Court of Appeal rules on employment status
A Court of Appeal ruled that a temporary receptionist who had worked for the same company for two and a half years could not be deemed to be an employee of that company or of the agency she worked through.
In the ruling, which, if applied to IR35 tests would take most contractors outside the measure, the Court of Appeal said that the receptionist, Mrs Jennifer Montgomery, did not have a claim for compensation for unfair dismissal against either the company, O&K or the agent Johnson Underwood.
The appeal from the Employment Appeal Tribunal gives a ‘temporary’ worker non-employee status under employment law despite the fact that she worked via an agency contract for two and a half years on the same site under standard direction, supervision and control terms. Whereas, for tax purposes, the Inland Revenue had issued guidance that contractors working on a standard agency contract of more than 28 days' duration would be treated as ‘employees’ under IR35.
The background to this case is that in early 1995 Mrs Montgomery telephoned Johnson Underwood Ltd. (JU), an employment agency, responding to an advertisement she had seen and sent her CV in to register.
In May 1995, JU telephoned her and said they had a suitable position with a local company, Orenstein & Kopple Ltd (O&K). Hours of work and rate of pay were discussed and agreed. The next day Mrs Montgomery received JU's letter of confirmation and printed terms and conditions. In return she sent her P.45 and bank details and started work at O&K on 1st June 1995. Thereafter JU caused payment for hours worked to be made directly into Mrs Montgomery's bank account and the amount was calculated in accordance with time sheets approved by O&K.
Mrs Montgomery worked on weekday afternoons for almost two and a half years until late 1997. By then it seems that O&K was unhappy with Mrs Montgomery's use of its telephone for personal calls and asked JU to terminate the assignment. A director of JU went to O&K's office and told Mrs Montgomery that ‘it was over’. She was offered another position but did not pursue it.
Mrs Montgomery lodged an application with the Bedford Industrial Tribunal claiming compensation for unfair dismissal and naming JU and O&K as the employers. Both companies denied that Mrs Montgomery was one of their employees.
The tribunal unanimously decided that 1) there was no basis upon which Mrs Montgomery could have been an employee of the client, O&K;
and that:
2) she was an employee of the JU.
It held that there had been little or no control, direction or supervision of Mrs Montgomery by the agent.
Both JU and Mrs Montgomery appealed to the Employment Appeal Tribunal (EAT), JU against the decision that Mrs Montgomery was its employee and Mrs Montgomery against the decision that she was not employed by O&K. All three parties appeared before the Employment Appeal Tribunal (EAT) on 10th November 1999. Judgment was delivered on 18th April 2000.
In April 2000, the EAT ruled that it had dismissed both appeals, therefore, retaining the position that Mrs Montgomery was an employee of the agent but not the client.
The case was then appealed to the Court of Appeal which issued its judgement on March 9, 2001. It found that as the tribunal had already ruled there had been little or no control, direction or supervision, Mrs Montgomery was not an employee of the agent.
It is therefore arguable that, even if mutuality of obligation is established with an agent, it becomes an immaterial factor as there is no direction, supervision or control from the agent over the person. And, if there is no mutuality of obligation between a client and the person, the client cannot be the employer.