Frontline UK Employment Law Update Edition 11 2022 - Case Updates
Written By
1. Smith v Pimlico Plumbers Ltd [2022] EWCA Civ 70
2. Johnson v Transopco UK Ltd [2022] EAT 6
3. Parr v MSR Partners LLP (formerly Moore Stephens LLP) [2022] EWCA Civ 24
4. Chell v Tarmac Cement and Lime Ltd [2022] EWCA Civ 7
5. Rainford v Dorset Aquatics Ltd EA-2020-000123-BA
6. Hope v British Medical Association EA-2021-000187-JOJ
1. Smith v Pimlico Plumbers Ltd [2022] EWCA Civ 70 - LINK
In this significant decision, particularly for businesses engaging contractors on a self-employed basis, the Court of Appeal (“CA”) overturned the decisions of the Employment Tribunal (“ET”) and the Employment Appeal Tribunal (“EAT”) and found that a plumbing and heating engineer was, as a worker within the Employment Rights Act 1996 definition, entitled to up to four weeks’ paid leave for every year worked without limitation, where such leave has been taken but not paid. Until now the position confirmed by the Court of Justice of the European Union (“CJEU”) in King v Sash Window Workshop Ltd was taken to limit this principle to leave which had not been taken, but this decision extends the principle to cover leave taken by the worker for which payment has not been made by the employer. Mr Smith’s claim for £74,000 of holiday pay succeeded.
Please see more details on this decision in our article here >
2. Johnson v Transopco UK Ltd [2022] EAT 6 - LINK
In this decision, the Employment Appeal Tribunal (“EAT”) upheld an Employment Tribunal (“ET”) decision that a taxi worker, who worked as a London black cab driver for the majority of their time, but also took passenger bookings through the Mytaxi app, was not considered a worker under section 230(3) of the Employment Rights Act 1996 (“ERA”).
The Claimant, worked as a self-employed black cab driver in London, under a TfL issued license. For a period he used the Mytaxi app owned bythe Respondent but was removed from the app in April 2018. During that period the Claimant did not rely on the app for all of his fares; his income from fares taken via the app was dwarfed by his income from direct fares. On removal from the app he brought ET claims for protected disclosure detriment, holiday pay, unlawful deductions from wages and failure to pay the national minimum wage, all of which are claims available to employees and workers but not the genuinely self-employed. The Claimant argued that he was a worker under section 230(3)(b), a “so-called limb (b) worker”. This section defines a worker as someone who has a contract to “do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.
The ET (with whom the EAT agreed) found that the Claimant was not a worker in this case. They found that there was a contract between the Claimant and Respondent, which did create an obligation of “personal service”, but that on the facts, the Respondent was a client or customer of the Claimant’s business rather than an employer. The ET correctly took into account the degree of independence with which the Claimant was able to operate, including the timing and acceptance of delivering rides, and the fact that that he was not subject to control by the Respondent.
The EAT held that the ET had applied the case law extensively and appropriately. They found that the ET had been correct to consider the Claimant’s activities when not working for the Respondent, to form a view on the “nature of his business activity, and whether the jobs he did for the Respondent formed part of that same business”. They found that the approach taken by the ET to the facts in relation to the “allocation of financial risk, control and integration” was correct, and that they had been entitled to consider the fact that only 15% of the Claimant’s annual income was generated from the Mytaxi app to form a view on whether or not the relationship between him and the Respondent was dependent (and therefore consistent with worker status or not). The EAT commented that the Uber case could not be a “‘panacea’ for all driver status questions, and that every case does turn on its own facts”.
This case, yet another in the long line of cases on worker status, highlights the very fact-specific nature of the test, with the EAT specifically noting that individuals using the same app, under the same contractual terms, could have different statuses, with some being self-employed and some being workers, and this variation in status may be due to factors outside of the app operator’s control (such as the nature and extent of any other work done by the individual). The government launched a consultation on employment status in February 2018, seeking views on whether a statutory test for employment status would increase certainty and reduce reliance on case law, and whether there should be changes to the statutory definition of a worker, to provide clearer boundaries between self-employment and worker status, and between worker and employment status. No response to the consultation has yet been published, and in the meantime the number of gig economy workers has increased significantly. The steady flow of cases looks set to continue for now.
3. Parr v MSR Partners LLP (formerly Moore Stephens LLP) [2022] EWCA Civ 24 - LINK
In this case, the Court of Appeal (“CA”) heard a dispute between an accountancy firm and a former partner of the firm. The CA held that the Respondent LLP’s decision to remove the Claimant from the equity partnership once he reached the retirement age set out in the LLP’s members’ agreement (but staying on as a salaried partner) did not amount to age discrimination.
A clause in the Respondent’s LLP members agreement stated that all partners would have a normal retirement age of 60. However, the Respondent had the discretion to extend this retirement age based on a business need, and on terms to be set by the managing partner. The Claimant reached the contractual retirement age in April 2018 and wished to continue on as a partner. The Respondent decided that the Claimant should remain a partner for two years beyond the ordinary retirement date, but only as a salaried, non-equity partner, meaning that he would not be entitled to a share of the firm’s profits. In September 2018, the Claimant became aware of plans to sell the firm. As a non-equity partner he would not receive any proceeds of the sale.
