Advise Mr Witanga as to whether he has a claim against Ugly Duckling Ltd
Advise Mr Witanga as to whether he has a claim against Ugly Duckling Ltd. Your advice should outline the relevant case law, procedure and any arguments that Ugly Duckling Ltd may put forward in response. You should also outline any employment tribunal process now that Mr Witanga has filed an ET1, and consider the ways in which the matter could be resolved.
This assignment will consider the employment position of Mr Witanga. It will consider his application to the employment tribunal and whether or not it is likely to be successful. It will consider some of the arguments that the respondents (ugly duckling) may raise to aver his claim. Finally the next steps that are taken in tribunal proceeding swill be considered, albeit briefly.
For unfair dismissal jurisdiction to be invoked the Mr Witanga must first satisfy a number of qualifying conditions, the most import of which, is that he or she has been dismissed. Under section 96(1) of the ERA 1996:
….. an employee is treated as dismissed by his employer if, and only if,
(a) the contract under which he is employed is terminated by the employer, (whether with or without notice)
(b) he is employed under a contract for a fixed term and the term expires without being renewed under the same contract, or
(c) the employee terminates the contract under which he is employed(with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct
Therefore Mr Witanga must demonstrate that he falls within one of these categories in order that he can claim unfair dismissal. It is of course likely that he will claim that he falls into category c as being entitled to terminate his contract because of his employers conduct. In such circumstances it will not be necessary for the employee to inform the employer, at the time of the termination, of his or her reason for leaving the employment; the test is simply one of causation, that is to say, was the employee's departure caused by the employer's conduct? The Court of Appeal in Western Excavating (ECC) Ltd v Sharp imposed acontract test. Lawton LJ found it neither “necessary[nor] advisable to express any opinion as to what principles of law operate to bring acontract of employment to an end by reason of an employers' conduct'and suggested that it would be a “waste of legal learning” for tribunals to expend much time and effort examining the law of repudiatory breach.
The voluminous case law that has developed around section 95 (1)(C) simply indicates that the circumstances giving rise to a constructive dismissal are as varied as those of employment itself. A serious breach by the employer of the duty to maintain mutual trust and confidence, which is part of the reciprocal duty of co-operation will normally be regarded as sufficient. Conduct falling into this category has included subjecting the employee to abusive and insulting language ; refusing to investigate a justified complaint relating to health and safety ; making an unsubstantiated allegation against the employee ; insisting without good cause that the employee should undergo a psychiatric examination ; arbitrarily capriciously and inequitably singling out an employee for an inferior pay rise to that received by other employees ; denying the employee access to the company's premises by changing he locks and telling customers that the employee no longer worked for the company ; allowing an employee to be subjected to sexual harassment ; writing a misleading reference for a prospective employer ; and suspending the employee in response to unsubstantiated allegations of child abuse . However, the notion of reciprocal co-operation has so far stopped short of imposing an obligation on an employer to offer an annual par rise or an offer of regarding. On the other hand, an attempt by the employer unilaterally to vary the express contract terms will almost certainly be regarded as repudiation .
There must be an immediate threat to the express contract terms for the employer to have committed repudiation; it may not be enough for the employer merely to voice a difference of opinion about the contract terms, even if it should subsequently turn out that the employee was right. This is an application of the principle, enunciated by the House of Lords in Woodar Investment Development Ltd v Wimpey Construction UK Ltd that an assertion of a contractual right, unless it was made in bad faith, does not amount to repudiation merely because it “has proved to be wrong in law”. For the assertion to amount to a repudiation the guilty party must “[evince] an intention not to be bound by the contract” . Similarly “[t] he mere fact that an employer is of the opinion, albeit mistakenly, that there is something to be discussed with his employee about the contract is a very long way from the employer taking up the attitude that he is not under any circumstances at all going to be bound by it.”
Therefore it can be argued that Mr Witanga was constructively dismissed when the unilateral change was made to his contract. The continued conduct of the parties, in so far as Mr Witanga was paid monthly at the same time every month, meant that this was the basis for payment in the contract. The addition into the new contract, that Mr Witanga, signed constituted a unilateral change in the terms of the contract, as it allowed Ugly Duckling to pay him on completion of the film, which wa snot part of the original contract. If this is the case then the effective date of termination will be the date at which this contract was presented to him. There will be no ready assumption of waiver orestoppel in cases where the employee's hesitation is due to ignorance of his or her rights .
