Stringfellow Restaurants Ltd v Quashie

A contract of employment depends on the contractual relationship viewed as a whole. Personal service and sufficient control do not compel employee status where other provisions are inconsistent with a contract of service.

The absence of an employer’s obligation to pay, together with the worker’s assumption of economic risk and exclusive payment by third parties, is a powerful indication against employment. It is not an absolute bar, since each case turns on its arrangements. The parties’ genuine description of their relationship is relevant, though never conclusive.

Where classification depends on documents and working practices, an appellate court may interfere only for legal error or a conclusion which no reasonable tribunal could reach.

The respondent worked intermittently as a dancer at clubs operated by the appellant. Customers paid her for dances through vouchers administered by the clubs. The clubs deducted commission, fees and fines, and she could finish a shift with a loss.

She claimed unfair dismissal after the appellant ceased permitting her to work. The Employment Tribunal held that she was self-employed and lacked the required continuous employment. The Employment Appeal Tribunal reversed that decision, holding that she was an employee during each engagement and that an umbrella contract, or alternatively statutory rules, supplied continuity.

The appellant challenged both conclusions. The principal issue was whether the contractual arrangements constituted a contract of employment within section 230 of the Employment Rights Act 1996.

1. Appeal allowed unanimously. The Employment Tribunal was entitled to find that the respondent was not employed under a contract of employment. Its decision was restored, with the consequence that it had no jurisdiction to hear the unfair dismissal claim.

2. The Tribunal’s references to mutuality of obligation were not entirely clear, but its decision, read as a whole, did not deny that a contract existed while the respondent was working. The correct question was whether the obligations made that contract one of service. Under the approach in Ready Mixed Concrete, personal service and control must be considered alongside every other relevant feature of the relationship.

3. The decisive finding was that the appellant had no contractual obligation to pay the respondent. She negotiated fees with customers, bore the risk of earning less than the charges and deductions incurred, and received only money originating from customers. That inference was supported by the contractual documentation and was neither perverse nor otherwise open to reversal by the Employment Appeal Tribunal.

4. Payment exclusively by third parties and the assumption of economic risk do not invariably preclude a contract of employment. Workers may sometimes be employees despite receiving much of their remuneration from customers. Nevertheless, economic risk is a powerful indication against employee status, and a contract of service will be unusual where the worker assumes that risk and is paid exclusively by third parties.

5. The arrangement was materially analogous to that in Cheng Yuen v Royal Hong Kong Golf Club. The appellant provided an opportunity for the respondent to earn money from customers rather than employing her to dance for wages. Her greater integration into the club did not alter the essential tripartite structure.

6. The parties’ description of the respondent as self-employed could not determine her legal status. Status is assessed objectively from all relevant facts. Their genuine intention, her treatment of herself as self-employed for tax purposes, and the absence of sick pay, holiday pay and other employment benefits nevertheless reinforced the Tribunal’s conclusion.

7. The Employment Appeal Tribunal had impermissibly substituted its own factual analysis. Its reasoning assumed a work-and-wages bargain and then treated control as the remaining question. The wage premise was inconsistent with the Tribunal’s sustainable findings. Whether separate engagements would have provided sufficient continuity was therefore unnecessary to decide.

1. Court of Appeal (Civil Division): Allowed the appellant’s appeal and restored the Employment Tribunal’s finding that the respondent was not employed under a contract of employment. The continuity issue did not arise.

2. Employment Appeal Tribunal: Allowed the respondent’s appeal. It held that she was an employee during each engagement and had continuity of employment through an umbrella contract or, alternatively, section 212 of the Employment Rights Act 1996. It remitted the claim to the Employment Tribunal.

3. Employment Tribunal: Held that the respondent was not an employee and, in any event, lacked the requisite period of continuous employment.