Stringfellows Restaurants Ltd v Quashie 2012 Analysis

“All employees are workers but not all workers are employees”

Stringfellow Restaurants Ltd v Quashie [2012] EWCA Civ 1735; [2013] IRLR 99 [5] (Elias LG)

Introduction

Not all workers are considered as employees, some individuals are referred to as workers. It is legally important to distinguish between the two but as proven in the Stringfellow Restaurants Ltd v Quashie, 2012 case it is not always easy to determine what category some individuals fall under. To briefly summarise Quashie brought a case of unfair dismissal to an employment tribunal, however the case was rejected on the regards she was not an employee. Only employees with qualifying service have the right to bring unfair dismissal claims, employees are individuals that work under a contract of service or apprenticeship as stated in section 230 of the employments right act 1996 (Kerseys, 2017).

The Contract of service is defined as the contract of employment in legal terms, the concept is usually distinguished against the contract for services; this is a contract where a person provides a service for example a self-employed worker (Middlemiss & Downie, 2015). Those working under a contract for services will not receive same statutory rights and obligations as employees but do benefit from flexibility and lower tax rates (Carby Hall, 1983).  Mainly because of the flexible interpretation in the labour market it makes it difficult to distinguish between a worker and an employee (CIPD, 2015).

There are three common law principles that determine whether an individual is an employee or a worker (Wallace, 2013). The Tribunal and the employment appeal tribunal had conflicting views on whether Quashie had fulfilled one of the main principles. The principles are known as personal service, control and mutuality of obligations. This case highlights the ambiguity and confusion about the relative status of workers or employees (Towers, 2012). Stringfellows Restaurants Ltd v Quashie 2012 will be explored in greater depth and in comparison to other case law and a selection of common law tests that can reveal the factors needed to be present for an individual to be considered an employee rather than a worker.

Common Law Principles

The case regarding Ready-Mixed Concrete (South East) Ltd vs Ministry of Pensions and National Service [1968] developed the common law principles. This case is commonly referred to when determining the status of an individual (Sherrington, 2007).  To summarise, the drivers of the Lorries were previously employed by the firm but when they were dismissed the firm sold the Lorries to the ex-employees and re-hired them as self-employed workers. This lead to some disagreement hence the legal case as the contract contained several clauses which made it difficult to distinguish whether the drivers were actually self-employed workers or employees (Emir, 2016). Due to the drivers owning the Lorries they now had to maintain and pay all the costs attached to running the vehicle, they had greater autonomy in deciding what route to take and could provide a substitute driver when necessary and were responsible for paying their own national insurance contributions: these in practice all point to the drivers being self-employed workers. However when the case is examined further it revealed that employees still had to wear uniform and Lorries could only be used for the activities carried out by Ready Mixed Concrete (South East) Ltd, they could not carry out work for anyone else because the lorries needed to be available to firm at any point. Ready Mixed Concrete Ltd still had the element of control as the drivers were under obligation to obey orders by the firm this suggests that they are in fact employees.  The court determined that the drivers were self-employed workers predominately due to the fact they could provide a substitute diver (Emir, 2016). Therefore it is critical to consider all the main principles in isolation, before combining them together to determine whether an individual is either an employer or a worker.    

Ready-Mixed Concrete Ltd vs Ministry of Pensions and National Service, 1968, judicial decision dictated that the three common law principles must be in existence for it be considered as a contract of employment (Cabrelli, 2016). Therefore each principle will be discussed in more detail throughout this essay.

Personal Service

Due to the substitute clause having the overriding affect in Ready Mixed Concrete case, Personal service will be discussed first. This test deliberates if the individual carried out the work did they do it personally (Middlemiss & Downie, 2015). If an individual is subject to provide a suitable replacement when they are not able to a provide service it is most often or not this individual is a worker or independent contractor (PlusHR, 2017). There have been several cases that reflect substitution clauses, however it is important to highlight that this type of clause cannot exist in a contract of employment because it is not consistent (Cabrelli, 2016)

The court of appeal set out the condition that an individual must perform a service personally to an employer before a contract of service can occur, as seen in the Express and Echo Publications Ltd v Tanton [1999] (Middlemiss, 2012). Tanton had a substitution clause in his contract which stated if he was unable or unwilling to perform his work personally, Tanton had to provide another suitable person to perform the work. Although there was a degree of control present the substitution clause overrides the control factor as it reflects a self-employed role and is inconsistent with a contract of employment (Middlemiss, 2015). The obligation of personal service must be present for a contract to be considered one of employment (Antell, 2004).

