Leeds City Council v Woodhouse & Anor

For the purposes of section 7 of the Race Relations Act 1976, the inquiry is fact-sensitive and requires consideration of both the work performed and the contractual supply of the worker. Work for the principal is not limited to work subject to the principal’s managerial control, and influence or control is not an essential requirement in every case. Mere commercial benefit from a subcontract is insufficient, but an exceptionally close relationship between principal and employer may show that the work was done for both. A contractual obligation requiring the employer to employ workers to perform the contracted services can satisfy the supply requirement. Unless the issue is straightforward, the contract-worker question will often require extensive factual findings and may be better determined as part of the full discrimination claim.

Mr Woodhouse, an employee of West North West Homes Leeds Ltd, brought claims of racial discrimination and harassment against his employer, Leeds City Council and Mr Malcolm Chapman, a council employee. The council owned the housing stock and had established West North West Homes as an arms-length management organisation. It provided management services to the council under a management agreement and obtained maintenance services from the council’s Property Services Division under a service agreement.

The Employment Judge treated the jurisdiction issue as a preliminary issue and held that Mr Woodhouse was potentially a contract worker of the council under section 7 of the Race Relations Act 1976. The Employment Appeal Tribunal dismissed the council’s appeal. The central issue was whether Mr Woodhouse performed work for the council and was supplied to it under a contract, despite being employed by West North West Homes.

1. Appeal dismissed. The Employment Judge was entitled to hold that Mr Woodhouse was a contract worker of the council under section 7 of the Race Relations Act 1976. The appeal was dismissed with costs, to be assessed in default of agreement.
2. Following Harrods Ltd v Remick [1998] ICR 156, section 7 requires consideration of two questions: whether the work was work for the principal, and whether the worker was supplied by the employer under a contract with the principal. The provision is to be construed broadly so as to provide a remedy to those who might otherwise lack protection against discrimination. The supply contract need not have the supply of labour as its primary or sole purpose.
3. The question whether work is for the principal is one of fact and degree. In a contractor and subcontractor relationship, mere benefit to the principal is insufficient. However, influence or control by the principal is not a necessary element in every case. The extreme closeness of the relationship may itself establish that the work was performed for both the immediate employer and the principal.
4. On the findings, West North West Homes had only one customer, existed to provide management services for the council, and was wholly owned by it. Its obligation under the management agreement to employ staff to perform those services meant that it supplied workers pursuant to that contract. The service agreement did not displace the relevance of the management agreement.
5. The court followed the helpful observations in Jones v Friends Provident Life Office [2004] IRLR 783 that section 7 is fact-sensitive and should be developed incrementally. It did not adopt control or influence as a universal condition. The court also cautioned against determining section 7 as an isolated preliminary issue in a complex case, since the tribunal may need to examine the contract, its practical operation and the surrounding facts.

• Court of Appeal (Civil Division) [2010] EWCA Civ 410: appeal from the Employment Appeal Tribunal dismissed with costs.
• Employment Appeal Tribunal: HHJ McMullen QC dismissed Leeds City Council’s appeal from the Employment Tribunal.
• Employment Tribunal, Leeds: Employment Judge Forrest refused the council’s application to strike out the claims against the council and Mr Chapman, treating the issue as a preliminary issue and holding that Mr Woodhouse was potentially a contract worker.