Montgomery v Johnson Underwood Ltd

A contract of employment requires an irreducible minimum of mutual obligations concerning the work and sufficient control by the alleged employer. Those requirements must be identified before the tribunal assesses the contractual relationship as a whole.

Where the parties’ agreement is derived from documents, communications and conduct, its terms are ordinarily a factual matter for the tribunal. An appellate court may intervene only for legal error or perversity. A finding that the alleged employer exercised little or no control is incompatible with a finding that it employed the worker.

Montgomery v Johnson Underwood Ltd concerned a temporary worker introduced by an employment agency to a client company. The agency paid her from time sheets approved by the client. After the client ended the assignment, she claimed unfair dismissal against both organisations.

The Employment Tribunal held unanimously that she was not employed by the client, but was employed by the agency. The Employment Appeal Tribunal dismissed her appeal concerning the client and, by a majority, dismissed the agency’s appeal. The agency appealed to the Court of Appeal.

The sole issue before the court was whether the tribunal and the Employment Appeal Tribunal had erred in holding that the agency employed her for the purposes of her unfair-dismissal claim.

1. Appeal allowed. Buckley J held that the tribunal had misdirected itself in law. Longmore and Brooke LJJ agreed. The court held that the worker was not employed by the agency.

2. A contract of service requires the conditions stated by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pension and National Insurance [1968] 2 QB 497: an undertaking to provide work and skill for remuneration, sufficient control by the alleged employer, and contractual provisions consistent with employment. Mutual obligations and control are an irreducible minimum. They are not merely factors to be balanced with all other indicia.

3. Where the parties’ intentions must be inferred from documents, exchanges and conduct, the contractual terms are matters of fact. The tribunal performs the evaluative task, subject to appellate intervention for an express or implicit legal misdirection or perversity. Subsequent conduct may assist in identifying what the parties objectively understood they had agreed.

4. The tribunal had treated the absence of mutuality as largely irrelevant and had placed little or no control in a general list of factors against employment. It had not identified the required minimum of control. Its clear finding that the agency exercised little or no control, direction or supervision was fatal to its conclusion that the agency was the employer. The court could not revisit that factual finding.

5. Buckley J added that an agency’s accepted offer of work, with remuneration paid by the agency, could in an appropriate case satisfy mutuality. Whether sufficient control exists in an agency arrangement remains a practical, fact-sensitive question. Longmore LJ rejected the suggestion that a worker who was neither an independent contractor nor employed by the client must therefore be employed by the agency. Appeal allowed with costs.

• Court of Appeal: Appeal allowed in Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318 . The court set aside the conclusion that the agency employed the worker.

• Employment Appeal Tribunal: Dismissed the worker’s appeal concerning the client unanimously and dismissed the agency’s appeal by majority. The tribunal’s decisions were left standing.

• Employment Tribunal: Held unanimously that the worker was not employed by the client, but was employed by the agency.