Hospital Medical Group Ltd v Westwood

The Court of Appeal affirmed that the statutory concept of a "worker" in section 230(3) of the Employment Rights Act 1996 contains three requirements: (i) an individual who has entered into or works under a contract to perform work or services; (ii) a personal performance obligation; and (iii) a negative requirement that the other party is not, by virtue of the contract, the individual's client or customer. The court held that Dr Westwood satisfied limb (b) of section 230(3) because, on the contract between the parties, he undertook to perform services personally and the contract did not make HMG his client or customer.

The court accepted Employment Tribunal findings that there was no mutuality of obligation sufficient to establish employment under a contract of service, and that Dr Westwood operated in business on his own account in other contexts. Nevertheless, focusing on the particular contract with HMG and factors of exclusivity and integration into HMG's operations, the court concluded HMG was not a client or customer for the purposes of limb (b). The appeal was dismissed.

The claimant, Dr Colin Westwood, a practising GP who provided hair restoration surgeries under a written "Surgeon’s Contract for Training and Services" with the Hospital Medical Group (HMG), brought claims for unlawful deductions from wages and accrued holiday pay. The central legal question was whether, during the contractual relationship, Dr Westwood was a "worker" within section 230(3)(b) of the Employment Rights Act 1996.

The Employment Tribunal found that Dr Westwood was not an employee (no contract of service) because there was no mutuality of obligation and no direct control, but that he did perform the services personally and that, under limb (b), the patients were clients or customers of HMG so that Dr Westwood was a limb (b) worker. The Employment Appeal Tribunal (Judge Peter Clark) upheld that decision. HMG sought permission to appeal to the Court of Appeal; after an initial refusal, permission was granted so the Court could consider the consistency of limb (b) jurisprudence.

Issues before the Court of Appeal included: (i) whether the tribunal erred in treating HMG as not being the claimant’s "client or customer" for the purposes of limb (b); (ii) whether the finding that the claimant was "in business on his own account" meant he was necessarily a client/customer’s supplier and thus excluded from limb (b); and (iii) the appropriate analytical approach (for example, the relevance of "integration" or "dominant purpose" tests) to cases on the worker boundary.

The court reviewed earlier authorities (including Autoclenz, Smith v Hewitson, Post Office, Cotswold, James v Redcats and Redrow), emphasising that no single universal test applies. The court adopted Aikens LJ’s three-part formulation of limb (b) from Autoclenz and endorsed Langstaff J’s "integration" approach as often helpful. Applying those tools to the particular contract, the court concluded that although Dr Westwood was in business on his own account in other contexts, in relation to the HMG contract he was personally engaged, was not free simply to market services to the world at large for that activity, and was integrated into HMG’s operations in providing hair restoration. Accordingly HMG was not a client or customer of his business for the purposes of limb (b) and the tribunal had jurisdiction to hear the claims for unlawful deductions and holiday pay.

Procedural posture: claims for unfair dismissal and breach of contract were dismissed for want of jurisdiction because employment under a contract of service was not established; the live claims concerned unlawful deductions and accrued holiday pay; the Court of Appeal dismissed HMG’s appeal.

Appeal dismissed. The Court of Appeal held that section 230(3)(b) contains three requirements including a negative limb that the other party must not, by virtue of the contract, be the individual's client or customer. Applying the contract and factual findings, and using the "integration" indicia as an appropriate analytical tool, the court concluded Dr Westwood was a limb (b) worker for the HMG contract and the tribunals were correct to assert jurisdiction over unlawful deductions and accrued holiday pay.

Employment Tribunal: initial findings that claimant was not an employee but was a limb (b) worker (UKEAT/023211LA). Employment Appeal Tribunal (Judge Peter Clark): appeal by HMG dismissed; ET decision upheld. Permission to appeal to the Court of Appeal initially refused on the papers by Sir Stephen Sedley, then later granted by Mummery and Moore-Bick LJJ for the Court of Appeal to consider limb (b) jurisprudence. Court of Appeal: [2012] EWCA Civ 1005, appeal dismissed.