Troutbeck SA v White & Anor

Employment status must be determined from the cumulative effect of the parties’ agreement and all the circumstances of their relationship. A low level of actual day-to-day control does not preclude employment. The relevant inquiry includes the employer’s contractual right of control and the other principal elements of employment.

The parties’ description of their relationship does not determine its legal character. It may, however, confirm the objective analysis. An appellate tribunal may substitute its conclusion where the tribunal below made an error of legal principle, all relevant facts have been found and only one lawful answer is possible.

Two resident caretakers and managers claimed unfair dismissal, arrears of wages and holiday pay against the owner of the farm where they lived and worked. Their written agreement referred to employment, provided a monthly allowance and paid holiday, and required them to live at the farm. They nevertheless retained considerable autonomy in performing their duties and could undertake other work.

The Employment Tribunal held that they were workers but not employees, placing decisive weight on the absence of actual day-to-day control. Following a review prompted by Autoclenz v Belcher [2011] ICR 1157, it confirmed that decision. The Employment Appeal Tribunal, in UKEAT/01777/12, reversed the ruling and substituted a finding of employment.

The central issues were whether the Employment Tribunal had made an error of law concerning control and whether the Employment Appeal Tribunal could substitute its own conclusion.

1. Appeal dismissed unanimously. The Employment Appeal Tribunal correctly held that the claimants were employees and was entitled to substitute that conclusion for the Employment Tribunal’s decision.

2. The written agreement was the starting point. Neither party alleged that it was a sham, and it was legally binding. The question concerned the legal character of the relationship created by the agreement, viewed in its surrounding circumstances, rather than the identification of different contractual terms.

3. The Employment Tribunal made an error of legal principle by treating the absence of actual day-to-day control as determinative. The correct approach was the multi-factorial approach associated with Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. The tribunal had to assess the cumulative effect of the agreement’s provisions and all the circumstances of the relationship.

4. The circumstances displayed the principal elements of employment. The claimants personally worked for reward at a workplace designated by the owner and for its continuing benefit. Their paid annual holiday reflected statutory employment protection. Although they exercised substantial day-to-day responsibility, the owner retained a sufficient degree of contractual control to exclude the conclusion that they were independent contractors operating businesses which supplied caretaking, management or security services generally.

5. Other work undertaken by the claimants did not preclude concurrent employment by the farm owner. Nor did informal payment arrangements and the absence of deductions for PAYE and National Insurance determine their status.

6. The parties’ chosen label was not necessarily conclusive of the legal character of their relationship. In this case, however, their signed reference to an employment agreement expressed their intentions and confirmed the objective analysis.

7. An appellate tribunal should not readily interfere with an Employment Tribunal’s fact-sensitive assessment of employment status. Intervention is justified where there is a legal misdirection or a conclusion which no reasonable tribunal, properly directing itself, could reach. Here all relevant facts had been found and only one answer was legally possible, so remittal served no purpose. The claimants could pursue their claims under the Employment Rights Act 1996 for unfair dismissal, arrears of pay, holiday pay and other unauthorised deductions.

1. Court of Appeal (Civil Division): Dismissed the employer’s appeal in [2013] EWCA Civ 1171 and upheld the substituted finding that the claimants were employees.
2. Employment Appeal Tribunal: In UKEAT/01777/12, allowed the claimants’ appeal, held that the Employment Tribunal had applied the control criterion incorrectly and substituted a finding of employment.
3. Employment Tribunal: At a pre-hearing review on 6 April 2011, held that the claimants were workers but were not employed under contracts of employment. It reviewed and confirmed that decision on 2 March 2012.