be found in the authorities that each case must be considered in the light of its particular facts and of the general principles which the courts have developed: see the observations of Barr J., in McAuliffe v. Minister for Social Welfare [1995] 2 I.R. 238.
At one stage, the extent and degree of the control which was exercised by one party over the other in the performance of the work was regarded as decisive. However, as later authorities demonstrate, that test does not always provide satisfactory guidance. In Cassidy v. Ministry of Health [1951] 2 K.B. 343, it was pointed out that, although the master of a ship is clearly employed under a contract of service, the owners are not entitled to tell him how he should navigate the vessel. Conversely, the fact that one party reserves the right to exercise full control over the method of doing the work may be consistent with the other party being an independent contractor: see Queensland Stations Property Ltd. v. Federal Comissioner of Taxation [1945] 70 C.L.R. 539.
In the English decision of Market Investigations v. Min. of Soc. Security [1969] 2 Q.B. 173, Cooke J., at p. 184 having referred to these authorities said:-
“The observations of Lord Wright, of Denning L. J. and of the judges of the Supreme Court suggest that the fundamental test to be applied is this: ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account?’. If the answer to that question is ‘yes’, then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what
…..
“It should also be noted that the Supreme Court of the Irish Free State in Graham v. Minister for Industry and Commerce [1933] I.R. 156, had also made it clear that the essential test was whether the person alleged to be a”servant” was in fact working for himself or for another person.
It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.
The question remains as to whether the appeals officer, in the light of the legal principles to which I have referred, was entitled to arrive at the conclusion he did on the facts as found by him. I have no doubt that he was. Obviously, having regard to the nature of the work for which she was employed, there was no continuous supervision of Ms. Mahon by the appellant. That cannot be regarded as a decisive factor, any more than it was in the case of the market researcher, the nature of whose employment was in issue in the case decided by Cooke J. On the other side of the equation are the facts that Ms. Mahon was provided by the appellant with the clothing and equipment necessary for the demonstration and made no contribution, financial or otherwise, of her own and that the remuneration she earned was solely dependent on her providing the demonstrations at the times and in the places nominated by the appellant. The amount of money she earned was determined exclusively by the extent to which her services were availed of by the appellant: she was not in a position by better management and employment of resources to ensure for herself a higher profit from her activities. She did not as a matter of routine engage other people to assist her in the work: where she was unable to do the work herself, she had to arrange for it to be done by someone else, but the person in question had to be approved by the appellant.
The written agreement was undoubtedly drafted with understandable care with a view to ensuring, so far as possible, that Ms. Mahon was regarded in law as an independent contractor. However, as I have already pointed out, although this was a factor to which the appeals officer was bound to have regard, it was by no means decisive of the issue. When he took into account all the circumstances of her employment, he was perfectly entitled to arrive at the conclusion, as he did, that she was employed under a contract of service.
As to the submission that the appeals officer should have treated himself as bound by the unreported decision of the Circuit Court in Cronin , it is sufficient to say that, since it was a decision on different facts in another statutory context and no written judgment appears to have been available, the appeals officer was entitled to adopt the approach he did,i.e. of applying to the facts as found by him the legal principles laid down in decisions of the High Court and this Court. This he clearly did and, for the reasons I have already given, I am satisfied that the High Court Judge was entirely correct in holding that his conclusions could not be disturbed.
I would dismiss the appeal.
Castleisland Cattle Breeding Society Ltd. v. Minister for Social and Family Affairs
[2004] IESC 40
THE SUPPRME COURT
Mr. Justice Geoghegan
“This appeal has its origins in a classic type of dispute between one Michael Walsh, a cattle inseminator, and the plaintiff/respondent (“Castleisland”) his employer, as to whether his contract was a contract of service or a contract for services or in other words as to whether he was a “servant” of the respondent or an independent contractor providing services to it. A deciding officer in the Department of Social and Family Affairs determined that Mr. Walsh was employed under a contract for services. Mr. Walsh appealed that decision to an appeals officer under the provisions of the Social Welfare (Consolidation) Act, 1993 and the decision was overturned. The appeals officer had conducted an oral hearing in Tralee, Co. Kerry. Under the provisions of s. 263 of that Act “the Chief Appeals Officer” may, at any time, revise any decision of an appeals officer, if it appears to him that the decision was erroneous by reason of some mistake having been made in relation to the law or the facts. I would comment in passing that s. 263 does not appear by its terms to be conferring a double appeal. What seems to be envisaged is that the Chief Appeals Officer may go through the materials which were before the appeals officer and check whether there was any error in law or on the facts. If he were to find that the appeals officer did not have enough facts or the facts which were before him or her were ambiguous there may be circumstances in which the Chief Appeals Officer would require additional evidence, but essentially it is a revising rather than an appellate procedure.
