A Manning v Walker Crips Investment Management Limited

The Employment Appeal Tribunal considered whether the claimant was a "worker" within section 230(3)(b) of the Employment Rights Act 1996 and regulation 2 of the Working Time Regulations 1998. Key legal questions were whether an express contractual substitution clause (clause 2.5) negated an obligation of personal service, whether an implied term limiting the employer's discretion to refuse substitutes should be read into that clause, and whether the respondent was a "client or customer" of a business undertaking carried on by the claimant.

The EAT held in part for the claimant. It concluded that it was not necessary or appropriate to imply a term that the respondent's consent to substitutes could not be unreasonably withheld: clause 2.5 was workable on its face and the strict tests for implying terms were not satisfied. The EAT also held that the Employment Judge had failed to give proper weight to the fact that clause 2.5 had never been formally exercised in practice, a matter of special importance after Uber BV v Aslam. The judge should not have given weight to the contractual label that the claimant was an "independent contractor" (clause 11.1) when assessing worker status, and the claimant's personal trading during working hours did not demonstrate he carried on a separate business undertaking for other clients.

Accordingly, the EAT allowed the appeal in part: it set aside the tribunal's conclusion that the claimant owed no obligation of personal performance (because the implied term should not have been read in) and remitted the narrower "client or customer" question to the employment tribunal for determination in light of the judgment.

Background and procedural posture. The claimant worked as an investment manager for the respondent from April 2015 to January 2021 and brought claims including detriment for protected disclosures (relying on Part IVA of the Employment Rights Act 1996) and unpaid statutory annual leave under the Working Time Regulations 1998. The employment tribunal held in a preliminary hearing that the claimant was not a worker for the purposes of s.230(3)(b) ERA and regulation 2 WTR. The claimant appealed to the EAT.

Key contractual terms and factual matrix. The claimant was engaged under a written contract (31 March/7 April 2015). Clause 2.5 required any employee or agent of the claimant who would provide services under the agreement to be approved in writing by a director of the respondent, with approval at the respondent's "sole discretion" and capable of withdrawal. Clause 1.3 treated references to the associate as including any employee or agent "subject to clause 2.5" and clause 11.1 described the associate as an "independent contractor" and stated no employee/employer relationship arose. In practice the claimant was integrated into the respondent’s operations, worked only for the respondent, and occasionally a colleague provided cover, but the formal approval process in clause 2.5 had not in fact been used.

Nature of the appeal and issues. The appeal raised (i) whether the tribunal was right to imply an objective reasonableness limitation on clause 2.5 so that consent to substitutes could not be unreasonably withheld, with the consequence that the claimant owed no obligation of personal service, and (ii) whether, alternatively, the respondent was a client or customer of a business carried on by the claimant such that the claimant fell outside limb (b) of the statutory definition.

Court’s reasoning. On implication of terms the EAT applied the conventional and strict tests (necessity/business efficacy; obviousness) and held the tribunal erred in implying a reasonableness limitation into clause 2.5. The contract and clause were coherent and operable without the implied term; the circumstances that justify implying a term in Braganza and Paragon Finance did not exist here; and Paragon-style implication would have had the effect of excluding statutory protection contrary to principle. The EAT further held the Employment Judge should have considered the highly relevant fact that clause 2.5 had never been formally exercised, particularly in light of Uber which requires close attention to the factual practice when assessing whether a written substitution clause reflects the true agreement. On the "client or customer" issue the EAT found the Employment Judge erred in giving weight to the contractual label of self-employment (clause 11.1) and to the claimant's personal investment trading as if that demonstrated a separate business undertaking; but otherwise rejected challenges to the majority of the tribunal's evaluative findings and refused to substitute a final factual conclusion on that issue. The EAT accordingly remitted the "client or customer" question to the employment tribunal for determination in accordance with its guidance.

Remedy and disposition. The appeal was allowed in part: the finding denying personal service was set aside and replaced with a finding that the claimant did undertake to perform work personally; the matter of whether the respondent was a client or customer was remitted to the employment tribunal (and the EAT directed the remit should go to the same Employment Judge unless parties agreed otherwise).

Appeal allowed in part. The EAT held that the Employment Judge erred in implying a term into clause 2.5 that the respondent could not unreasonably withhold consent to substitutes; that omission of consideration of the fact clause 2.5 was never exercised was a material error after Uber; and the tribunal should not have given weight to the contractual label of "independent contractor" or to the claimant's personal trading as demonstrating a separate business undertaking. The EAT set aside the tribunal's conclusion that the claimant owed no obligation of personal service, substituted a finding that he did undertake to perform work personally, and remitted the "client or customer" issue to the employment tribunal for reconsideration in light of the judgment.

Appeal to the Employment Appeal Tribunal from a preliminary decision of the Employment Tribunal (Employment Judge Stout) on worker status (reasons issued 29 March 2022). Determination by the EAT in [2023] EAT 79 remitted the remaining "client or customer" issue to the employment tribunal.