Appeal No. EAT/0311/02 TC

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 22 January 2003

Before
THE HONOURABLE MR JUSTICE RIMER
MR D BLEIMAN
MISS D WHITTINGHAM

RATHBONE TRADING LTD	APPELLANT

MISS ANNE-MARIE KNOTT	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR STEPHEN HILLS
(Solicitor)
Instructed by:
Messrs Halliwell Landau Solicitors
St James Court
Brown Street
Manchester M2 2JF	
For the Respondent	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT	

THE HONOURABLE MR JUSTICE RIMER

1	This is an appeal by Rathbone Trading Ltd (which we will call “Rathbone”) against the decision of an Employment Tribunal, chaired by Mr A Fraser, at a hearing at Carlisle on 28 January 2002. Extended reasons for the decision were given on 15 February 2002.  

2	The applicant before the Tribunal was Anne-Marie Knott and the matter before the Tribunal, as described by it in paragraph 2 of its extended reasons, was a Preliminary Hearing under Rule 6 of the Employment Tribunal Rules of Procedure, which are set out in Schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.  The preliminary issue was as to “whether the Applicant was, for the purposes of Part X of the Employment Rights Act 1996, an employee, and therefore entitled to bring a claim of unfair dismissal.” Miss Knott was represented at the hearing by her mother and Rathbone was represented by Mrs Raw, its personnel manager.  

3	The Tribunal found that Miss Knott was an employee and as such entitled to bring a claim for unfair dismissal under Part X of the 1996 Act.  It also made an order that the name of the respondent to Miss Knott’s application should be amended to Rathbone Training Ltd, although that appears to us simply to have been a formal correction arising out of the fact that in her application notice Miss Knott had named as the respondent Linda Beck of Rathbone rather than Rathbone itself, whereas the application ought clearly to have named Rathbone rather than Mrs Beck.

4	Mr Stephen Hills of Halliwell Landau, who appears before us on behalf of Rathbone in support of this appeal, made it clear that Mrs Raw, at the hearing before the Tribunal, was not under the impression that the Tribunal was also concerned to consider whether, if Miss Knott was an employee, she was an employee of Rathbone because, as we shall relate, there is also an argument for a conclusion that, if she was an employee, she might have been an employee of a hospital.  Mr Hills explained that Mrs Raw did not argue the question of the identity of the employer at all, but left the matter to go by default on the basis that, if the conclusion was that Miss Knott was an employee, Rathbone would wish to argue that she was at any rate not an employee of Rathbone.

5	The Tribunal itself made what might be regarded as a reference to this in paragraph 18, the last paragraph of its decision, where it said:

18	“Our formal finding is that the Applicant was, at the material time, an employee as defined by section 230 (1) of the 1996 Act, and the Tribunal therefore has jurisdiction to hear her claim.  [Neither side sought to argue that the employer was the Hospital Authority rather than the Respondent.  Having heard no submissions to this effect, we did not consider that question any further.]”

The fact that no such submissions were so made is consistent with what Mr Hills told us was Mrs Raw’s understanding of the ambit of the preliminary issue, namely it was simply one as to whether Miss Knott was an employee but did not also involve a consideration of who, if she was an employee, was her employer.

6	We say straight away that we find it difficult to see how the Tribunal could embark upon a sound consideration of whether a particular person was an employee under an employment contract without considering with whom that employment contract was said to be; that is to say, without considering who the employer was.  If the Tribunal was considering whether Miss Knott was an employee the task it had to perform required it, as it seems to us, to consider who was said to be the employer and was there a contract of employment between that employer and Miss Knott.  It appears that the Tribunal did not approach the case quite in that way, perhaps because Mrs Raw did not invite it to do so, and it appears to us further, for reasons to which we shall come, that it may be that that has led to an unsafe decision, namely that Miss Knott was, as the Tribunal found, an employee.

7	We need to relate a little more of the facts of this case to see the problem with which the Tribunal was engaged, although we should say that our task has not been assisted by the fact that, although we have been much helped by Mr Hills, we have not had the advantage of any representations from Miss Knott, who was debarred from taking any part in the appeal by an Order of Ms J Johnson, the Deputy Registrar of the EAT, made on 12 September 2002.

