Cable & Wireless Plc v Muscat

A contract of employment requires reciprocal obligations to provide and perform work for remuneration, together with sufficient control. The remuneration may be paid through a third party.

In a triangular relationship involving a worker, agency and end-user, the tribunal must consider all the documents, statements and conduct. It may infer an employment contract between the worker and end-user where that inference is necessary to give business reality to their dealings and create the enforceable obligations which the circumstances require.

An agency agreement does not automatically exclude such a contract. Its terms must be examined for inconsistency with the alleged employment relationship. The parties’ description of their status is relevant but not conclusive.

The respondent worked as a telecommunications specialist for Exodus Internet Ltd. Although subsequently described as a contractor operating through his own company, the Employment Tribunal found that his employment continued. When the undertaking transferred to Cable & Wireless Plc, his employment transferred with it under the Transfer of Undertakings (Protection of Employment) Regulations 1981.

Cable & Wireless later required him to contract through an agency, Abraxas Plc, which thereafter paid invoices for his work. His work, supervision and practical relationship with Cable & Wireless remained unchanged. When his services ended, he claimed unfair dismissal.

The Employment Tribunal found that he remained an employee. The Employment Appeal Tribunal dismissed Cable & Wireless’s appeal. The central issue before the Court of Appeal was whether the agency contract precluded an implied employment contract with the end-user and whether the tribunal had applied the correct legal test.

1. Appeal dismissed. The Employment Tribunal was entitled to find that the respondent remained an employee of Cable & Wireless throughout the relevant period. It had applied the correct legal principles, and the Employment Appeal Tribunal had properly upheld its decision.

2. The essential features of a contract of employment are reciprocal obligations to provide and perform work for remuneration, together with sufficient control. Payment need not pass directly from employer to employee. An employer does not cease to be an employer merely because it arranges for a third party to pay the worker.

3. The majority guidance in Dacas v Brook Street Bureau (UK) Ltd [2004] EWCA (Civ) 217 was correct, although not strictly binding as a matter of precedent. In a triangular relationship, a tribunal should examine all the evidence concerning the worker, agency and end-user. This includes written agreements, oral statements and the parties’ conduct. It should then consider whether an employment contract between the worker and end-user must be implied.

4. Such a contract may be inferred only where that inference is necessary to give business reality to the parties’ dealings and to create the enforceable obligations which one would expect in the circumstances. The question is objective. The parties’ chosen description of their relationship does not determine its legal character.

5. An express contract with an agency does not automatically preclude an employment contract with the end-user. The agency contract must be examined to determine whether its terms are essentially inconsistent with the alleged employment relationship. It may also assist in identifying such matters as working hours, remuneration and notice. Here, Cable & Wireless was not a party to the agency contract, and that contract did not alter the substance of its relationship with the respondent.

6. Before and after the agency agreement, Cable & Wireless provided the work, controlled its performance and received its benefit. The respondent remained obliged to attend and perform that work. Only the payment arrangements changed. There was no termination or novation of the existing employment contract. Its continuing existence therefore had to be inferred.

1. Court of Appeal (Civil Division): By [2006] EWCA Civ 220, dismissed Cable & Wireless Plc’s appeal and upheld the finding that the respondent remained its employee.

2. Employment Appeal Tribunal: Dismissed Cable & Wireless Plc’s appeal from the Employment Tribunal, while granting permission to appeal to the Court of Appeal.

3. Employment Tribunal: Determined the preliminary issue in favour of the respondent, finding that he had an implied contract of employment with Cable & Wireless Plc and continuous employment throughout the relevant period.