Appeal No. EAT/472/93

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 31 January 1995

	Before

	THE HONOURABLE MRS JUSTICE SMITH

	MR D G DAVIES

	MISS A MACKIE OBE

FILCOM LTD	APPELLANTS

MR I S ROSS	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR JOHN STOCKER
DIRECTOR

For the Respondent	NO APPEARANCE BY OR
ON BEHALF OF THE RESPONDENT

	MRS JUSTICE SMITH:   This is an appeal against a decision of an Industrial Tribunal sitting at Bedford on 10 December 1992 and confirmed on review on 4 May 1993.  The unanimous decision of the Tribunal was that the Respondent's complaint that the Appellants, Filcom Limited, had made deductions from his wages contrary to Section 1(1) of the Wages Act 1986, was well founded.  A declaration was made to that effect and the Tribunal ordered the Appellants to pay the sum of £355.08 as wages wrongfully deducted.

	The Appellants, Filcom Limited, who have been represented both here and below by Mr Stocker, a Director of the Company, carry out contract work in the telecommunications field.  They work for clients or customers such as British Telecom.  Much of the practical work done by them is carried out by persons whom they describe as contract staff members.  The Respondent, Mr Ross was one such.  His skill was that of a jointer.  Contract staff members hold a certificate 714 supplied by the Inland Revenue which entitles them to be treated as self-employed for tax and National Insurance purposes.  Mr Ross had such a certificate.  It entitled him to receive payment in gross of any sum earned by him with the Appellants, without deduction of income tax.  

	There was a written contract between the parties dated 5 September 1991, under which Mr Ross undertook to provide contract jointing services as required by Filcom Limited for not less than 40 hours per week.  After about four months, during which Mr Ross worked on a contract for British Telecom at premises at Coombe Martin in North Devon, British Telecom and Filcom became dissatisfied with his work.  His contract was terminated and it was found that some remedial work was required on the work which he had carried out.

	Soon after Mr Ross's contract had been terminated, Filcom sent him a letter detailing the payments which they contended were due to him on termination.  This was dated 20 March 1992.  They calculated that the total sum earned by Mr Ross was £355.08.  They sought to deduct the cost of remedial work carried out by other contractors on behalf of Filcom, at £288.19.  They therefore asserted that there was a balance due to Mr Ross of £66.89, but they proposed to withhold that pending the provision by Mr Ross of a voucher of type 715 in respect of a previous payment made by them to Mr Ross.  A voucher 715 is, in effect, a receipt acknowledging payment without deduction of income tax.  

	Mr Ross was dissatisfied with Filcom's proposals and made a complaint to the Industrial Tribunal alleging that these deductions were in breach of Section 1(1) of the Wages Act 1986.  Filcom opposed the application contending that the Wages Act did not apply as Mr Ross was not a worker within the meaning of that word in the Act.  He was, they said, a self-employed contractor to whom the Act did not apply.

	Section 1(1) of the Wages Act 1986 provides:

		"(1)  An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions, namely -

			(a)  it is required or authorised to be made by virtue of any statutory provision or any relevant provision of the worker's contract; or

			(b)  the worker has previously signified in writing his agreement or consent to the making of it".

	Wages are defined at Section 7 of the Act.  Section 7(1) provides:

		"(1)  In this Part `wages', in relation to a worker, means any sums payable to the worker by his employer in connection with his employment, including -

			(a)  any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise;".

	"Employed" and "employment" are defined in the interpretation section of the Act, Section 8.  "Employment" is there defined as follows:

		"8(1) .... in relation to a worker, means employment under his contract; .... ".

	"Worker" is defined as meaning:

		".... an individual  who has entered into or works under (or, where the employment has ceased, worked under) one of the contracts referred to in subsection (2), and any reference to a worker's contract shall be construed accordingly.

		(2)  Those contracts are -

			(a)  a contract of service;

			(b)  a contract of apprenticeship; and

			(c)  any other contract whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual,

		in each case whether such a contract is express or implied and, if express, whether it is oral or in writing".

	Having set out those definitions, the Industrial Tribunal examined the written contract and heard evidence and submissions from both sides, both appearing in person.  They concluded that Mr Ross was a worker within the definition to which we have alluded and was therefore entitled to the protection of Section 1 of the Act.  Filcom sought a review of the decision mainly on that issue.  In their review decision the Industrial Tribunal expanded upon their reasons for confirming their conclusion that Mr Ross was indeed a worker to whom the Act applied.  