8	We turn then to the facts found by the Tribunal.  Those facts included that Rathbone is one of the largest training companies in the United Kingdom and is a registered charity.  It trains more than 15,000 people a year.  It was formed in April 1995 following the merger of the Rathbone Society and Community Industry.  The Tribunal referred to certain documentation put forward by Rathbone which described its aim as follows:

5	“…Our aim is that at the end of your time with us you will have the confidence and ability to get and keep a job, or to be able to go to college to do further studies.  You should have developed a number of skills and, if specified in your action plan, you should have achieved a qualification, or credits towards one.  You should be able to demonstrate from your time with us that you are reliable, willing and adaptable.”

9	The Tribunal also referred to Rathbone’s so called “Client Charter” and cited as follows from its descriptions of the training provided:

“Your Training Adviser will agree your normal hours of work with you and your work placement.  If you attend a college or other training centre as part of your course, they will give you a course timetable.  The total hours each week are 37.  You will not normally be expected to work overtime.  If you are not attending a placement or college, you must attend the Rathbone CI Centre at Abbey Road.
On some kind of courses you may be entitled to a weekly training allowance.  If you are working on placement this may be paid to you by your employer.  If you are currently receiving benefit payments, your allowance may be added to that payment.”

10	The Tribunal pointed out that the Charter stated that Miss Knott would receive a weekly training allowance of £50.  It explained that it then dealt with holidays (21 days each year) sickness, time off and length of course, which last

“…would depend on three things:
The type of course you follow.
Your particular needs.
Your progress towards your training plan.
Your course will not normally be longer than 2 years.”

The Tribunal explained that the document contained further provisions including a formal disciplinary procedure, and a complaints and grievance procedure, to be raised with the Training Adviser.

11	Miss Knott had previously attended a childcare course at college and had expressed an interest in health related business administration.  She commenced her training programme with Rathbone on 27 March 2000, having been referred to Rathbone by the Careers Service.  She was 17 years old.  Her Individual Training and Development Plan (known as the R4) stated her training location to be at the Pathology Laboratory, Furness General Hospital (which we will call “the Hospital”), where Rathbone placed her.  She was also undertaking her NVQ in Administration, Level 2, which involved her attending one day a week at the Rathbone Centre.  The weekly allowance of £50 that Rathbone paid her was reimbursed to it by the Health Authority.

12	The Hospital terminated Miss Knott’s placement with it on 27 June 2001, allegedly because of a breach of confidentiality.  As she was by now over 18, she was no longer eligible for youth training and she was told she could no longer continue with the programme at Rathbone.  Rathbone agreed, however, to help her to complete her training qualifications and she did complete her NVQ, Level 2.  It told her that she would be welcome to return to complete further qualifications when she had obtained new employment.

13	The issue on which the Tribunal had to rule was whether Miss Knott was an employee so as to be entitled to bring a claim for unfair dismissal.  The Tribunal started by citing from the definitions in section 230 of the Employment Rights Act 1996:

230	“Employees, workers etc
(1)	In this Act “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
(2)	In this Act “contract of employment” means a contract of service or apprenticeship, whether express of implied, and (if it is express) whether oral or in writing.”

14	The Tribunal then held that it was well established that “trainees”, particularly those in government-sponsored training schemes, may have no legal contract with their trainer.  They expressed the view tha, if there is a contract and its primary purpose was training, with the work content being secondary, then the contract will be one of training, not of employment.  The Tribunal referred to the decision of the Employment Appeal Tribunal in Daley v Allied Suppliers Ltd [1983] IRLR 14.  In that case, Miss Daley had been taking part in a work experience scheme as part of the Youth Opportunities Programme (“the YOP”).  The YOP was introduced by the Manpower Services Commission (the “MSC”) and its practice was to interest employers in becoming sponsors of work experience schemes.  Any employer so interested would submit a work experience scheme to the MSC, with schemes usually providing training programmes of about 26 weeks.  If approved by the MSC, copies of the scheme would then be sent to job centres and careers offices which would find young people to submit to the sponsor as trainees.  Trainees would receive a payment of £25 a week from the sponsor, which could recover it from the MSC.  The schemes would provide for the trainees to be subject to the same disciplinary provisions as the workforce, that they would have a specified amount of paid holiday and would be subject to provisions in relation to sickness absence, would be subject to a limit on the hours they could be required to attend, and that attendance for training was entirely optional.

15	The issue in the case was whether Miss Daley was employed by either Allied Suppliers (the sponsor) or the MSC within the meaning of section 78 of the Race Relations Act 1976.  Section 78 (1) provided then, as it still provides, that:

78	(1)	“In this Act, unless the context otherwise requires - …
“employment” means employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour, and related expressions shall be construed accordingly.”

