Hudson Contract Services Ltd v Construction Industry Training Board

The court dismissed Hudson's statutory appeal against an Employment Tribunal ruling that Hudson was liable to an assessment to levy issued by the Construction Industry Training Board under the Industrial Training Levy (Construction Industry Training Board) Order 2015 (the 2015 Order). The key legal principle was one of statutory interpretation: the phrase "employer in the construction industry" in Article 3(1) of the 2015 Order must be read with the extended statutory definition of "employee" and "employer" in the Industrial Training Act 1982, so that an employer's character is determined by what its employees (including statutory/self‑employed operatives) do. Article 5(1)–(2) requires assessment by reference to construction establishments, and whether an establishment is "engaged wholly or mainly in the construction industry" is likewise answered by reference to the activities of its employees. The court held there was a sufficient connection for Hudson's Bridlington head office to be a construction establishment "at or from" which construction work was carried out, given the contractual relationships, payroll, tax deductions and operational control exercised through Hudson. The appeal was dismissed for these reasons.

This case is a statutory appeal under s.11(1) Tribunals and Inquiries Act 1992 from an Employment Tribunal decision of 18 May 2018 upholding a levy assessment issued by the Construction Industry Training Board (CITB) under the Industrial Training Levy (Construction Industry Training Board) Order 2015 (SI 2015/701). Hudson, a company that contracts to engage and pay self‑employed operatives on behalf of small construction firms, challenged two legal issues: (i) whether Hudson was an "employer in the construction industry" for the purposes of Article 3(1) of the 2015 Order, and (ii) whether Hudson had a "construction establishment" for the purposes of Article 5(1)–(2).

Background and facts:

• Hudson provides payroll, compliance and administrative services to clients in the construction sector and engages operatives on contracts for services; it directly employs only a few office staff.
• The CITB issued a levy assessment for the third levy period (1 January–31 March 2017) calculated under Article 7(2) of the 2015 Order after Hudson returned a nil levy return.
• Hudson had previously challenged the 2015 Order by judicial review ([2016] EWHC 844 (Admin)) but that challenge was rejected.

Issues framed:

1. How should the phrase "employer in the construction industry" be interpreted — by reference to the employer's directly employed staff only, or by reference to the employer's statutory employees (including self‑employed operatives)?
2. Whether Hudson's Bridlington head office was a "construction establishment" engaged wholly or mainly in the construction industry and whether construction activities were carried on "at or from" that establishment.

Court's reasoning:

• The court applied ordinary rules of statutory interpretation, purposive considerations and recognised that the 1982 Act supplies an extended definition of "employee" (section 1(2)) and defines "employer" accordingly. The use of the word "employer" in Article 3 informed the construction: the statutory definition applies and an employer is to be characterised by what its employees do.
• What an employer does includes the activities of statutory/self‑employed operatives. Reading Article 3(1) as excluding statutory employees would be inconsistent with the statutory scheme and the drafting of the primary legislation.
• Article 5's concept of a construction establishment is part of the levy assessment machinery and, where relevant, is to be judged by reference to what employees (including statutory employees) do "at or from" the establishment. The court followed and approved the activities approach adopted in prior authority (including Bobcat Plant Hire).
• On the facts available to the Employment Tribunal — the contractual relationship between Hudson and the operatives, the signing process, Hudson's role in payroll and tax deductions, Hudson's receipt of cleared funds and handling of status issues — there was a sufficient connection to treat the Bridlington head office as a construction establishment from which operatives were employed, even though no physical construction work occurred there.
• The court addressed concerns about double or multiple levies and avoidance. It explained Article 5(4) concerns ownership and responsibility for an establishment at the start of a levy period and does not preclude more than one person in the chain being liable to levy depending on contractual and tax status; overlaps in levy liability were not unlawful per prior judicial analysis.

Conclusion: The appeal was dismissed because the statutory definitions and purposive construction brought Hudson within the definition of an "employer in the construction industry" and its Bridlington head office was a construction establishment from which construction activities were carried on for levy purposes.

The appeal is dismissed. The court held that the phrase "employer in the construction industry" must be read with the extended statutory definition of employee and employer in the Industrial Training Act 1982 so that an employer's character is determined by what its employees (including statutory/self‑employed operatives) do. Article 5's construction‑establishment test is likewise answered by reference to employees' activities; the Bridlington head office had a sufficient connection to the statutory operatives to be treated as a construction establishment "at or from" which construction activities were carried out, and therefore Hudson was properly assessed to levy.

Statutory appeal under s.11(1) Tribunals and Inquiries Act 1992 from an Employment Tribunal ruling of 18 May 2018 dismissing Hudson's appeal under s.12(4) Industrial Training Act 1982. The judgment discusses prior judicial review proceedings in R (Hudson Contract Services Ltd) v Secretary of State for Business, Innovation and Skills and the CITB [2016] EWHC 844 (Admin).