Stack v Ajar-Tec Ltd

The central question was whether Mr Stack was an employee or a worker of Ajar-Tec Ltd. The Court of Appeal upheld the Employment Tribunal's finding that there was a contract of employment (and therefore worker status) on the facts found by the Employment Judge. The court applied the classic Ready Mixed Concrete criteria for distinguishing contracts of service from contracts for services and considered whether an express or implied term as to remuneration formed part of the agreement reached by the promoters prior to incorporation.

The court rejected the Employment Appeal Tribunal's conclusion that there was no consideration and that implication of a term as to pay was impermissible. It held that the pre-incorporation agreement between the three promoters contained sufficient mutual promises and consideration (contributions of skills and money) and that it was open to the Employment Judge to imply the necessary term as to remuneration to give the arrangement business reality (drawing on the approach in Attorney General v Belize Telecom Ltd and related authorities). The Employment Tribunal's conclusions that Mr Stack was both an employee and a worker were therefore restored.

Background and nature of the claim:

• Mr Stack brought claims before the Employment Tribunal for constructive unfair dismissal and unauthorised deduction from wages. To pursue unfair dismissal he had to be an employee; to pursue unauthorised deduction he had to be a worker.
• At a preliminary hearing in April 2010 an Employment Judge initially found he was neither employee nor worker. That decision was overturned by the EAT and remitted. The company unsuccessfully appealed to this Court in 2012 ([2012] EWCA Civ 543). On rehearing Employment Judge Pettigrew found Mr Stack to be both an employee and a worker, but the EAT (Judge Birtles) allowed the company’s appeal and set that decision aside.

Issues framed:

• Whether there was a contract of employment between Mr Stack and Ajar-Tec Ltd (express or implied).
• Whether an agreement made by the promoters prior to incorporation could give rise to contractual obligations enforceable by or against the company once formed, including whether there was consideration and mutuality.
• Whether it was appropriate to imply a term as to remuneration and, if so, whether Tilson v Alstom required a different approach.

Facts and findings of the Employment Tribunal: The tribunal found that the three promoters agreed that each would contribute different things to the venture (skills and money). Mr Martin was paid from incorporation; Mr Stack performed substantial operational and project-management work (the judge found about 80% of full time from June 2006) but had not in fact been paid and had not sought payment until later. The Employment Judge concluded there was an express agreement that Mr Stack would work and that an implied term as to remuneration should be inferred; he was therefore an employee and a worker.

Appellate reasoning: The Employment Appeal Tribunal held that there was no consideration and that the Employment Judge had wrongly proceeded to imply a term concerning remuneration without first establishing a contract. The Court of Appeal disagreed. The Court held the pre-incorporation agreement contained sufficient mutual promises (skills and capital) to constitute consideration and that a term as to pay could properly be implied to give business reality to the arrangement. The court explained that contract formation may be partly express and partly by implication and that the Employment Judge's fact-finding supported the inference of an employment relationship. The Court therefore allowed the appeal, set aside the EAT order and restored the Employment Tribunal's decision that Mr Stack was an employee and a worker.

Procedural posture: Appeal from the EAT (His Honour Judge Birtles) allowed; Employment Tribunal judgment restored.

This was an appellate decision allowing Mr Stack's appeal. The Court of Appeal held that the Employment Tribunal was entitled to find that a contract of employment existed. The court concluded that the pre-incorporation agreement between the promoters contained sufficient mutual promises and consideration and that it was open to imply a term as to remuneration to give business reality to the arrangement. The EAT's decision setting aside the Employment Tribunal was therefore wrong and was set aside; the Employment Tribunal's finding that Mr Stack was both an employee and a worker was restored.

Employment Tribunal (preliminary hearing Apr 2010: no jurisdiction) → Employment Appeal Tribunal (Underhill P) remitted the matter (UKEAT/0293/13; judgment dated 8 July 2011) → Court of Appeal dismissed company’s appeal in 2012 ([2012] EWCA Civ 543) → Employment Tribunal (Pettigrew) trial decision 8 January 2013 found Mr Stack an employee and a worker → Employment Appeal Tribunal (Judge Birtles) allowed company’s appeal (judgment 30 May 2014) → Court of Appeal ([2015] EWCA Civ 46) allowed Mr Stack’s appeal and restored the Employment Tribunal’s decision.