White v Troutbeck SA

The Court of Appeal dismissed the employer's appeal against the Employment Appeal Tribunal's decision that the claimants were employees under a written Agreement and therefore entitled to bring claims for unfair dismissal and arrears of pay. The court applied the multi-factorial test in Ready Mixed Concrete and s. 230 of the Employment Rights Act 1996 as the statutory context for defining "employee". It held that the Employment Tribunal erred in law by treating the lack of actual day-to-day supervision as determinative. Instead the correct approach is to consider the cumulative effect of the contractual terms and surrounding circumstances, including the contractual right of control, payment for work, requirement to live at the workplace, paid annual holiday and the designation of the document as an "employment agreement". On that basis the Employment Appeal Tribunal was entitled to substitute its conclusion that the Agreement created contracts of employment.

Background and parties: Troutbeck SA, a Panamanian company, owned Starcross Farm. The respondents, Mr Gary White and Ms Katy Todd, had an oral arrangement to manage and caretake the farm and subsequently signed a written Agreement on 1 August 2009. The claimants lived rent free in an annexe and received a monthly personal allowance and paid annual holiday. Troutbeck served three months' notice under the Agreement and the claimants brought claims for unfair dismissal and unpaid wages.

Procedural posture: The Employment Tribunal at a pre-hearing review concluded the claimants were not employees, emphasising the absence of day-to-day control. The Employment Appeal Tribunal (EAT) allowed the claimants' appeal, holding that the Employment Tribunal had erred in law by treating lack of actual day-to-day control as decisive. Troutbeck appealed to the Court of Appeal with permission.

Nature of the claim and issues:

• The claimants sought to establish they were employees and so could pursue unfair dismissal and arrears claims.
• The central legal issue was whether the written Agreement constituted a contract of employment within s. 230 Employment Rights Act 1996, applying the Ready Mixed Concrete multi-factorial test and considering the significance of control, payment, place of work and labels in the Agreement.

Court's reasoning: The court accepted that the Agreement was the starting point and was legally binding. It rejected the Employment Tribunal's emphasis on absence of day-to-day supervision as determinative. The court endorsed the EAT's approach that what matters is whether there is a contractual right of control to a sufficient degree, not whether that control was exercised daily in practice. The Agreement's terms (including clauses referring to employment, the duty to live at the property, a monthly allowance, 30 days paid holiday, and contractual rights affecting expenditure and management) and the surrounding circumstances pointed in aggregate to the existence of employment relationships rather than an independent contractor arrangement. The court therefore concluded the claimants were employees and permitted them to proceed with claims for unfair dismissal, arrears of pay and holiday pay.

Wider context: The court noted the general appellate rule that appellate tribunals should not lightly overturn Employment Tribunal findings of fact, but confirmed that an error of law in applying legal tests (here the control element within the multi-factorial inquiry) justifies intervention.

The appeal was dismissed. The Court of Appeal held that the Employment Tribunal had erred in law by making absence of actual day-to-day control the determinative factor. Viewing the Agreement and surrounding circumstances in the round, there was a sufficient contractual right of control together with other indicia (payment, designated workplace, paid annual holiday and the parties' description of the document as an employment agreement) to establish contracts of employment; the EAT was therefore entitled to substitute its conclusion.

Employment Tribunal pre-hearing review: decision that the claimants were not employees (pre-hearing review dated 6 April 2011; original decision reviewed and confirmed 2 March 2012). Employment Appeal Tribunal: EAT allowed the claimants' appeal and reversed the ET on 23 January 2013. Permission to appeal to the Court of Appeal was granted by Elias LJ on 20 February 2013. Appeal to the Court of Appeal: [2013] EWCA Civ 1171 (this judgment).