There are other conditions that Mr Witanga must satisfy in order to commence a claim at the employment tribunal. He must demonstrate that he was employed as an employee by Ugly Duckling Studios.
Under ERA 1996, an “employee” is defined as an “individual who has entered into or works under….a contract of employment”, and a “contract of employment” is defined, in turn, to mean “a contract of service or apprenticeship, whether express or implied, and (if it is express)whether oral or in writing.
” The definition of employee is however by no means a simple concept and cannot be determined simply by the existence of a contract or bythe label that the parties place on their respective positions. InO'Kelly v Trusthouse Forte PLC the Court of Appeal decided by amajority that the application of the legal criteria for identifying acontract of employment was a “question of mixed law and fact” to whichseveral correct answers are possible.
In Carmichael v National Power PLC the majority opinion of Lord Irvineand Lairg LC was that the construction of an employment contract couldonly be a question of pure law if the parties had intended the writtendocuments passing between them to be the exclusive source of theiragreement. In the view of Lord Hoffman, who gave a concurring opinion,whether the parties had such an intention in a given case was itself aquestion of fact. In the construction of employment contracts, it wouldnormally be open to a tribunal to take into account the behaviour ofthe parties entering into the relationship of employment as well astheir subsequent understanding of what the contract required them todo. Cases of completely written contracts of employment would thereforebe untypical.
It would seem that “Ugly Duckling” have attempted to create a contractwith Mr Witanga in order to label him as an independent contractorhowever in McMeechen v Secretary of State for Employment Mummery LJnoted that if the “reality” is one of employee status, the partiescannot override this by “choosing” to adopt self-employment in order toavoid the impact of tax and protective legislation or for any otherpurpose: a “statement that …[a worker] supplies [services] as a selfemployment worker is not conclusive of his statues, since it has beensaid many times that whether someone is an employee is a matter ofanalysing all the rights and obligations created by the contract. It isfor the court and not for the parties to determine whether acontractual nexus can be inferred from the regular practice of workbeing carried out in return for payment, or whether the worker's statusis that of a “volunteer” and hence outside the protection of labourlaw.
In the case of Ferguson v John Dawson and Partners (Contractors) LtdMegaw LJ said that “a declaration by the parties, even if it wereincorporated in the contract, that the workman was to be, or was to bedeemed to be, self-employed, an independent contractor, ought to bewholly disregarded – not merely treated as not being conclusive- if theremained of the contractual terms, governing the realities of therelationship, showed the relationship of employer and employee.”
However in Calder v H Kitson Vickers & Sons (Engineers) Ltd RalphGibson LJ said that “a man is without question free under the law tocontract to carry out certain work for another without entering into acontract of service. Public policy has nothing to say either way.”
It will not automatically be the case that Mr Witanga is an independentcontractor because he pays his own taxes and national insurance. Thisis not fatal to an employer/employee relationship. In Renninson vMinister of Social Security Bridge J saw through a scheme to describeweekly paid secretarial workers as self-employed for tax and nationalinsurance purposes, holding that they were employees and liable to payClass 1 national insurance contributions. Similarly, in Young &Woods LTD v West the Court of Appeal held that the applicant wasentitled to claim unfair dismissal on the grounds that “in reality” hehad a contract of employment, and that an attempt to present him asself-employed was a sham. Therefore the court will consider the reasonsas to why the parties sought to arrange payment this way- it is true tosay that the only reason for the existence of this arrangement was toaccommodate Mr Witanga's request, and to enable him to obtain cheaperrates for income tax and therefore his primary reason was not that hewished to obtain self employed status.
The other test to see whether or not a contract of employment exists isto consider control. In the case of Yewens v Noakes it was held that:“a servant is a person who is subject to the command of his master asto the manner in which he shall do his work”.
In the case of Ready Mixed Concrete (South East) Ltd v Minister forPensions and National Insurance it was held that control included thepower of deciding the thing to be done, the means to be employed indoing it, the time when and the place where it shall be done. All theseaspects of control must be considered in deciding whether the rightexists in a sufficient degree to make one party the master and theother his servant.” Similarly, in McMeechan v Secretary of State forEmployment an agreement under which an agency worker agreed “to fulfilthe normal common law duties which an employee would owe to an employerso far as they are applicable”, including duties of fidelity,confidentiality and obedience to instructions, was for that reason heldmore likely to give rise to a contract of employment between himselfand the agency. Control has also recently been invoked to support afinding that the user of an agency worker's labour may assume thestatus of his employer.
