Lord Advocate v Babcock & Wilcox (Operations) Ltd

For selective employment payments, an employee’s employment is the work performed under the contract of employment. Employment is carried out from the establishment on which the employee is based, rather than from a distant administrative centre which hires, pays, dismisses or directs the employee.

Whether premises constitute an establishment is a question of fact and degree, approached by broad common sense. Relevant indications include exclusive occupation, permanence, on-site organisation and whether employees work in or from the premises. A qualifying site does not cease to be an establishment merely because its activities are running down; its status must be considered from contribution week to contribution week.

The respondent’s construction division was based at Renfrew, within a development area, but installed and repaired steam-raising plant at sites throughout the United Kingdom. Four sites outside development areas—Didcot, Carrington, Fulham and Barking—were selected to test whether regional employment payments were due for employees working there.

An industrial tribunal found that each site and Renfrew constituted an establishment. It nevertheless treated the employees as employed from Renfrew and awarded the payments. The Court of Session upheld that result.

The central question before the House was whether the employees’ work was employment in, or carried out from, the Renfrew establishment or the respective local establishments for the purposes of section 1 of the Selective Employment Payments Act 1966 and section 26(1) of the Finance Act 1967.

1. The appeal was allowed unanimously, with costs. The employees at Didcot, Carrington, Fulham and Barking were in employment in, or carried out their employment from, the establishments at those sites. As those establishments were outside development areas, the respondent was not entitled to regional employment payments for the relevant period.

2. Per Lord Kilbrandon, with Lord Morris of Borth-y-Gest, Lord Diplock and Lord Simon of Glaisdale agreeing, an “establishment” in this statutory context is local and place-based. Whether premises amount to an establishment is a question of fact and degree, determined by broad common sense. The guidelines stated by Lord Parker CJ in Secretary of State for Employment and Productivity v Vic Hallam Ltd—exclusive occupation, some permanence, on-site organisation and whether employees work in or from the premises—were relevant and helpful. The substantial premises, duration, labour organisation and local management at Didcot justified the tribunal’s finding that it was an establishment.

3. Per Lord Kilbrandon, “employment” meant the work carried out by a person under a contract of employment. The statutory language concentrated primarily on the employee’s activity. Employees working within the local premises were employed in that establishment; employees going from those premises to other parts of the site carried out their employment from it.

4. Per Lord Morris and Lord Kilbrandon, the tribunal misdirected itself by asking whether the employees were, in some sense, employed from Renfrew. The statute instead required identification of the establishment in which, or from which, the employees carried out their work. Centralised hiring, payroll, records, dismissal, planning and instruction did not make Renfrew the establishment from which work at the local sites was carried out. Per Lord Simon, “carried out from” meant, in ordinary language, “based on”.

5. Per Lord Kilbrandon, the smaller sites were governed by the same conclusion because the parties had not distinguished them, their labour arrangements were materially similar and there was insufficient material to determine when any running-down site might have changed character. Lord Reid regarded the three smaller sites as borderline cases but accepted that they could be treated as establishments. Per Lord Simon, an establishment does not lose that character merely because its activities are running down; its position must be considered from week to week.

1. House of Lords: Allowed the Lord Advocate’s appeal unanimously and reversed the conclusion that regional employment payments were payable for employees at the four sites.

2. Court of Session: Upheld the industrial tribunal’s decision. No citation for that decision is stated in the judgment.

3. Industrial tribunal: Found that Renfrew and each local site constituted an establishment, but held that the employees were employed from Renfrew and that regional employment payments were payable.