That definition of employment is therefore slightly wider than the definition in the 1996 Act, but the wider element of its definition is not in point for present purposes.  The question before the Tribunal in the present case was whether Miss Knott was employed “under a contract of service or of apprenticeship”, an element of the definition in the 1996 Act which is the same as that in the 1976 Act.

16	In the Daley, case the EAT held, by a majority, that there was no contract between Miss Daley and Allied Suppliers and so her claim to discrimination against it necessarily failed; but the EAT was unanimous that, if there was such a contract, then it was anyway one for the training of Miss Daley, and not one of employment.  The Tribunal cited from the headnote of that decision but we will cite from paragraphs 20-23 of the judgment delivered by Neill J.  He said:

20	“The first question to consider is whether there was any contract at all between Miss Daley and the company….In [the view of the majority], though it is true that in a general sense the two parties accepted certain obligations towards each other while the relationship between them existed, the acceptance of these obligations did not bind Miss Daley and the company together by a legal contract.  The company were taking part as sponsors in a form of training which was organised by the MSC.  Miss Daley was availing herself of facilities for training which the scheme provided.
21	We are, however, all agreed on the answer to the second question which has to be considered.  If a contract did exist between Miss Daley and the company, we are satisfied that this was a contract for the training of Miss Daley.  She was undertaking to work and comply with instructions as a trainee and not as an employee.  The underlying purpose of any contract between them was not to establish a relationship of an employer and employee but to enable Miss Daley to acquire certain skills and experience.  In Wiltshire Police Authority v Wynn [1980] ICR 649 the Court of Appeal had to consider the question whether a police cadet was employed under a contract of service within the meaning of the Trade Union and Labour Relations Act 1974.” – 

we interpose to say that the definitions in that Act of “employee” and “contract of employment” were in terms essentially identical to those in the 1996 Act – 
“At page 656, Lord Denning, MR referred to two old cases concerned with the distinction between a contract of service and a contract of apprenticeship.  He continued:
“The courts drew a distinction according to which purpose was the primary purpose: and which was secondary.  If the primary purpose was work for the master – and teaching a trade was only a secondary purpose – it was a contract of service.  But if teaching a trade was the primary purpose – and work for the master was only secondary – then it was a contract of apprenticeship.
The distinction between the cases where teaching and learning is the primary purpose – and cases where the work done is the primary purpose – is helpful in the present context.  Applied to the case of a police cadet, it seems to me that throughout the cadetship, the primary purpose is to teach and to learn – not a trade – but as part of general education…They are not being taught a trade such as would make them an apprentice.  They are not doing work for the employer so as to be under a contract of service.  They are neither apprentices nor servants.  They are in a class by themselves – police cadets.”
And at page 600, Dunn LJ said:
“Ever since the settlement cases of the 18th and 19th centuries, the common law has held that the court must look at the principal object of the contract in deciding whether or not a contract of service exists.  Where the primary object of the contract is teaching or learning, then there is no contract of service.”
22	The primary object of the work experience scheme was to enable Miss Daley to obtain some work experience.  We are satisfied that even if a contract existed between the company and Miss Daley it was not ‘a contract of service’ or ‘a contract personally to execute any work or labour’.  We have therefore come to the conclusion that the Industrial Tribunal were correct in deciding that they had no jurisdiction to entertain any complaint of an infringement of s.4 (2).” –

which we interpose to say was a provision of the 1976 Act which outlaws discrimination against employees – 

23	“We are further satisfied that Miss Daley was not employed by the MSC.  Miss Daley accepted no contractual obligation towards the MSC and certainly no obligations of the kind covered by the definition of ‘employment’ in s.78.  Accordingly, no complaint could be entertained for an infringement of s.7 (2).” –

which we interpose to say was a provision of the 1976 Act outlawing discrimination against a contract worker.

17	The Daley authority might perhaps be said to have provided a fairly clear steer towards the conclusion that, at any rate if Miss Knott had a contract with Rathbone, it was one whose underlying purpose was to provide her with training, enabling her to acquire skills and experience, and not one under which the performance of the work she did under it was the primary purpose.  If this was the right conclusion then, as with the Daley case, the contract could not have been a contract of employment.  No suggestion appears to have been made to the Tribunal that there was any question here of Miss Knott having a contract of apprenticeship.

18	On the other hand, if the Tribunal in the present case had had to consider whether there was a contract between the Hospital and Miss Knott, it may be that the Daley case would not have been of such assistance.  As we have already indicated, the Tribunal did not focus on who the employer of Miss Knott might have been; it simply considered the essentially abstract question of whether she was an employee.

