Franks v Reuters Ltd. & Anor

The Court of Appeal held that the employment tribunal erred in law by failing to determine, as a matter of fact, whether there was an implied contract of service between Mr Franks and Reuters. The court emphasised that the tribunals must consider all relevant evidence, including surrounding circumstances and the parties' conduct, when deciding whether an employment relationship exists under section 230 of the Employment Rights Act 1996. The tribunal’s reliance on a finding of lack of "mutuality of obligation" without first addressing whether an implied contract existed was insufficient.

Because the tribunal did not make clear and comprehensive findings on whether an implied contract arose from the parties' dealings (including length of service, operational arrangements and contractual documents involving the agency and the client), the Court allowed the appeal and remitted the matter for rehearing by a fresh tribunal.

Background and parties:

• The appellant, Mr Raymond Franks, began working for Reuters on a temporary placement arranged by an employment agency, First Resort, in late 1993 and continued in roles for Reuters until his dismissal in 1999. He brought claims for unfair dismissal, redundancy pay and breach of contract asserting he was an employee of Reuters. First Resort paid his wages and denied employing him; First Resort did not participate in the appeals to the Employment Appeal Tribunal or to the Court of Appeal.

Procedural history:

• An employment tribunal decided on a preliminary issue (12 May 2000) that Mr Franks was not an employee of either respondent. The Employment Appeal Tribunal upheld that decision on 27 June 2002. The Court of Appeal heard the appellant's appeal.

Nature of the claim / relief sought:

• Mr Franks sought declarations and remedies available to employees, namely unfair dismissal, redundancy pay and damages for breach of contract, on the basis that he was an employee of Reuters under section 230 of the Employment Rights Act 1996.

Issues framed by the court:

• Whether the employment tribunal properly addressed whether there was an implied contract of service between Mr Franks and Reuters, having regard to the need to consider all relevant evidence (including surrounding circumstances, subsequent conduct and any documentation) before finding whether "mutuality of obligation" existed.

Reasoning:

• The Court reviewed Carmichael v National Power plc and confirmed tribunals may examine not only documents but surrounding circumstances and conduct when deciding employment status. The Court found the tribunal had insufficiently considered whether an implied contract could be inferred from (a) the written arrangements between Mr Franks and First Resort and between First Resort and Reuters, (b) documents detailing operational requirements, (c) the specific arrangements for payment, and (d) the unusual length and continuity of service at the same client.
• The Court held that a finding of absence of mutuality of obligation cannot properly dispose of the question of employment status without first establishing whether there was any express or implied contractual relationship between the putative employer and worker. Because the tribunal did not make clear findings on the implied contract point, its decision involved an error of law.

Disposition:

• The Court allowed the appeal and remitted the matter for re-hearing by a fresh tribunal to determine, as a question of fact, whether an implied contract of service existed between Mr Franks and Reuters and, if so, the consequences for his claims.

Appeal allowed. The employment tribunal erred in law by concluding the appellant was not an employee without first determining, on all relevant evidence, whether an implied contract of service existed between the appellant and Reuters. The matter is remitted for re-hearing so the fact-finding tribunal can address that issue and, if necessary, determine the substantive claims.

Employment tribunal (preliminary issue) 12 May 2000: held Mr Franks was not an employee. Employment Appeal Tribunal 27 June 2002: upheld the employment tribunal decision. Court of Appeal [2003] EWCA Civ 417: allowed appeal and remitted for rehearing.