Revenue and Customs Comrs v Jones (No 2)

A contract of apprenticeship has training as its essential purpose, with work for the employer being secondary. Education and training must be provided, and the arrangement must contain an objectively ascertainable duration. It is not ordinarily terminable at will or by ordinary dismissal provisions. The parties’ description of their relationship is relevant but cannot determine its legal status. The court must assess the substance of the arrangement, including whether the work primarily benefits the employer’s business and whether the training is genuinely central. Where the facts show that the workers are essential to the business, perform substantial productive work and have no fixed or objectively ascertainable training endpoint, the relationship is a contract of employment rather than apprenticeship.

HM Revenue and Customs appealed under section 19C of the National Minimum Wage Act 1998 against a replacement notice of underpayment. The Employment Judge held that the workers at a riding centre were outside the ordinary definition of workers qualifying for the national minimum wage under regulation 2(2) of the National Minimum Wage Regulations 1999, and that, save for one worker, they were employed under contracts of apprenticeship for the purposes of regulation 12.

The workers performed yard duties, taught riding lessons for which customers were charged, received accommodation and payments, and obtained training towards British Horse Society qualifications. The central issue was whether the arrangements were contracts of apprenticeship or ordinary contracts of employment.

1. Appeal allowed. The Employment Judge had erred in law. The workers were employed under contracts of employment and not contracts of apprenticeship.
2. The essential purpose of an apprenticeship is training, with execution of work for the employer being secondary. The relationship must include education and training in the relevant trade or profession, together with an obligation to serve, work and follow reasonable instructions.
3. A contract of apprenticeship must have a fixed duration or an objectively ascertainable end. That end may arise from completion of a prescribed course, training plan or other defined event. Here, the workers individually chose which examination to take and when to take it. There was no contractual requirement to undertake a prescribed qualification, and no objectively ascertainable endpoint.
4. The ordinary law of dismissal does not apply to an apprenticeship. A power to dismiss for gross misconduct is inconsistent with such a contract unless the conduct fundamentally undermines the ability to teach the apprentice. The contractual notice provisions and gross-misconduct power were therefore material matters which the Employment Judge failed properly to analyse.
5. The Employment Judge also failed to assess the primary purpose of the arrangements. The workers were essential to the riding-centre business, performed productive yard work and taught fee-paying customers. The training was incidental and subsidiary to the business benefit obtained by the respondents.
6. The parties’ description of the relationship cannot determine its legal status, which is an objective question. It is nevertheless relevant and may be decisive where the position is uncertain. The Employment Judge ignored evidence that the parties regarded the arrangements as training or working-pupil arrangements rather than apprenticeships.
7. No further factual findings were required. The Tribunal therefore declared that the relevant workers were employed under contracts of employment and not apprenticeship, and invited the parties to agree the appropriate quantum. If they could not agree, the issue was to be determined by the same Employment Judge.

• Employment Appeal Tribunal: allowed HM Revenue and Customs’ appeal from the decision of Employment Judge Sherratt, sitting alone on 6–7 and 18 June 2013. The decision was replaced by a declaration that the workers were employed under contracts of employment and not apprenticeship.