19	Even if the Daley case provided the Tribunal with a steer towards the conclusion that Miss Knott was not an employee, the Tribunal nevertheless declined to arrive at such a conclusion.  It directed itself that, in forming its views as to whether or not Miss Knott had a contract of employment it had to consider not just the documentation “but the arrangements as they operated in practice, as well as the surrounding circumstances.”  The Tribunal then referred to the fact that Miss Knott carried out an induction at the Rathbone Centre as well as an induction at the Pathology Department in the Hospital.  It found that the type of work she did at the Hospital was dealing with samples and records, including labelling specimens and the entry of data on the computer.  She also did some office work including filing, answering the telephone and manning the reception desk, sometimes on her own during lunch breaks.  It found that Miss Knott was doing more than acquiring skills and experience – she was doing work which would have to be done in any event.  It found that there was no suggestion that this was a series of placements under which she was obtaining experience from different types of work or office routine.  The Tribunal found, in particular, that:

15	“…It would have been difficult to distinguish her situation from that of any other employee.  Her hours of work, conditions of employment and holiday entitlement appeared to be consistent with the conditions one would expect for employees.  Her weekly attendance at the Rathbone Centre to undertake work in connection with the NVQ Course was equally consistent with the day – or block – release courses provided for many young employees.
16	It is of course quite true that the Hospital did not pay the Applicant directly.  Nor was there any written contract, or other documentation between the Hospital and the Applicant.  But what appeared to us to be crucial was the fact that the termination of the placement brought not merely the placement, but the complete arrangement, to an end.  This does not seem consistent with the intention of a training contract with a two year course length (see R5, box 2) if that is really what it was.  Mrs Raw asked us to bear in mind that Mrs Knott had accepted that it was a training programme.  But equally Mrs Raw had described the course to us as a work-based training programme.”

20	For those reasons the Tribunal concluded that Miss Knott’s contract was one of service rather than for her training and, as we have already indicated, it appears to have reached the conclusion that, there having been no argument to the contrary, it was implicit that the employer was Rathbone rather than the Hospital.

21	On this appeal, Mr Hills has submitted on behalf of Rathbone that the Tribunal was in error in concluding that Miss Knott was an employee.  He said that this was a placement of Miss Knott with the Hospital by Rathbone for training purposes and that the Daley case showed that such contracts were not contracts of employment and that the Tribunal gave insufficient reasons as to why it should not regard the Daley case as governing the instant one.

22	We do not find that argument by itself to be a very compelling one since we consider that the Tribunal did provide reasons as to why it did not regard the outcome of the case as governed by the Daley case.  Those reasons were, in summary, that it was satisfied from the evidence that the primary purpose of the contract – whoever that contract was with – was the performance of work under it rather than the training of Miss Knott.  If that finding was one to which the Tribunal was entitled to arrive on the evidence before it, then it would appear to us that its decision that Miss Knott was an employee would be an unimpeachable one.  However, looking at the matter from Rathbone’s viewpoint, we do at least have misgivings as to whether it was a decision at which the Tribunal was entitled to arrive.

23	Assuming that Miss Knott had a contract, if with anyone, with Rathbone, we are unconvinced that there was anything in the facts of the case to which the Tribunal referred that justified the conclusion that its primary purpose was the performance of work by Miss Knott for the Hospital.  We have no difficulty in accepting that she was indeed doing work for it or in accepting that it was work which would have to be done by the Hospital anyway; although those facts appear to us to be unremarkable since it appears to us that that is likely to be the case with the work done by most people who are put on work experience placements like Miss Knott.  However, we doubt whether a consideration of the work actually done by Miss Knott during her time at the Hospital provided any reliable guide as to the primary purpose of the contract, if any, which she had earlier entered into with Rathbone.

24	The fact which appears to us to be of overriding importance in considering the primary purpose of any contract Miss Knott may have had with Rathbone, was that Rathbone was and is a company whose function is to provide training for young people.  The training it provides includes training by way of a placement at a place of work, at which the trainee will do work by way of obtaining experience and training; and on one view this is all that was happening in Miss Knott’s case.  The Tribunal had in terms found that Miss Knott commenced Rathbone’s “programme”, which was a training programme, with the Hospital on 27 March 2000.  It described the Hospital as her “training location”.  It referred in paragraph 7 of its reasons to Miss Knott’s “National Traineeship Record”, in which she was described as “non-employed”.  In paragraph 17, it held that “there was clearly a training element to the contract” and in paragraph 16 it had referred to Mrs Knott’s acceptance that the placement was a “training programme”, although it appeared to regard the weight to be attached to this as negatived by the fact Mrs Raw had described it as a “work-based training programme”.

