Leeds City Council v. Woodhouse and others
Court of Appeal
There was no requirement that a principal had to have control or influence over a worker for the Race Relations Act 1976 s.7 to apply. Although control might bring a case within s.7, that did not mean that it was required in all cases.
The appellant local authority appealed against a decision by the Employment Appeal Tribunal upholding the dismissal of its application to strike out claims of racial discrimination and harassment brought against it by the respondent (W). W was employed by an arm's length management company (H) created by the local authority to manage its housing stock under a management agreement. H subcontracted its building maintenance services to a department of the local authority under a services agreement. W's duties included responsibility for the quality control of the department's work. He complained of racial discrimination against him by a local authority employee in the department (C). W was dissatisfied with the response of H and the local authority to his complaint and began proceedings against them. The local authority applied to strike out the proceedings against it on the ground that W was not its contract worker within the meaning of the Race Relations Act 1976 s.7. The judge determined the matter as a preliminary issue and held that s.7 should be broadly construed, that all the work done by H's employees, including W, was for the benefit of the local authority, and that W was therefore a contract worker of the local authority. The local authority argued that (1) mere benefit was insufficient for s.7 to apply. There had to be evidence that the local authority could control or influence W's work; (2) the circumstances in which W had come into contact with C were pursuant to the service agreement, not the management agreement, and under the service agreement the department and C worked for H; moreover, H could have subcontracted the maintenance work to another organisation.
HELD: (1) Control and influence were not necessary to bring a case within s.7. Although in previous cases where s.7 or comparable provisions had been held to apply it had been found that the principal had control over the worker, that did not undermine the judge's reasoning, Harrods Ltd v Remick (1998) 1 All ER 52 CA (Civ Div) and Jones v Friends Provident Life Office (2004) NI 125 CA (NI) considered. Each case was fact-sensitive. Merely because the facts were not similar to a previous case did not mean that they could not fall within s.7. The authorities suggested that where the principal and the employer of the worker were contractor and subcontractor, the mere fact that the worker worked under the subcontract from which the principal derived benefit was not enough to bring the case within s.7. It could be that if the principal did exercise an element of control, that would be enough, but that was not to say that control had to be demonstrated in all cases. The judge had considered that the extreme closeness of the relationship between the contracting parties meant that it could be said that W's work was done for the local authority, regardless of control or influence. (2) It was true that H could have subcontracted the maintenance services to another organisation, but the fact was that it subcontracted them to the department, and the department was part of the local authority. It had not been suggested that the only contract which caused W and C to come into contact was the service agreement, or that the management agreement was irrelevant. The judge had assumed that both agreements were relevant and, in the absence of evidence to the contrary, he had been entitled to do so. He had rightly noted that the local authority was H's only customer; that H existed only to provide management services to the local authority; and that H was a wholly-owned subsidiary of the local authority. In those circumstances, it could properly be said that everything done by H's servants, including W, was being done not only for H but also for the local authority, Harrods applied. Further, under the management agreement, H had been obliged to employ employees to carry out the work as it could not otherwise fulfil its obligations. H had accordingly supplied workers pursuant to its contract with the local authority. (3) (Obiter) Unless a case was very straightforward, it would be necessary for the tribunal to make extensive findings of fact when determining an issue under s.7. In those circumstances, it would be preferable for the issue to be heard as part of the entire case rather than as a preliminary issue and, as the issue under s.7 was largely one of fact, it should be determined by a full tribunal rather than by a judge alone.
 IRLR 625
AGENCY WORKERS, LOCAL AUTHORITY COMPANIES, RACE DISCRIMINATION