These cases demonstrate that while the controlwhich exists under modern labour market conditions may be less personaland more bureaucratic in nature than that identified in the nineteenthcentury judges it is arguably no less important as a feature whichseparates the employment relationship from other forms of the provisionof labour. It is certainly true from the information that has beenprovided to us that Mr Witanga was, after receiving specific training,instructed on which models he should build for the director. Howeverthe respondent (Ugly Duckling) could argue that he was left to his owndevices and therefore it was entirely up to him how he created themodels.
In Beloff v Pressdram Ltd a highly paid journalist was unable to arguethat, given her high status, she could not be regarded as having acontract of employment, even though she worked full time for thenewspaper and was treated as an employee for tax and national insurancepurposes. According to Ungoed-Thomas J, “the greater the skill requiredfor the employee's work, the less significant is control in determiningwhether the employee is under a contract of service.” This wouldsupport Mr Witanga's argument that he is in fact an employee, as itwould appear that his role requires a great deal of skill and is veryspecialised, for this reason the control test is likely to be of littleimportance.
In Lee Ting-Sang v Chung Chi Keung Lord Griffiths said that there is adifference between “a skilled artisan earning his living by working formore than one employer as a an employee… and a small businessmanventuring into business on his own account as an independent contractorwith all its attendant risks.” In this case the applicant neither hiredhis own helpers nor provide his own equipment; moreover, “he had noresponsibility for investment in, or management of, the work on theconstruction site, he simply turn up for work and chipped off concreteto the required depth upon the beams indicated to him on a plan by the[employer]…. It is true that he was not supervised in his work, butthis is not surprising, he was a skilled man and he had been told thebeams upon which he was to work and the depth to which they were to becut and the work was measured to see that he achieved that result.
Although see the case of Hall v Lormier , where the respondent was askilled television technician who worked for around 20 separatecompanies on a series of short-term engagements. He was held to beself-employed and therefore chargeable to income tax under Schedule D.According to Nolan LJ:
….the question, whether the individual is in business on his ownaccount, though often helpful, may be of little assistance in the caseof one carrying on a profession or vocation. A self-employed authorworking from home or an actor or a singer may earn his livings withoutany normal trappings of business. The most outstanding feature to mymind is that Mr Lorimer customarily worked for 20 or more productioncompanies and that the vast majority of his assignments…. Lasted onlyfor a ingle day”
In Lane v Shire Roofing Co (Oxford) Ltd the Claimant was a buildingworker who was hired by the defendant employer to carry out are-roofing job for which he was to be paid according to a daily rate.The defendant “considered it prudent and advantageous to hire forindividual jobs”. While carrying out the work, the Claimant fell andwas injured. It was held that he was an employee for the purposes ofthe job, and so was owed the common law duty of care with regard to hishealth and safety. According to Henry LJ, applying the test of economicreality, the “business” involved in the work was that of the defendantand not the claimant's.
In the cases of Airfix Footwer Ltd v Cope and Nethermere (St Neots) Ltdv Taverna and Gardiner the court dealt with the position ofhomeworkers. In Nethermere Dillion LJ found it “unreal to suppose thatthe work in fact done by the applications for the company over the notinconsiderable periods…. Was done merely as a result of the pressuresof market forces on the applicants and the company and under nocontract at all” and Stephenson LJ could not see “why well-foundedexpectations of continuing homework should not be hardened or refinedinto enforceable contracts by regular giving and taking over periods ofa year or more, and why outworkers should not thereby become employeesunder contracts of service, like those doing similar work in a factory.
By contrast, in Clark v Oxfordshire Health Authority the Court ofAppeal held that there was no evidence of a global contract ofemployment in the case of a nurse who, under an arrangement with thehealth authority, was offered work as and when the need arose, but whootherwise had no regular working hours. This can be contrasted with MrWitanga's position in which he worked regular hours and took regularlunch breaks.
In the case of Express & Echo Publications Ltd v Tanton the courtconsidered a particular term of a contract. The term in question, underwhich the employee has the right to nominate another person to supplythe labour services in question, on the face of it clearly indicated alack of mutuality of obligation. However, in suggesting that thepresence of such a term was, in itself, incompatible with employeestatus, the Court of Appeal failed to have regard to the standard-formcharacter of the terms in question.
According to Lord Wright in Montreal Locomotive Works, “in many casesthe question can only be settled by examining the whole of the variouselements which constitute the relationship between the parties .”