25	Overall, all these factors appear to be factors which could be said to point convincingly to the conclusion that Miss Knott was not an employee, or at any rate not an employee of Rathbone, but was a trainee on a placement; and we cannot identify any evidence which justified the conclusion that the primary purpose of any contract that Miss Knott may have had with Rathbone was the performance of work for the Hospital rather than for training.  In addition, the Tribunal appears to have attached weight to factors which may be said to carry little or no weight.  It appears to have attached weight to the point that “a number of people had continued working in the Hospital after the completion of the training programme.”  Secondly, it attached weight to the fact that “there was no suggestion that this was part of a series of placements where [Miss Knott] would have been getting experience of different types of work or office routine.”  We have serious reservations as to the extent to which either of those points carried any real weight.

26	We are also concerned as to whether the point the Tribunal regarded as “crucial” (see the extracts to which we have earlier referred from paragraph 16 of the Reasons) was in fact a point of any material weight at all.  It can be said that the Tribunal appears to have overlooked the fact that there was evidence before it that, upon the termination of her placement by the Hospital, Miss Knott was already over the age of 18 and so was no longer eligible to be provided with placements for youth training, which was the explanation as to why “the complete arrangement” had to come to an end, although this was something to which the Tribunal had twice earlier referred in the course of its reasons.

27	We have come to the provisional view that, if the relevant question was whether there was a contract with Rathbone, there is a compelling case for a conclusion that there was no evidence before the Tribunal which justified its conclusion that that contract was one of employment.  But we have stopped short of reversing the Tribunal’s decision and substituting a declaration that there was no contract of employment between Rathbone and Miss Knott because we have been satisfied by the discussion with Mr Hills in the course of his submissions to us that there is a real risk that the Tribunal did not actually focus on the right question.

28	As we indicated earlier, it is not really appropriate for an Employment Tribunal to ask itself whether a given person is an employee without considering the candidate or candidates who might be that employee’s employer.  The relevant question any Tribunal has to decide in a case of this sort is whether or not there is or was a contract of employment between two given persons or entities.  Only when you focus on the would-be employer and on the would-be employee can you consider whether the relationship between them was one amounting to a contract of employment.

29	The Tribunal does not appear to have addressed the question in this concrete way and we have already indicated that.  That appears to us to have led the Tribunal to have taken into account various factors which might be relevant if it were considering whether there was a contract between the Hospital and Miss Knott and might be relevant if considering whether there was a contract between Rathbone and Miss Knott.  There is a potential danger in mixing the two and we have quoted from paragraph 16, which appears to us to reflect language which suggests that the Tribunal may have been looking to see whether there was in fact any contract between Miss Knott and the Hospital.

30	We have come to the conclusion that the Tribunal has not focused on the real question which ought to have been focused on for the purposes of the proper disposition of the preliminary issue before it; which is whether or not there was a contract of employment between Rathbone and Miss Knott.  We have come to the view that, that being so, and the Tribunal not having focused on what we would regard as the right question, there is a serious risk that the decision which the Tribunal made is flawed.

31	We have therefore decided that the right solution is to allow this appeal and to set aside the Order set out in the first paragraph in the Tribunal’s decision, which was that Miss Knott was an employee and therefore entitled to bring a claim of unfair dismissal under Part X of the Employment Rights Act 1996, but to leave unaffected the order correcting the name of the respondent to Rathbone Training Limited.  We will remit the matter to a fresh Employment Tribunal for a rehearing of the preliminary issue as to whether or not Miss Knott was, for the purposes of Part X of the 1996 Act, an employee of Rathbone and therefore entitled to bring a claim of unfair dismissal.

32	Mr Hill raised with us the question of whether we can or should give a direction on the reference back to a fresh Employment Tribunal that the Hospital Authority should be joined in the proceedings so that the question can be canvassed as to whether there was any contract between that Authority and Miss Knott.  We have decided that it would not be appropriate for us to give any such direction, even if we have a jurisdiction to do so.  The only matter that Rathbone is concerned with is the question as between it and Miss Knott and that is the question which needs to be reconsidered by a fresh Tribunal.  Of course, if Rathbone forms the view, on advice, that it ought to take steps to bring the Hospital Authority before the Employment Tribunal, then it will be for Rathbone to consider that; but we propose to say nothing more about that matter.