However this statement is challenged, in the case of Pauley v Kenaldo Ltd [1953]. In certain circumstances an individual will have an obligation of personal service, but will only have to do some of the work personally. In turn this contract could be held as a contract of employment. For example Pauley was a clockroom attendant who organised a substitute at her expense to cover her day off, however this was an unusual occurrence as she usually carried out the work personally (Antell, 2017). The Personal Service factor is case by case specific not one size will fit all. Although it would be unusual to be accepted to delegate as an employee as long as it is limited it will not prevent someone being an employee. As proven in the Byren bros (Foamwork) Ltds v Baird [2002]. The delegation in this case was found not be inconsistent with the contract of employment, as the individual had to receive permission first by the employer before delegating in circumstances where the individual cannot carry out the work personally (Vettori, 2007).

However as argued that substitution clause can be dangerous, as it provides the possibility that employers can deliberately place one into the contract to  contradict the employment status for workers, this was expressed in Consistent Group Ltd v Kalwak [2008]. This is when the substitution clause was used to deny any obligation to provide work to employees, even though it did not reflect the actual relationship (Painter & Holmes, 2012).

Control

Control is important factor to consider when establishing if there is an employee/employer relationship in existence. The control test was one of the earliest developments by the courts to verify the relationship status (Sargent, 2014). This is determined by how much control the employer has over the individual party (Emir, 2016).  As proven in Narich Piry Ltd vs Payroll Tax Comr [1984].  The employer (Narich) can effectively control not only the allotted task but also the way how a task is to be carried out/performed (Gov, 2016). It was degree of control through the detailed and specific instructions that confirmed that those classed as lecturers working for Narich were in fact employees. 

However, element of control can subject to different interpretations as shown in Hitchcock v Post Office [1980]. An organisation can exercise control over certain functions ran by an Individual but it would be wrong to assume that this individual is an employee. As explained in this case Hitchcock ran a sub post office in his own shop. The Post Office provided him with a degree of instructions with regards to financial control and security but did provide guidance on how to carry out other functions on the managerial side, therefore resulting in Hitchcock not being an employee of the Post Office (Emir, 2016). It is argued if an individual has greater autonomy and fewer instructions that individual is more likely to be a worker or an individual contractor (PlusHR, 2017).

The control test can be inappropriate for skilled individuals and problems were highlighted in the simplicity of the test in Hillyer v Governors of St Bartholomew’s Hospital [1909]. The court decided that nurses are not employees of the hospital within the operating theatre because instead of taking orders from the hospital authorities they took orders from the operating surgeon (Honeyball, 2016). This took into consideration because surgeons were seen as professional they were not bound to accept hospital instructions (Carby Hall, 1983).Thus the organisational test was developed to realistically examine the control factor against skilled employees. Points devised from Stevenson, Jordon and Harrison Ltd v MacDonald and Evans [1952] is referred to throughout case law  if an individual work is seen an integral part of the business, they are in fact an employee (Emir, 2016). As seen in Whittaker v Minister of Pensions and National Insurance [1966]. A Trapeze artist was carrying out her contractual duties -an integral part of business – when she fell by accident. Due to circumstances and the accident happen when Whittaker was employed under a contract of service she was declared an employee which entitled her to claim industrial injury benefits (Mocatta, 1967)

Mutuality of Obligation

Mutuality of obligation is the essential requirement because without it there can be no contact of any sort (Dixon, 2006). This refers to the obligation of an employer to provide work and pay for it alongside the obligation of the employee to personally do the work (Antell, 2004). If an individual is carrying out the work and getting paid there is obligatory mutuality in existence.  It is legally important to distinguish the relationship between the individual and the employer, whether the individual is seen as an employee or a worker. As failing to define the status of employment relationship can result in legal penalties which would be financially detrimental to the firm due to fact if a worker manages to declare themselves as an employee they then have the employment rights to gain benefits that they are entitled to (PLC, Employment, 2013).

The key point considered in the case law tends to be whether the work is carried out on a regular uninterrupted basis or a causal basis. The issue is highlighted in the Carmichael v National Power plc [2002] it needs to be established whether there is still an obligation or a contract of employment during gaps in employment. Two women were employed as guides at Blyth Power Station in Northumberland on a causal as required basis. They ended up working an average of 25 hours per week but only by invitation and only when they chose to work (Middlemiss & Downie, 2015). When they brought a claim against their employer to a tribunal for not providing them with written statement of particulars. The tribunals examined the documentation and decided it was “foundered on the rock on absence mutuality” (Antell, 2004). This stresses for a contract to exist there must be an ongoing mutuality of obligation between parties during periods of non-employment and just because you have series of one off contracts does not automatically equal mutuality of obligations.

