Court of Appeal
The nature of the contractual obligations between a nightclub and a lap dancer, who worked for the club on a rota basis, were not such as to render it a contract of employment. It was properly inferred from the evidence that the club was under no obligation to pay the lap dancer, that the lap dancer negotiated her own fees with clients, took the risk that she might be out of pocket, received back from the club only monies received from clients after deductions, had received no sick or holiday pay and had accepted that she was self-employed by conducting her affairs on that basis.
The appellant nightclub owner (S) appealed against the findings of the Employment Appeal Tribunal that the respondent lap dancer (Q) was an employee and that she had the necessary continuity of employment for the purposes of an unfair dismissal claim.
Q had danced at S's club on a rota basis for some 18 months. The employment tribunal found that there was a club agreement which Q had not received but in practice matters had been conducted consistently with those terms. Appended to the agreement were house rules, which Q had not received but she had received a booklet that contained similar material. The tribunal found that whilst Q had been obliged to follow those rules and had been subject to a degree of control by S, the level of control did not amount to mutual obligation. The tribunal held that S was under no contractual obligation to provide work for which Q would be paid; Q's earning came directly from S's customers who paid by vouchers bought from S's clubs; the vouchers had to cover the cost of a tip out fee, house fee fines and commission; and Q was not required to work a set number of nights per week. The tribunal also held that there was no mutuality of obligation in the periods when Q was not dancing at S's club. If Q put herself forward to go on the rota she could be fined for not turning up but she was not under an obligation to dance at the club. The EAT held that the tribunal had erroneously concluded that there was no contract of employment; that there was no obligation on S to provide work, that S was under no obligation to pay wages to Q. The EAT held that the fact that customers provided the source of pay was irrelevant and that Q was integrated into the business and S had not merely provided Q with premises.
S submitted that the EAT misread the tribunal's conclusion when it concluded that it had found that there was no contract and that the finding that it was not obliged to pay any remuneration to Q for the work she did was entirely consistent with the evidence before the tribunal. S also submitted that the tribunal was entitled to find that S was under no duty to provide Q the opportunity to dance even when she was present at the club, and that there were no continuing obligations of the kind necessary to establish an umbrella contract, in existence between rotas.
HELD: (1) The tribunal’s decision confusingly used the concept of mutual obligations in two distinct senses: there were no obligations of any kind and no obligations of the kind necessary to establish a contract of employment. However the tribunal was not saying that there was never any contract in place at all. The critical question was whether the nature of those contractual obligations were such as to render it a contract of employment. The tribunal properly inferred from the evidence that S was under no obligation to pay Q anything at all: Q negotiated her own fees with the clients, took the risk that on any particular night she would be out of pocket and received back from S only monies received from clients after deductions, Spearmint Rhino Ventures (UK) Ltd v Revenue and Customs Commissioners  EWHC 613 (Ch),  S.T.C. 1252 considered. S did not employ Q to dance; rather Q paid S for an opportunity to earn money by dancing for clients, Cheng Yuen v Royal Hong Kong Golf Club  I.C.R. 131 considered. The fact that S also derived profits from selling food and drink to clients did not alter that fact. The economic risk Q took was also a powerful pointer against there being a contract of employment and the lack of any obligation to pay precluded the establishment of such a contract, O'Kelly v Trusthouse Forte Plc  Q.B. 90considered. The tribunal’s conclusion was reinforced by the fact that the contract terms involved Q accepting that she was self-employed, and she conducted her affairs on that basis, paying her own tax, Calder v H Kitson Vickers (Engineers)  I.C.R. 232 applied. In addition, she did not receive sick pay or holiday pay. Whilst there were some mutual obligations in play when Q was at work; and indeed she had a duty, at least once on the rota, to work certain days, and S was under some obligation to allow Q to dance when she was at work, but there was no relationship of employer and employee constituted by that arrangement (see paras 42, 45-46, 48, 50-52, 54 of judgment). (2) Although it was not necessary to consider if each engagement had constituted a separate contract of employment, there was nonetheless sufficient continuity of employment between engagements to constitute the necessary qualification period for claiming unfair dismissal (para.58).
 IRLR 99, EWCA Civ 1735
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