Redrow Homes (Yorkshire) Ltd v (1) Buckborough (2) Sewell [2008] is another case addressing the question "What is a worker?". However, this case also deals with whether the documentation in place between a so-called 'self-employed contractor' and the end user is a sham.
The judgment of the Employment Appeal Tribunal (EAT) has underlined the importance of the contractual documentation being an accurate reflection of what the parties actually expect. The EAT's decision also highlighted the difference between 'workers' and 'employees' under UK employment legislation.
The Working Time Regulations (WTR) allow 'workers' to take a minimum amount of paid annual leave - currently 4.8 weeks' holiday if they work a full working week. If they leave their employment, the WTR also provide that they can obtain compensation for any accrued but untaken leave.
Regulation 2(1) of the WTR describes a worker as:
'... an individual who has entered into or works under (a) a contract of employment; or (b) any other contract, whereby the individual undertakes to do or perform personally any work or services for another party to the contract...'
redrow Homes
Facts of the case
In Redrow Homes (Yorkshire) Ltd v Wright [2004], the Court of Appeal had confirmed that Redrow's self-employed bricklayer subcontractors were in fact 'workers' for the purposes of the WTR. As a result of losing that case, Redrow had redrafted its terms and conditions for its subcontractors to try to ensure that they fell outside of the definition of worker and therefore would not be entitled to holiday pay under the WTR. In particular, Redrow had inserted a new provision into the terms and conditions that stated that the obligation to perform the work is not personal to the subcontractor and can be carried out by other subcontractors.
These new terms were put to the test by Mr Buckborough (B). B was a bricklayer engaged by Redrow to work on its building sites. B sought to bring a claim for holiday entitlement, but first had to show that he was a worker.
One of the key points in determining whether B was a worker was the issue of whether he was under an obligation to provide his services personally.
B's contract expressly allowed him to find someone else to do the work if he so wished. The clause read:
'For the avoidance of doubt the obligation to perform the work is not personal to the contractor [here, B] and their obligations may be performed by other labour. Further the contractor is required to provide other labour if it is necessary to carry out the works or to maintain the rate of progress stipulated by the company.'
Notwithstanding this express clause, the Tribunal found that B was a 'worker' within the meaning of the WTR.
Employment Tribunal decision
The Employment Tribunal held that the clause was 'a sham', which had been inserted into the contract by Redrow to avoid contracting the likes of B as a worker. The Tribunal held that there was never any intention by either side that B would actually seek to provide a substitute or would refuse the work offered. This was not the way in which, in practice, Redrow had used this sort of labour in the past and it could not be expected to be the position in the future either. The contract had to be interpreted in the circumstances in which it was made, so as to reflect the reality of the relationship between the parties.
In the alternative, the Tribunal held that B was a 'worker' because, by signing the contract, he had undertaken personally to ensure that someone was on site at Redrow to lay bricks as and when required. This meant that he was obliged personally to provide services, thus bringing him under part (b) of the definition of 'worker' in the WTR, ie that B had 'undertaken to do or perform personally any work or services for another party to the contract'.
Redrow appealed to the EAT, arguing that both grounds for the Tribunal's decision were wrong in law.
The EAT decision
The EAT dismissed Redrow's appeal and agreed with both of the Tribunal's reasons for holding that B was a worker. In its judgment, the EAT referred to the Court of Appeal's decision in Consistent Group Ltd v Kalwak [2008].
Redrow argued that the decision in Kalwak only applied to situations where the parties intended to deceive a third party or the court, and that, given that the Tribunal had not found evidence of this intention to deceive, the documentation was therefore not a sham.
However, the EAT held that there were two different contexts that could constitute a 'sham' in respect of a contract or contractual provision:
- firstly when, in order to deceive third parties or the court, the parties had jointly agreed a provision that appeared to create legal rights and obligations but that neither party actually intended to exist between them; and
- secondly, as was the case here, where despite there being no joint intention to deceive a third party or the court, the provision was not intended, in reality, by the parties to have any binding effect between them.
The EAT therefore held that it was not always necessary for 'a sham' to involve a joint intention to deceive third parties or the court. Instead, both parties must intend that the documents do not create the legal rights and obligations that they appear to create.
In this particular case, the Tribunal had found that there was enough factual evidence to show that the parties never intended the substitution clause to have effect. They intended that the work was always to be carried out personally.
Workers or employees?
The EAT considered, if the contract was not sham, whether it contained an obligation on B to perform personally work or services, thus making him a worker under the WTR.
The EAT held that the contract expressly obliged B to provide such labour as was necessary to carry out the work and to comply with the rate of progress set down by Redrow.
While the EAT acknowledged that there was no case law addressing the difference between 'work' and 'services' in the definition of a worker under the WTR, it believed that it was Parliament's intention that the act of 'performing services' be given a wider concept than that of 'work'. In that case, while the obligation on B to provide labour was not an obligation personally to perform work, it was an obligation personally to perform a service for Redrow - the service being to provide the substitute labour. Either B performed the service himself or he found a replacement to do so, either way relieving Redrow from having to find other labour.
Comment
The importance of this decision is that it highlights the necessity of reviewing the overall circumstances in which a contract is to be performed. It is also perhaps a warning that the best-drafted contract may not succeed if it does not reflect the reality of the situation.
By Clare Battersby, associate solicitor, and Louise Adam, trainee solicitor, Salans.
E-mail: cbattersby@salans.com; ladam@salans.com.
For further information, please visit www.salans.com