The Claimant brought a claim in the Employment Tribunal (“ET”) for age discrimination in January 2019. However, the claim would be out of time (since it was brought more than three months after the date on which he was demoted to salaried partner) unless he could establish that section 123(3)(a) of the Equality Act 2010 applied. Under this section, the three-month time limit to bring a claim would not apply if the Respondent’s decision to remove him from the equity partnership amounted to “conduct extending over a period” or a “continuing act”: if this was the case, then the time limit would run from the point at which the discriminatory conduct ended. The ET found that the provisions in the Member’s Agreement providing for a contractual retirement age amounted to a continuing act of ongoing age discrimination. This was overturned by the Employment Appeal Tribunal, which found that removing the Claimant as an equity partner was a one-off change to his contract, and not an ongoing course of conduct.
On appeal, the CA agreed with the lower courts that the removal of the Claimant’s equity status amounted to a demotion. It held that for the purposes of determining whether there was a continuing or one-off act of discrimination in connection with that demotion, it should be treated in the same way as a dismissal, such that the time limit will begin to run from the day of the dismissal/demotion and it will not be considered an ongoing detriment. The CA further dismissed the Claimant’s argument that the very existence of the contractual retirement age in the Member’s Agreement constituted an act of discrimination which continued for as long as the parties remained in a contractual relationship – those provisions also included a discretion, so that it was not “inevitable” that all partners reaching 60 would be excluded from the benefits of equity partnership. The demotion was a one-off act; it had continuing consequences, but this did not mean that it was conduct extending over a period.
In other cases, the courts have held that policies which inevitably have a discriminatory effect (such as men only being eligible for a certain benefit) amount to conduct extending over a period and fall within s123(3)(a), such that affected employees could potentially bring a claim at any time while the policy is in force or within three months of its ceasing to apply to them, even if it has been over three months since they themselves suffered less favourable treatment under the policy. This case illustrates that a rule or policy applied by an employer will not amount to conduct extending over a period if it is not inevitably discriminatory but the rule or policy includes an element of discretion, as in this case with the option to extend membership of the partnership beyond the contractual retirement age. In this scenario, an employee who has suffered less favourable treatment as a consequence of the exercise of that discretion has three months from the date of the exercise of the direction to bring a claim.
4. Chell v Tarmac Cement and Lime Ltd [2022] EWCA Civ 7 - LINK
In this case, the Court of Appeal (“CA”) upheld the County Court’s (“CC”) finding that the Respondent employer was not liable for the personal injuries suffered by a contractor in the workplace which were caused by practical jokes played by employees.
There were increasing workplace tensions between the Respondent’s employees and its contractors. In that context, one employee hit two explosive pellet targets with a hammer close to the Respondent (a contractor)’s ear, causing him to suffer noise-induced hearing loss and tinnitus for which he brought personal injury claims against the Respondent. The question for the court was whether the Respondent was vicariously liable or liable in negligence for the actions of the employee.
An employer can be vicariously liable for the actions of an employee if there is a sufficiently close connection between the employment and the act which caused injury such that it is fair, just and reasonable to impose liability on the employer. The CC held that the Respondent was not vicariously liable for the actions of the employee in this case because those actions were not within the field of activities assigned by the Respondent and there was not a close connection which would make it fair, just and reasonable to impose liability on the Respondent. This was based on a number of factors, including that the pellets were not work equipment and were brought onto the site by the employees themselves; the employee’s actions were not connected to any instructions given to him in the course of his work; and the employee had no supervisory role.
In relation to the negligence claim, the CC found that there was no reasonably foreseeable risk of injury arising from the prank. Although “horseplay, ill-discipline and malice” – here, the workplace tension between the employees and contractors, and the practical jokes played – could potentially create such a risk, on the facts of the case there was no reasonably foreseeable risk. There had been no threats of violence or actual violence between the contractors and employees concerned. The mere fact that heavy and dangerous tools were present in the workplace did not create a reasonably foreseeable risk of injury from misuse of a tool.
The CA upheld the CC’s reasoning, and the Respondent was held not to be liable for the actions of the employees.
This case serves as a useful illustration of the factors that the court will look at when considering whether there is a sufficiently close connection between an employer and the wrongful actions of the employee when determining whether the employer should be held vicariously liable for those actions. As in this case, employers can reasonably expect employees to use common sense in the workplace and the court will not generally expect them to take steps such as expressly prohibiting practical jokes and horseplay in order to fulfil their duty of care to employees.
5. Rainford v Dorset Aquatics Ltd EA-2020-000123-BA - LINK
In this case, the Employment Appeal Tribunal (“EAT”) upheld the decision of the Employment Tribunal (“ET”) that the Claimant was not an employee or worker and therefore was not able to bring claims for unfair dismissal, notice pay, holiday pay, and unlawful deductions from pay.
