The court determined that a contract under which a worker was supplied to a company as a contractor was not a sham designed to avoid any employment relationship. Taking as a starting point what had been put down in writing at the commencement of the relationship together with the conduct of the parties once the relationship had started, the worker was a contractor.
The appellant train maintenance company (E) appealed against a decision that the respondent technician (T) had been its employee and that he had been unfairly dismissed. E had a contract with another company (M) under which M had supplied T to work for E as a "contractor". M in turn had a contractual relationship with a third company (S), paying S for E's services. There was no written contract between E and T but the relationship had involved significant elements of integration of T into E's business, as well as control and supervision by E. T had been paid an hourly rate but had not received benefits such as holidays or sick pay. E had invited T to become an employee but T had refused. T's work was terminated and he brought a claim for unfair dismissal. The judge focussed on a clause contained in the contract between M and S precluding either them or E from exercising any supervision, direction or control over T. He found the clause to be an attempt to engineer a structure so as to avoid any employment relationship. Although T had not made any allegation to that effect, he took the view that the clause was a bogus one which infected the contract and he set aside all reliance upon that contract. Instead, he found that there was an implied contract of employment and held that T was an employee who had been unfairly dismissed. E submitted that (1) the judge should not have made findings that the contract was bogus as that had not been a live issue before him; (2) the intention of the parties had been that the T's relationship with E should be one of independent contractor.
HELD: (1) It had been wrong for a judge to make a decision on an important and pejorative issue such as a sham when it had not been live. Where an allegation was made that a document was a sham, it had to be put expressly with evidence and an opportunity to put the point in cross-examination. If there had been evidence which had prompted the judge to consider that the documentation was a sham he would have been entitled to come to that view, but only after canvassing it with the parties. In any event, deciding whether a document accurately reflected the reality or was a sham required a holistic approach but the judge had focused only on one clause even though the rest of the contract did not point to a sham. (2) The task of a judge was to consider the reality of the relationship, starting with what the parties had put down in writing at its commencement. Since there were no documents between E and T, the words of the parties had to be the starting point and there was no reason to consider that the agreement between E and M did not reflect the intention of the parties to establish an independent contractor relationship for persons supplied, Protectacoat Firthglow Ltd v Szilagyi (2009) EWCA Civ 98, (2009) ICR 835 followed. It was also significant to examine the conduct of the parties after the relationship began to see how it reflected upon the contract, Secretary of State for Business, Enterprise and Regulatory Reform v Neufeld (2009) EWCA Civ 280, (2009) 3 All ER 790 applied. It followed from T's flat refusals to join E's workforce that he regarded himself as an independent contractor and it was axiomatic that since E had offered a contract of employment to T, it had hitherto been its view that T had not been in the workforce. Whilst T now argued that he was an employee, he had at all times asserted the opposite and had understood the advantages to be gained from remaining as an independent contractor. Although there were some indications of an employment relationship such as E's integration into the organisation, supervision and control, the starting point had to be what documents there were and the conduct of the parties once the relationship had started and those factors pointed firmly away from an employment relationship, Heatherwood and Wexham Park Hospitals NHS Trust v Kulubowila Unreported March 29, 2007 EAT applied. T was not an employee and had not been unfairly dismissed.