Accordingly, I intend to address now the fundamental question raised by the notice to vary, that is to say, as to whether the evidence before the appeals officer clearly established that the contract was one for services and not of service. Although the court was referred to different authorities it is clear that the principles to be applied are those set out in the judgments of Keane J. (as he then was) and Murphy J. in the decision of this court in Henry Denny and Sons (Ireland) Limited v. Minister for Social Welfare [1998] 1 IR 34. That case related to the employment of a demonstrator whose job it was to offer passing shoppers free samples. There was a written contract which had been deliberately structured (as of course is the case here) by the employer so as to create an “independent contractor” relationship rather than a “servant” relationship. The written contract had contained the following sentence “for the avoidance of all doubt, I am obliged to point out to you that you will not be an employee of …, you will be providing it with your services as an independent contractor as and when they are required during the term of the contract.”
Keane J. and Murphy J. with whom Hamilton C.J. agreed made it clear that while obviously the terms of the written contract had to be examined, the appeals officer was nevertheless bound to examine and have regard to what the real arrangement on a day to day basis between the parties was. Indeed, Murphy J. pointed out that a sentence of the kind as set out above is not a contractual obligation at all but is merely a statement which may or may not be correct of what the legal relationship between the parties is. Keane J. referred to and adopted the well known statement of principle enunciated by Kenny J. in his Supreme Court judgment in Mara (Inspector of Taxes) v. Hummingbird Limited [1982] 2 I.L.R.M. 421 at 426:
“A case stated consists in part of findings on questions of primary fact … these findings on primary facts should not be set aside by the courts unless there was no evidence whatever to support them. The Commissioner then goes on in the case stated to give his conclusions or inferences from these primary facts. These are mixed questions of fact and law and the court should approach these in a different way. If they are based on the interpretation of documents, the court should reverse them if they are incorrect for it is in as good a position to determine the meaning of documents as is the Commissioner. If the conclusions from the primary facts are ones which no reasonable commissioner could draw, the court should set aside his findings on the ground that he must be assumed to have misdirected himself as to the law or made a mistake in reasoning. Finally, if his conclusion shows that he has adopted a wrong view of the law, they should be set aside. If, however, they are not based on a mistaken view of the law or a wrong interpretation of documents they should not be set aside unless the inferences which he made from the primary facts were ones that no reasonable commissioner could draw.”
Keane J., after reviewing a number of authorities dealing with the question of contract of services as distinct from contract for services concluded as follows at p. 50 of the report.
“It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.
The question remains as to whether the appeals officer, in the light of the legal principles to which I have referred, was entitled to arrive at the conclusion he did on the facts as found by him. I have no doubt that he was. Obviously, having regard to the nature of the work for which he was employed there was no continuous supervision of Miss Mahon by the appellant. That cannot be regarded as a decisive factor, any more than it was in the case of the market researcher, the nature of whose employment was in issue in the case decided by Cooke J. On the other side of the equation are the facts that Miss Mahon was provided by the appellant with the clothing and equipment necessary for the demonstration and made no contribution, financial or otherwise, of her own and that the remuneration she earned was solely dependent on her providing the demonstrations at the times and in the places nominated by the appellant. The amount of money she earned was determined exclusively by the extent to which her services were availed of by the appellant: she was not in a position by better management and employment of resources to ensure for herself a higher profit from her activities. She did not as a matter of routine engage other people to assist her in the work: where she was unable to do work herself she had to arrange for it to be done by someone else but the person in question had to be approved by the appellant.”
The principles applied by Keane J. ought to have been applied by the appeals officer in this case and, in my view; if they had there would have been a different result.
Tierney v. An Post
[1999] IESC 91; [1999] ELR 293
Supreme Court Keane J.
“The nature of the contract
The question as to whether a particular agreement is in law a contract of service as distinct from a contract for services, has been considered in a number of cases both in our courts and the English courts. In a recent case of Denny & Sons (Ireland) Limited T/A Kerry Foods v The Minister for Social Welfare (unreported; Supreme Court, 1 December 1997), in a judgment with which Hamilton CJ and Murphy J agreed, I suggested that the following approach should be adopted:-
“It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself. The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. The inference that the person is engaged in business on his or her own account can be more readily drawn where he or she provides the necessary premises or equipment or some other form of investment, where he or she employs others to assist in the business and where the profit which he or she derives from the business is dependent on the efficiency with which it is conducted by him or her.”
