Christopher Watson v Wallwork Nelson Johnson & Anor

The Employment Appeal Tribunal dismissed the claimant's appeal against the Manchester Employment Tribunal's conclusion that, after April 2019, he was not an employee for the purposes of section 230 of the Employment Rights Act 1996 but was a worker under section 230(3)(b). The ET applied a multi‑factorial assessment of status, gave weight to the parties' contemporaneous intention that the claimant should move from employment to an associate partnership under the Partnership Act 1890 and found that essential terms (in particular remuneration and tax treatment) had been agreed by January 2020 at the latest. The ET also found the claimant not to be a credible witness and rejected arguments that absence of a signed deed, the claimant's desire to inspect accounts or the parties' failure to agree a written limitation of partnership liability were fatal to the existence of a PA 1890 partnership. The EAT held that the ET had applied the correct legal tests (including relevant Partnership Act provisions and the Ready Mixed Concrete approach) and permissibly reached the factual conclusions it did; the appeal was therefore dismissed.

Background and procedural posture

The claimant, an experienced tax accountant, brought claims including unfair dismissal and unauthorised deductions. The Manchester Employment Tribunal (Employment Judge Allen with two members) found that the claimant had been an employee until 31 March 2019, that from April 2019 he became an associate partner within the meaning of the Partnership Act 1890 and was therefore not an employee under section 230 Employment Rights Act 1996, but that he was a worker under section 230(3)(b). The claimant appealed to the Employment Appeal Tribunal challenging the ET's finding that a PA 1890 partnership had been formed and arguing inadequate reasons and inconsistency with the worker finding.

Nature of the claim / relief sought

• The claimant sought declarations and remedies relating to employment status, specifically to pursue unfair dismissal and breach of contract claims as an employee; he also claimed unauthorised deductions of wages.

Issues for decision

1. Whether the ET was wrong to find a de facto partnership within the meaning of the Partnership Act 1890 despite the absence of a signed partnership deed and the claimant's stated requirement to see accounts and agree all terms.
2. Whether the ET gave adequate reasons, including adequate engagement with relevant Partnership Act provisions and case law.
3. Whether the ET's finding that the claimant was exposed to partnership risk was inconsistent with its finding that he was a worker.
4. Consequences for the unfair dismissal claim.

Court's reasoning

The EAT reviewed the ET's multifactorial assessment of status, applying the Ready Mixed Concrete test and the authorities on partnership and status. The ET had found (factually) that parties genuinely intended the transition to associate partner, that by January 2020 the essential terms (notably the fixed drawings and tax treatment) were agreed even if not all terms in the draft deed were finalised, and that the claimant had accepted the changed tax and payroll treatment for a substantial period. The ET also found the claimant not credible and was entitled to weigh that in assessing whether his earlier stated preconditions (inspection of accounts, signed deed) remained operative. The ET recognised that in the absence of an express variation under section 19 Partnership Act 1890 the default joint liability under section 9 applied, but concluded that failure to agree a written variation was not fatal to finding a partnership. The EAT held these were permissible factual and legal conclusions and rejected the criticisms that the ET failed to engage with relevant statutory provisions or erred by giving weight to the parties' contemporaneous intentions. The EAT also accepted that the ET could permissibly find worker status for section 230(3)(b) purposes even though it concluded the claimant was not an employee.

Subsidiary findings

• The ET would have found an unfair dismissal had it determined the claimant to be an employee because no fair procedure preceded dismissal, but that question did not arise given the status finding.
• The ET upheld the unauthorised deductions claim in the sum of 2,865.60.

Appeal dismissed. The Employment Appeal Tribunal concluded that the Employment Tribunal had correctly applied the law and was entitled, on the facts found (including findings on credibility and the parties' contemporaneous intentions and tax treatment), to find that a partnership within the meaning of the Partnership Act 1890 had been formed and that the claimant was therefore not an employee under section 230 ERA; the ET had also permissibly found worker status and had given adequate reasons and engagement with relevant statutory provisions and authorities.

Appeal from the decision of the Manchester Employment Tribunal (Employment Judge Allen, with Mrs Ashworth and Mrs Hillon) sent 21 January 2022. This decision was heard in the Employment Appeal Tribunal and handed down as [2024] EAT 105; Case No EA-2022-000287-JOJ.