However this principle is challenged in Cornwall County Council v Prater [2006]. Prater worked as a home tutor for the council between 1988 and 1998 under a series of separate engagements. The council were not obliged to provide Prater with work nor did she have to accept engagements offered.  However once accepted Prater was under an obligation to complete the work and council paid her, there was a number of engagements within the ten year period. The tribunal had to decide whether this series of engagement made Prater continuously employed by the council. The tribunal found that was the case and she was working under a contact of employments for each engagement and when out of work she was covered by the temporary cessation of work (Section 212 (3) Employments Rights Act, 1996) this resulted in there being an ongoing mutuality as this period still counted as continuous employment (Nixon, 2006). This temporary cessation was not available to workers in Carmichael case stressing the difference.

Applying Principles to the Case; Stringfellow Restaurants Ltds v Quashie, 2012.

When applying these principles to the Stringfellow Restaurants Ltd v Quashie [2012] case showed the different interpretations of mutuality of obligations between the tribunal and Employment Appeal Tribunal (EAT) (Wallace, 2013).

Tribunal deliberated the issues of personal service, control and mutuality of obligations and decided that Miss Quashie was not an employee. This is due to insufficient mutuality of obligation in the employment relationships (PLC Employment, 2013). Points considered were that Stringfellow was under no obligation to pay Quashie during periods when she was not dancing at the club and she could work anywhere else if she wanted to (Wallace, 2013). This meant she was not covered by continuous employment clause that Prater was. This also contributes to the fact even if she was considered as an employee she did not have the sufficient entitlement period of two years to even claim unfair dismissal, as Quashie only worked over 18month period (Wallace, 2013). Stringfellow were not obliged to pay Quashie anything; they just allowed her to dance in the club Quashie made her earnings through the customers, so with work to get paid element not present she was declared not as an employee (Kerseys, 2017). Hence providing justification to the tribunal for not allowing the unfair dismissal claim to proceed.

However the tribunal did not consider the level of control that Stringfellows had over Miss Quashie that qualifies as mutuality of obligations (PLC Employment, 2013). This is how EAT reasoned their case to support Quashies appeal. EAT argued that mutuality of obligations did exist when Quashie worked at Stringfellows as she was rostered on the rota and they controlled her activities to a certain extent, there was several rules that Quashie must abide e.g. dancing on the stages at various time for no pay, it was during the private dances that should she was earn money but Stringfellows took a commission of this. In doing so there was a mutual benefit for both parties involved (PLC Employment, 2013). EAT supported the appeal because they articulated that all three common law principles were in existence.

The Court of Appeal upheld the original tribunal’s decision, as when further examined factors favoured more towards Quashie being a self-employed worker. Although it was acknowledged that mutual obligations were in existence but only during the times Quashie was physically working. It was argued that Stringfellows were under no obligation to pay Quashie due to the setup of payment. There was a surcharge of commission because Stringfellows provided Quashie with opportunity to dance for clients, they did not employ Quashie to dance which would have resulted in an obligation to pay (PLC Employment, 2013). The deciding factor was that Quashie put herself in this position of not getting paid, it was the economic risk that the courts declared as “powerful pointer” that opposes the nature of a contract of employment (Wallace, 2013). Furthermore Quashie was responsible for paying her own tax which suggests that Quashie accepted that she was a self-employed worker (PLC Employment, 2013).

To conclude the Quashie case is a prime example to show how differing interpretations of the three common law principles can result in contradictory judicial decisions. All three principles must be present for an individual to be considered as an employee. Although there is confusion and ambiguity with each principle as expressed in the cases above, however each principle should be considered on a case by case basis. It is more likely or not if an individual is given detailed and specific instructions, carries out the work personally and is not responsible for deducting tax and national insurance that the individual is an employee. Employees benefit from statutory rights and benefits, also employers have a duty of care towards that employee. This therefore puts the employee in a better positions than workers especially in regards to unfair dismissal claims as proven in Quashie case.

References

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List of Cases

• Ready-Mixed Concrete (South East) Ltd vs Ministry of Pensions and National Service [1968] 1 AII ER 433, (1968) 2 QB 497
• Express and Echo Publications Ltd v Tanton [1999] IRLR 367, CA
• Pauley v Kenaldo Ltd [1953] 1 All ER 226.
• Byren bros (Foamwork) Ltds v Baird [2002] IRLR 96 Case
• Consistent Group Ltd v Kalwak [2008] EWCA Civ 430 CA
• Narich Piry Ltd vs Payroll Tax Comr [1984] ICR 286 PC
• Hitchcock v Post Office [1980] ICR 100, EAT
• Hillyer v Governors of St Bartholomew’s Hospital (1909)
• Stevenson, Jordon and Harrison Ltd v MacDonald and Evans (1952) 69 RPC 10, [1952] 1 TRL 101, CA
• Whittaker v Minister of Pensions and National Insurance 1966 3 All ER 531
• Carmichael v National Power plc [2002] IRLR 43
• Cornwall County Council v Prater [2006] EWCA Civ 102 Case