Dr Graeme Madden v Waracle Limited & Anor

In determining the employer in an agency or umbrella-company arrangement, the tribunal must make a sufficiently wide-ranging inquiry into what the parties truly agreed. Written contracts are relevant but are not conclusive where the wider circumstances show that they do not reflect reality.

An employment contract with the end client is implied only where necessary to give business reality to the arrangement. Integration into, and control by, the client do not alone make implication necessary where genuine contractual arrangements explain the worker’s supply and identify another employer.

An Employment Tribunal’s concise reasons are sufficient if, read fairly and as a whole, they enable the informed reader to understand how the substantial issues were decided.

The appellant, an IT professional, was recruited by Cathcart to work on Waracle’s temporary project for a bank. He entered an agreement headed Employment Contract with Paystream, an umbrella company, and worked on the assignment for less than two months.

Following the end of the assignment, he claimed notice pay, unfair dismissal, disability discrimination and harassment. The Employment Tribunal held at a preliminary hearing that Paystream, not Waracle, was his employer. It rejected the notice-pay claim on the contractual basis then advanced.

The appellant appealed, contending that the tribunal had applied the wrong approach to the identity of his employer and had inadequately addressed whether the Paystream contract was a sham or whether a contract with Waracle should be implied. He also sought, at a late stage, to expand the appeal and introduce fresh evidence.

1. Appeal dismissed. The Employment Tribunal did not err in law in finding that Paystream was the appellant’s employer and that no contract of employment with Waracle should be implied.
2. The tribunal had made a sufficiently broad inquiry into the true agreement. It considered the contractual documentation alongside the appellant’s experience, his prior use of umbrella arrangements, his choice of Paystream, the short assignment, and the parties’ conduct. Those findings entitled it to conclude that the Paystream contract was freely made, genuine and reflected the parties’ agreement.
3. The appellant’s integration into Waracle’s project and Waracle’s control of his day-to-day work did not require a contract with Waracle to be implied. Genuine agency arrangements can explain those features. A direct contract with the end client may be implied only where necessary to give business reality to the relationship, and no such necessity arose here.
4. The tribunal’s reasons, though succinct, adequately addressed the substantial issue: whether Paystream or Waracle employed the appellant. Its findings made clear why it rejected the contention that the Paystream arrangement was fraudulent or a sham, and why it did not imply a contract with Waracle.
5. The EAT did not determine whether the deemed-resignation provision might be ineffective under section 86(3) of the Employment Rights Act 1996. That issue had not been pleaded or determined below. The case was remitted so that the tribunal could consider any application to amend to claim statutory notice pay against Paystream, and determine the outstanding claims against Waracle.
6. The applications to expand the grounds of appeal and admit fresh evidence were refused. It was neither just nor proportionate to reopen the appeal beyond the permitted grounds at that late stage.

• Employment Appeal Tribunal: Appeal dismissed. The tribunal’s conclusion that Paystream was the employer was upheld, and the matter was remitted for the outstanding claims and any application concerning statutory notice under section 86(3) of the Employment Rights Act 1996.
• Employment Tribunal: On 10 May 2024, at a preliminary hearing, held that Paystream was the appellant’s employer rather than Waracle and rejected the contractual notice-pay claim. The unfair-dismissal claim had previously been struck out on 13 November 2023.