A sub-postmaster such as the applicant provides the premises necessary for the carrying on of the business of the post office. He or she is also entitled to employ others to assist in the carrying on of the post office business, as is made clear by Article 2.1(b) of the Postmaster’s Manual which provides that:-
“The Emoluments of Postmasters are considered sufficient to provide for the efficient performance of the duties, for the adequate remuneration of any Assistants who may be employed by the Postmaster, for the cost of providing office accommodation . . .
It is true that, under Article 2.25, the authority of the head postmaster is required for the employment of any person at a sub-office. It is not surprising to find that the respondent has, as it were, a right of veto over the appointment of persons who for any reason it might not be appropriate to employ in a post office: the fact remains that it is not normal to find in a contract of service that the employee can hire assistants to perform the work which he or she is employed to do.
Counsel for the applicant relied on Clause 2.5 of the Postmaster’s Manual which provides that:-
“Postmasters are under the control and direction of the Regional Manager and are also subject to the immediate direction of their respective Head Postmaster, to whom in case of doubt arising on any point, reference should be made for instructions.”
In his judgment, the learned trial judge laid stress on this provision and also on the undoubted fact that the applicant must carry on the same business as the respondent carries on at numerous other locations throughout the country and that, in that sense, his business was part of the business of the respondent. While that approach is understandable, it seems to me, that, on the whole, it does not have sufficient regard to the fact that the post office business is carried on in the same premises as the applicant’s own business. No doubt the extent to which the applicant could maximise the profit which he derived from carrying on the post office business was relatively modest, but that cannot affect the legal principles applicable. Monies expended by him on improving the premises or employing assistants which had the effect of increasing the volume of the post office business would increase his own profit from that business as well as the profits of the respondent. As to the right of the respondent to control and direct his operations, it has frequently been emphasised in the authorities that, while the degree of control exercised by the other party is always a factor to be taken into account, it has long since ceased to be regarded as the only factor to be taken into account.
It is of interest to note that in Hitchcock v Post Office ICR 100 the English Employment Appeals Tribunal concluded that, in circumstances closely resembling those with which we are concerned, the contract was one for services and not of service. Slynn J, as he then was, delivering the judgment of the appeal tribunal said that at pages 108-109:-
“We accept, as Mr Carr quite rightly has accepted, that there is here a substantial measure of control which relates to the conduct of the Post Office’s business. It might be, if there were no other factors present, that that control would be sufficient to make the contract one of service rather than for services. But there are other factors present. The question in this case, it seems to us, is really whether the control which does exist is such that it prevents the contract from being one for services rather than of service. Accordingly we must look at the matter as a whole. We consider here that great importance has to be attached to the fact that the applicant provided the premises and a certain amount of the equipment at his own expense. The sub-post office came into what was his general store. It was a part of his own business. Moreover it is clear that even though, apparently, he chose to spend a great deal of his working week doing the sub-post office work at this particular premises himself he had the right to delegate, and did in fact delegate . . .
Moreover it seems to us that even though there may be less chance of making profit, or risk of loss than in many businesses, there was still here the chance of profit and the risk of loss . . .
It seems to me that the reasoning in that passage, which is clearly in accordance with the principles of law established in the many authorities on the point, is entirely applicable to the facts of this case.
I am satisfied, accordingly, that the conclusion of the learned High Court judge that this was a contract of service was wrong in law and should not be upheld.
Conclusions
There remains the question as to whether the contract, although a contract for services, should be construed as containing an implied term that the respondent was obliged to conduct the disciplinary machinery provided for in the contract in accordance with fair procedures.
Barry & ors -v- Minister for Agriculture & Food
Revenue Code of Practice
Determining Employment or Self-Employment Status of Individuals
Criteria on whether an individual is an employee.
While all of the following factors may not apply, an individual would normally be an employee if he or she:
- Is under the control of another person who directs as to how, when and where the work is to be carried out.
- Supplies labour only.
- Receives a fixed hourly/weekly/monthly wage.
- Cannot subcontract the work. If the work can be subcontracted and paid on by the person subcontracting the work, the employer/employee relationship may simply be transferred on.
- Does not supply materials for the job.
- Does not provide equipment other than the small tools of the trade. The provision of tools or equipment might not have a significant bearing on coming to a conclusion that employment status may be appropriate having regard to all the circumstances of a particular case.