Mackenna J in Ready Mixed Concrete (South East) Ltd v Minster for Pensions and National Insurance said that:
“A contract of service exists [when] three conditions are fulfilled.(i) The Servant agrees that, in consideration for a wage or otherremuneration, he will provide his own work and skill in the performanceof some services of his master (ii) He agrees, expressly or impliedly,that in the performance of that service he will be subject to theother's control in a sufficient degree to make that other master (iii)The other provisions of the contract are consistent with it being acontract of service”
In O'Kelly v Trusthouse Forte the employment tribunal produced alist of no fewer than 18 different relevant factors, some of which wereconsidered consistent with the existence of a contract of employment.These included the lack of any financial investment by the applicantsin the company's business; the payment by the company of holiday payand an incentive bonus paid on past service; the presence of control bythe employer; and the fact that they were paid weekly in arrears withtax and national insurance deducted at source.
According to Lord Justice Peter Gibson, the first task of a court ortribunal is to identify the contract terms. If it appear that a term ispresent which is incompatible with employee status, there is no need togo further consider and consider the range of factors discussed above.This approach would elevate of the role of the formal contract term indetermining issues of status, at the expense of the more full roundedview of the bargain entered into by the parties which is implicit inthe test of economic dependence.
Therefore in conclusion and in consideration of all of the varioustests that have been proposed by the courts it would appear that MrWitanga satisfies the test and can be deemed an employee for thepurposes of bring a claim for unfair dismissal.
The second requirement of the employment tribunal is that the employeemust have had continuity of employment of not less than one year at thetime of the dismissal, the “effective date of termination. If MrWitanga succeeds on his constructive dismissal claim the effective dateof termination will be deemed to have been the day at which he handedin his notice. The question of fairness in relation to constructivedismissal is another matter for consideration. This will be consideredindependently to the potentially fair reasons for dismissal and thefairness of these issues, this is a separate issue and one that will beconsidered in detail below.
Constructive dismissal asks whether the employer's conduct wasrepudiatory. It is a contractual test and, as with any other dismissal,the employer's breach of contract is not what the idea of fairnesscentres on. However it is quite unusual for an employment tribunal tobe convinces that a constructive dismissal was nevertheless fair in allthe circumstances. For instance in Cawley v South Wales ElectricityBoard , an employee was found urinating out of the back of a SWEB vanas it travelled down the main street. Apparently the employee hadbladder trouble and the whole incident arose out of a practical jokebeing played by his workmates. The employee was at firs dismissed buton appeal this was turned into heavy demotion. He complained hat,although the demotion was allowed for in his contract, itsimplementation was an abuse of power. He resigned and claimed that hewas unfairly constructively dismissed. The tribunal found constructivedismissal. On appeal it was found that fairness and constructivedismissal were very much intertwined and therefore most constructivedismissals will be unfair. The major exception to this is whenconstructive dismissal arise because of business re organisation, as isthe case here and as will be discussed in more detail below. Here thetwo questions of serious breach an fairness are quite distinct.
The issue of fairness will need to be assessed in much the same wayas any other kind of termination it will not make any difference thatMr Witanga is claiming that he was constructively dismissed. The fivefair reasons for dismissal are contained with S98 of ERA 1996 and itwould seem that Mr Witanga will not fall into either of the first fourcategories and the only reason that this can be seen as potentiallyfair reason would be those reasons outlined under (e) and that is thecategory of some other substantial reason. The most common form of“some other substantial reason” is that of business reorganisations,this can be argued by the respondent, to perhaps be the case here.
Employers frequently wish to reorganise parts of the business in orderto increase efficiency and this can involve a change in workingpatterns or methods as seen here with the change of payment methods. Anemployee who refused to cooperate and who resigns in the face of suchchanges may have a claim for wrongful repudation.
If the change does constitute a breach of contract the employer maystill argue that the dismissal was not unfair because of the businessreorganisation. The tribunal is not allowed to second-guess theemployer's business decision, so the employer can establish the fairreason quite easily. In the case of Hollister v National Farmers Unionit was held that all that was needed was a “sound business reason”, oreven merely that the change was beneficial to the operation of thecompany. A mere assertion that there is a business reason is notenough, but employers are only expected to show the factual evidence asthe basis for making their business decision.
The question of fairness then has to be decided, as with any unfairdismissal claim, the manner in which the employer handles the dismissalis still very important. The tribunal will therefore seek to find outwhether the reorganisation was effected in a reasonable way. One of thedifficulties that crops up here is that just because the employer isacting reasonably in seeking to implement the change it does notautomatically follow that the employee is acting unreasonably inrefusing to accept it. All manner of reasons may be relevant. Thetribunal will therefore need to consider the following aspects whenreaching its decision:
(a) whether the employer was consulted with the employee and any employee representatives
(b) Whether the employer considered alternative courses of action
(c) Whether the terms were those which a reasonable employer would offer
(d) What is the balance of advantages and disadvantages to both parties;
(e) Whether the majority of employees have accepted the change.
