Who is an employee?

Dacas v Brook Street Bureau (UK) Ltd (2004) IRLR 358

The Court of Appeal ruled that a cleaner at a council hostel was not an 'employee' of the employment agency that had assigned her to that work.

Accordingly, she did not have the right to claim unfair dismissal when, at the instigation of the council, the agency terminated her contract.

The basis for the decision was that, on the facts, the contract between the cleaner and the agency was not a contract of service.

It lacked the 'irreducible minimum of mutual obligation' that was necessary.

The agency was under no duty to provide her with work and she was under no duty to accept any work it offered to her.

The fact that the agency agreed to do some things that an employer would normally do, including paying her, did not make it the employer.

However, the tribunal was wrong to hold that the cleaner was not employed by the council.

It had failed to address the possibility that there was an implied contract of service between the cleaner and the council.

Such a contract may be deduced as a necessary inference from the conduct of the parties and the work done.

Lord Justice Mummery said that in cases involving 'triangular arrangements' of this kind, the outcome which would accord with practical reality and common sense is that the individual has a contract (not a contract of service) with the agency and works under an implied contract of service with the end-user.

The objective facts and degree of control over the work done for the end-user is crucial.

Lord Justice Sedley said the tribunal's conclusion that the cleaner 'was employed by nobody is simply not credible.' But Mr Justice Munby gave a cogently reasoned dissenting judgment.

The majority decision has rung alarm bells with many employers who use agency workers on a long-term basis and, since the Court of Appeal was not unanimous, definitive guidance from the House of Lords on this important issue would be welcome.

Mingeley v Pennock & Ivory t/a Amber Cars (2004) IRLR 373

A differently constituted Court of Appeal upheld a decision that a taxi driver was not employed under 'a contract personally to execute any work or labour' within the meaning of the definition of 'employee' in section 78 of the Race Relations Act 1976 because under his contractual arrangements, there was no mutual obligation to offer or accept work.

While it was questionable whether Parliament intended to exclude such arrangements from the scope of the Act, their inclusion could only be achieved by fresh legislation.

South East Sheffield Citizens Advice Bureau v Grayson (2004) IRLR 353

The question for the Employment Appeal Tribunal (EAT) in this case was whether volunteer advisers working for a Citizens Advice Bureaux (CAB) were 'employees'.

The EAT said they were not.

For a volunteer to be an 'employee', there must be an arrangement under which, in exchange for valuable consideration, the volunteer is contractually obliged to render services to or work personally for the employer.

Whether any benefit flowed from the CAB to the volunteer in consideration of any work actually done by the volunteer was not the key issue.

Like similar charities, the CAB provides training for its volunteers and expects of them a commitment to work for it, but the work expected is expressed to be voluntary and is unpaid.

Volunteers may at any point, with or without notice, withdraw their services.

Advising employees

Crossley v Faithful & Gould Holdings Ltd (2004) IRLR 377

The Court of Appeal held that there was no implied term in a director's employment contract obliging the employer to take reasonable care of his economic wellbeing.

He had argued that the company was required to alert him to the effect that resigning would have on his entitlement to benefits under a long-term disability insurance scheme.

The court considered that the suggested implied term would impose an unfair and unreasonable burden on employers.

It is one thing to say that, if an employer assumes responsibility for giving financial advice to an employee, the employee is under a duty to take reasonable care in giving that advice.

It is quite another to impose on the employer a duty to give financial advice in relation to benefits accruing from his employment.

An employer is not required to have regard to the employee's financial circumstances when taking lawful business decisions that may affect the employee's economic welfare.

Nor is the function of the employer to act as the employee's financial adviser.

To impose the suggested duty would have been inconsistent with the approach adopted by the House of Lords in Scally v Southern Health & Social Services Board (1991) IRLR 522.

It is worth noting, however, that it was relevant that Mr Crossley was a senior employee and that he had access to advice from an insurance broker who had arranged the disability insurance scheme.

Lennon v Commissioner of Police of the Metropolis (2004) IRLR 385

In this case, the Court of Appeal upheld a judge's decision that the Metropolitan Police Commissioner owed a duty of care to ensure that a police officer did not lose his housing allowance in transferring to another employer.

Crucially, a personnel executive had assumed responsibility for handling the transfer arrangements and Mr Lennon relied on her to perform that responsibility with due care and skill.

The staff member in question did not tell Mr Lennon, as she could have done if the matter was outside her area of responsibility, to seek advice elsewhere, such as from his trade union.

The Hedley Byrne principle can apply to an omission to give advice, even where the parties are in the relationship of employer and employee.

The duty of care arose from an express assumption of responsibility for a particular matter on which the claimant relied and the judge's decision did not break new ground.

Protective awards

Susie Radin Ltd v GMB & others (2004) IRLR 400

The Court of Appeal held that the futility of consultation is not relevant to the making of a protective award.

The only statutory guidance as to the length of the protected period is that, subject to the maximum of 90 days, it should be what the tribunal determined is 'just and equitable in all the circumstances having regard to the seriousness of the employer's default'.

So a tribunal did not err in making a protective award for the maximum 90-day period even though consultation would have been futile.

The Court of Appeal said that tribunals should have the following matters in mind when exercising their discretion as to whether to make a protective award and for what period:

- The purpose of the award is to provide a sanction for breach by the employer of its statutory duty and not to compensate the employees for loss suffered as a result of that breach.

- Tribunals have a wide discretion, but the focus should be on the seriousness of the employer's default.

- The default may vary in seriousness and the deliberateness of the failure may be relevant, as may the availability to the employer of legal advice.

Where there has been no consultation, it is proper to start with the maximum period and reduce it only if there are mitigating circumstances justifying a reduction to an extent which the tribunal considers appropriate.

By Martin Edwards, Mace & Jones, Liverpool