- Is not exposed to personal financial risk in carrying out the work.
- Does not assume any responsibility for investment and management in the business.
- Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements.
- Works set hours or a given number of hours per week or month.
- Works for one person or for one business.
- Receives expense payments to cover subsistence and/or travel expenses.
- Is entitled to extra pay or time off for overtime.
Additional factors to be considered:
- An individual could have considerable freedom and independence in carrying out work and still remain an employee.
- An employee with specialist knowledge may not be directed as to how the work is carried out.
- An individual who is paid by commission, by share, or by piecework, or in some other atypical fashion may still be regarded as an employee.
- Some employees work for more than one employer at the same time. Some employees do not work on the employer’s premises.
There are special PRSI rules for the employment of family members.
Statements in contracts considered by the Supreme Court in the ‘Denny’ case, such as
- “You are deemed to be an independent contractor”,
- “It shall be your duty to pay and discharge such taxes and charges as may be payable out of such fees to the Revenue Commissioners or otherwise”,
- “It is agreed that the provisions of the Unfair Dismissals Act 1977 shall not apply etc”, “You will not be an employee of this company”,
- “It shall be your duty to pay and discharge such taxes and charges as may be payable out of such fees to the Revenue Commissioners or otherwise”, “It is agreed that the provisions of the Unfair Dismissals Act 1977 shall not apply etc”, “You will not be an employee of this company”,
- You will be responsible for your own tax affairs” are not contractual terms and have little or no contractual validity.
While they may express an opinion of the contracting parties, they are of minimal value in coming to a conclusion as to the work status of the person engaged.
Criteria on whether an individual is self-employed While all of the following factors may not apply to the job, an individual would normally be self-employed if he or she:
- Owns his or her own business.
- Is exposed to financial risk by having to bear the cost of making good faulty or substandard work carried out under the contract.
- Assumes responsibility for investment and management in the enterprise.
- Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks.
- Has control over what is done, how it is done, when and where it is done and whether he or she does it personally.
- Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken.
- Can provide the same services to more than one person or business at the same time.
- Provides the materials for the job.
- Provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account.
- Has a fixed place of business where materials, equipment etc. can be stored.
- Costs and agrees a price for the job.
- Provides his or her own insurance cover e.g. public liability cover, etc.
- Controls the hours of work in fulfilling the job obligations.
Additional factors to be considered:
Generally an individual should satisfy the self-employed guidelines above, otherwise he or she will normally be an employee. The fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed.
An office holder, such as a company director, will be taxed under the PAYE system. However, the terms and conditions may have to be examined by the Scope Section of Department of Social Protection to decide on the appropriate PRSI Class.
It should be noted that a person who is a self-employed contractor in one job is not necessarily self-employed in the next job. It is also possible to be employed and self-employed at the same time in different jobs.
In the construction sector, for health and safety reasons, all individuals are under the direction of the site foreman/overseer. The self-employed individual controls the method to be employed in carrying out the work.
Consequences arising from the determination of an individual’s status. The status as an employee or self-employed person will affect:
- The way in which tax and PRSI is payable to the Collector-General.
- An employee will have tax and PRSI deducted from his or her income.
- A self-employed person is obliged to pay preliminary tax and file income tax returns whether or not he or she is asked for them.
- Entitlement to a number of social welfare benefits, such as unemployment and disability benefits.
An employee will be entitled to unemployment, disability and invalidity benefits, whereas a self-employed person will not have these entitlements.
Other rights and entitlements, for example, under Employment Legislation.
An employee will have rights in respect of working time, holidays, maternity / parental leave, protection from unfair dismissal etc A self-employed person will not have these rights and
protection.
Public liability in respect of the work done.
Deciding status – getting assistance
Where there are difficulties in deciding the appropriate status of an individual or groups of individuals, the following organisations can provide assistance.
Tax and PRSI
The Local Revenue Office or The Local Social Welfare Office.
Scope Section in the Department of Social Protection.
If there is still doubt as to whether a person is employed or self-employed th e Local Revenue Office or Scope Section of Department of Social assistance. Having established all of the relevant facts, a written decision as to status will be issued. A decision by one Department will generally be accepted by the other, provided all relevant facts were given at the time and the circumstances remain the same and it is accepted that the correct legal principles have been applied to the facts established. However, because of the varied nature of circumstances that arise and the different statutory provisions, such a consensus may not be possible in every case.