Cable & Wireless Plc v Muscat

The Court of Appeal upheld the employment tribunal's finding that the claimant, Mr Muscat, was an employee of Cable & Wireless (C&W) for the whole period in issue. The court applied the statutory definitions in the Employment Rights Act 1996 (notably section 94(1) and section 230) and endorsed the guidance in Dacas v Brook Street that tribunals must consider all the evidence in a triangular relationship (agency, worker, end-user) and may infer an implied contract of employment with the end-user when mutuality of obligation and sufficient control exist.

The court held that the fact that pay was routed via an agency did not of itself defeat an implied employment contract with the end-user. The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) had transferred the claimant's employment to C&W; the subsequent contract between the claimant's limited company and the agency for payment did not negate continuing obligations, control, or the need to imply the employment contract to give business reality (applying the necessity test derived from The Aramis).

Background and parties: Mr Muscat had been an employee of Exodus Internet Ltd (EIL) and, after dismissal and re-engagement through a limited company (E-Nuff Comms Ltd), continued to provide services. EIL was taken over by Cable & Wireless (C&W) in 2002 and the employment transferred under TUPE. C&W later required that payment be made via an agency, Abraxas, and a Contract for Services was signed between E-Nuff and Abraxas covering part of the period at issue.

Nature of the claim and relief sought: Mr Muscat claimed compensation for unfair dismissal, alleging he was an employee of C&W and had been continuously employed for more than a year. C&W denied he was their employee and contended that the agency arrangements changed his status.

Procedural posture: The employment tribunal found that an implied contract of employment existed between Mr Muscat and C&W. The Employment Appeal Tribunal (EAT) dismissed C&W's appeal but granted permission to appeal to the Court of Appeal. This Court heard the appeal against the EAT/ET decisions.

Issues framed:

• Whether a tribunal may imply a contract of employment between a worker and an end-user in a triangular relationship involving an agency.
• Whether the existence of an express contract for services between the worker (or his company) and the agency precludes the implication of an employment contract with the end-user.
• Whether it was necessary to imply such a contract to give business reality to the relationship (necessity test).

Reasoning and conclusions: The Court of Appeal concluded that the majority guidance in Dacas (that tribunals should examine the whole evidence and may infer an implied employment contract with the end-user) was correct and that tribunals should follow it. The court emphasised the established requirements for a contract of service (obligation to provide work and to perform it, and control), referring to Ready Mixed Concrete, Nethermere, Clark and Carmichael. It held that routing payment via an agency did not, of itself, destroy mutuality or control; payment arrangements are not determinative so long as the end-user retained practical obligations and control and would be liable if the payment arrangement failed. The Aramis necessity test was applied: it was necessary to infer the continued employment contract to give business reality to the parties' conduct. The express contract between E-Nuff and Abraxas did not amount to an agreement by C&W that no contract of employment could arise between C&W and Mr Muscat.

The appeal was dismissed. The Court concluded that the Employment Tribunal had correctly applied the law and the guidance in Dacas: all the evidence should be considered and, on the facts, an implied contract of employment between Mr Muscat and C&W existed because the essential elements of mutuality of obligation and control were present and it was necessary to infer the contract to give business reality to the arrangement.

Appeal from the Employment Appeal Tribunal (EAT) which had dismissed Cable & Wireless's appeal against the Employment Tribunal (ET). EAT reference: UKEAT/0661/04/LA. The ET had held that an implied contract of employment existed between Mr Muscat and C&W. Permission to appeal to the Court of Appeal was granted; the Court of Appeal delivered judgment in [2006] EWCA Civ 220.