No one factor is given greater weight than another and the wholecontext of the reorganisation needs to be examined. Applying theseissues to the current scenario it seems likely that this will not be afair dismissal. The reasons for this are that firstly at no time was MrWitanga consulted about the need to re organise the business. As far aswe are aware the employer considered no other alternatives and this wassimply a knee jerk reaction to a seminar that he had attended. It wouldnot seem reasonable that an employer would offer such terms, given thatthis would result in the employee waiting 10 years for his money. Thereare no advantages to the employee whatsoever. Finally, it is highlyunlikely that the majority of employees would have accepted the change.Therefore on the basis of the facts as presented it would appear thatthe dismissal was not fair and therefore cannot be considered to be apotentially fair reason.
Above has been discussed the various arguments that may be raised byboth Ugly Duckling and by Mr Witanga. It is not certain whether or notMr Witanga will win his claim. Briefly below the procedure followingthe lodgement of the ET1 will be considered. The next stage will be forthe tribunal office to send to the employer a standard letter ET2called a notice of originating application and with this will beenclosed the ET1, a blank form of notice of appearance an explanatorybooklet. This practice sometimes means that he employer is incorrectlyidentified, perhaps using a trading name that has no standing to answerpleadings at all. Such a problem is easily resolved later on and theidentity of the employer is most often amended by consent at the startof the hearing.
Having received these papers from the tribunal office the employer mustnow enter an appearance which must be returned to the tribunal officewithin 21 days of receipt. Following receipt of all documentation thetribunal may or may not decide to hold a preliminary hearing. Such ahearing will deal with issues about the jurisdiction of the tribunal ina particular case or other such issues. The two issues which have mostoften been dealt with in this way are whether the originatingapplication was submitted in time and whether the applicant hassufficient service.
Following such hearings the next stage that may or may not occur isthat the tribunal may or may not decide to hold a Pre-trial hearing.Either party can also apply for such a hearing. Following his stagethere may be requests for further and better particulars. Then the nextstage is to arrange for discovery and inspection of relevantdocumentation. The tribunal will then summon any witnesses that theymay wish to call, once this is done a date will be set for the hearingand the parties will then attend the tribunal where a decision will bereached by the tribunal.
Employment Rights Act 1996
Adams v Charles Zub Associates Ltd  IRLR 551
Airfix Footwer Ltd v Cope  ICR 1210
Beloff v Pressdram Ltd  1 ALL ER 241
Calder v H Kitson Vickers & Sons (Engineers) Ltd  ICR 232
Carmichael v National Power PLC  IRLR 43
Cawley v South Wales Electricity Board  IRLR 89
Clark v Oxfordshire Health Authority  IRLR 124
Express & Echo Publications Ltd v Tanton  IRLR 367
Hall v Lormier  IRLR 171
Industrial Rubber Products v Gillion  IRLR 389
Ferguson v John Dawson and Partners (Contractors) Ltd  1 WLR 1213
Hollister v National Farmers Union  ICR 542
Lane v Shire Roofing Co (Oxford) Ltd  IRLR 493
Lee Ting-Sang v Chung Chi Keung  ICR 409
Motorola Ltd v Davidson  IRLR 4
McMeechen v Secretary of State for Employment  IRLR 461
Nethermere (St Neots) Ltd v Taverna and Gardiner  IRLR 240
O'Kelly v Trusthouse Forte PLC 1983] ICR 728
Peyman v Lanjani  CH 457
Polkey v A E Dayton Services Ltd
Ready Mixed Concrete (South East) Ltd v Minister for Pensions and National Insurance 1968] 2 QB 497
St John of God (Care Services ) Ltd v Brooks  IRLR 546
Yewens v Noakes (1880) 6 QBD 530
Young & Woods LTD v West  IRLR 201
Bowers J & Honeyball S, (2002) “Bowers and Honeyball Textbook on Labour Law”, Oxford University Press
Dudington J, (2003) “Employment Law”, Pearson Higher Education
Lewis D & Sargeant M, (2005) “Employment Law” , Pearson Higher Education Press
Willey B, (2003) “Employment Law in Context”, Pearson Professional Education