The Claimant was, with his brother, the co-director of the Respondent company, and was also a shareholder. The Respondent was a small family company and paid the brothers a monthly salary. The brothers also received dividends each year, agreed between them. The ET found that the salary was paid on the advice of accountants of the company for tax reasons, and not at the request of either of the brothers. The company issued wage slips which included NI and income tax deductions, but there was no other documentation to suggest an employment or worker relationship.
In June 2018, a dispute arose between the brothers and the Claimant stepped away from the business. The Claimant subsequently brought claims before the ET for unfair dismissal, notice pay, unlawful deductions from pay, and holiday pay. The unfair dismissal claim could only succeed if the Claimant was an employee and the notice, unlawful deductions and holiday pay claims could only succeed if he was a worker. At a preliminary hearing, the ET found that the Claimant was neither a worker nor an employee because of a number of factors. These included the fact that he decided his own hours of work and holidays, and could in principle have sent a substitute if he had wished (notwithstanding that he had never done so). The Respondent had a number of employees in addition to the two brothers and there was a clear difference in status between the Claimant and these employees. The Claimant was therefore not entitled to bring such claims.
The EAT upheld the ET's finding. Since there was no evidence of a written employment contract in this case, the question of whether there was an implied contract of employment or a worker contract was one of fact for the ET to determine. The EAT could only reverse the ET's finding of fact if it was perverse, which it was not in this case. The case law on worker status, in particular the Supreme Court’s decision in Clyde & Co v Bates van Winkelhof, did not mean that any individual who goes to work for another and receives money must necessarily come within one of the three categories identified in that case of employees, the self-employed, and workers. It therefore did not follow simply from the fact that the Claimant was paid a wage that he was a worker or employee.
This case illustrates that the question of whether an individual is a worker/employee or not is nuanced and will not be determined by only one factor, such as payment of a salary. Shareholder-directors may not have employment rights even where they are paid a monthly salary; the question of whether they do or not will come down to all of the relevant circumstances. The right of substitution in this case was important, since personal service is necessary for both employment and worker status. In practice it is likely to be quite rare for a shareholder director involved in the day to day running of the business to have such a right.
6. Hope v British Medical Association EA-2021-000187-JOJ - LINK
In this case, the Employment Appeal Tribunal (“EAT”) considered the relevance of the standard of gross misconduct to the question of whether a dismissal was fair and the legitimate purpose of grievance procedures. It upheld the decision of the Employment Tribunal (“ET”) that the Claimant had not been unfairly dismissed.
The Claimant raised a number of grievances relating to issues such as criticism from colleagues and not being invited to meetings with senior management. During the grievance procedure, the Claimant refused to take steps suggested by the Respondent to resolve the issues in question, e.g. declining to meet with colleagues to discuss the criticisms, or refusing to proceed with a formal grievance after he had raised an issue but wanting to retain the ability to do so in the future. The ET found that the grievances were directed at one colleague in particular who was starting to feel bullied by the Claimant’s behaviour. After being informed that continued use of the grievance procedure in this way may be considered a disciplinary issue, the Claimant refused to attend a formal grievance meeting in relation to the complaints he had raised, and the chair of the meeting found that his behaviour was “frivolous and vexatious”. The Claimant’s grievances were not upheld and after a disciplinary hearing he was dismissed for gross misconduct due to misuse of the grievance process.
In response to the Claimant’s claim for unfair dismissal, the ET found that the Respondent had followed a fair procedure, carrying out a reasonable investigation. It was not unreasonable for the Respondent to find that the Claimant’s behaviour was vexatious, and treating the behaviour as a sufficient reason for dismissal was within the band of reasonable responses.
On appeal, the Claimant argued that the ET had failed to consider whether his behaviour met the standard of gross misconduct. The EAT held that whether an employee’s conduct amounted to gross misconduct or not was not relevant to the determination of whether a dismissal was fair. The starting point is section 98 of the Employment Rights Act 1996 (“ERA”), which lists “conduct” as a potentially fair reason for dismissal – it does not refer to “misconduct” or “gross misconduct”. The particular label to be applied to the conduct did not affect the question of whether the employer had acted reasonably in all the circumstances in treating it as a sufficient reason for dismissal.
This case clarifies earlier case law which had been interpreted by some as requiring the ET to determine whether misconduct amounted to gross misconduct in determining whether a dismissal was fair, wherever gross misconduct was cited as the reason for dismissal. Gross misconduct is a separate contractual concept relevant to the question of whether a summary dismissal without notice is lawful or amounts to a breach of contract and will not be determinative in a claim for unfair dismissal. However, employers will need to balance this decision against the ACAS Code of Practice, which indicates that a dismissal without prior warnings will generally be unfair unless the employee’s conduct amounts to gross misconduct, such that the nature of the conduct is relevant to the determination of fairness under the ERA.
The facts of the case also helpfully illustrate that grievance procedures cannot be used as a “repository for complaints that can then be left unresolved and capable of being resurrected at any time.” It suggests that if an employee has refused to proceed with a grievance, an employer may require them to withdraw the grievance or at least cooperate in its resolution (as the Respondent did in this case).