	First, they referred themselves to the case of Broadbent  v  Crisp [1974] ICR 248.  This was a decision of the National Industrial Relations Court under the chairmanship of Sir Hugh Griffiths, as he then was.  The case concerned Mr Broadbent who had contracted with Mr Crisp to collect pools coupons and stakes for Mr Crisp, who was an area concessionaire for Littlewoods.  The question which fell to be determined was whether Mr Broadbent was a worker within the definition of that term in the Industrial Relations Act 1971, Section 167 of that Act defined "worker" as follows:

		"`worker' (subject to the following provisions of this section) means an individual regarded in whichever (if any) of the following capacities is applicable to him, that is to say, as a person who works or normally works or seeks to work - (a) under a contract of employment, or (b) under any other contract (whether express or implied, and, if express, whether oral or in writing) whereby he undertakes to perform personally any work or services for another party to the contract who is not a professional client of his, or (c) [which is not relevant for present purposes] ....".  

	It is right that any Court or Tribunal should always hesitate before applying a case decided under one statute in deciding an issue under a different statute.  Here however, it seems to us, as indeed it seemed to the Industrial Tribunal, that it is legitimate to derive some assistance from the case of Broadbent  v  Crisp so far as the meaning to be attached to the word "worker" is concerned.  In the 1986 Act the definition of worker by reference to the concept of personal performance of work is much the same as in the 1971 Act.  In the 1971 Act definition there is an exclusion, limited to cases where the other party to the contract is a professional client, whereas in the 1986 Act the exclusion is more widely expressed as to apply where the other party to the contract is either a professional client or a business customer of the person concerned.  Bearing that distinction in mind, we consider, as did the Industrial Tribunal, that it is useful to consider what Sir Hugh Griffiths said in his judgment at page 254F.

		"Mr Brodie submits that Mr Broadbent was running a small business on his own account and should be regarded as working for himself and not for Mr Crisp.  But the fact that a person is self-employed and may thus be said to be in business on his own account and in one sense working for himself does not prevent him from being a `worker'.  The definition of `worker' is wide enough to embrace the self-employed.

		As Mr Gilman points out, it was clearly Parliament's intention to cast the net wide because it was thought necessary to exclude specifically professional men in section 167(1)(b), although one might less readily apply the term `worker' to them in everyday speech than to the self-employed small businessman, such as a plumber. ....".

	At page 255A he continued:

		"Each case has to be looked at on its own particular facts to see if the obligation undertaken by the contract involves the personal performance of the work or services to which the contract relates.  The essence of the matter is whether the contract leaves the party free to delegate the performance of the work or services to some other person or whether he must perform it himself.  No one test will be conclusive, but if the personality of the contracting party is found to be of importance in the formation of the contract it is a strong pointer towards the conclusion that his personal performance of the contractual obligations is envisaged by the contract.  In the present case the personality of the main collector was vital - he could not be appointed unless he was a person approved by Littlewoods and the whole of the terms of the approval to the appointment spelt out in the letter of August 23 emphasised the personal nature of his commitment.

		The very considerable degree of control exercised by the area concessionaire is also indicative of the personal nature of the contractual obligations.  The fact that one party is entitled to give detailed instructions does not fit easily with the notion that the other party is under no personal obligation to carry out his work in accordance with those instructions."

	Having referred themselves to that case, the Tribunal continued as follows:

		"6  Mr Stocker accepts that Mr Ross worked personally for the respondents and was not free to delegate work to anyone else.  He worked as a sub-contractor for the respondents [Filcom] as a contractor.  He was given specific tasks to do and was responsible to a site agent.  The respondents carried out quality checks on his work.  The respondents decided the work to be done and Mr Ross's remuneration was negotiated with him according to a set scale.  Mr Ross did not tender for specific jobs.

		7  On these facts, Mr Ross, in our view, comes within the definition of `worker' considered in Broadbent  v  Crisp, just as Mr Crisp did".

	They then referred themselves to the case of Mirror Group  v  Gunning [1986] ICR 145, in which the Court of Appeal had considered the definition of "worker" in the Sex Discrimination Act 1975.  Although the Industrial Tribunal appeared to have derived some assistance from that authority, we have not done so.  However, we do not consider that the Industrial Tribunal relied upon this authority to any great extent.  We say that we have not derived any assistance from it, as the definition of "worker" in the Sex Discrimination Act 1975, is not as closely similar to that in the 1986 Act, as the definition of "worker" in the 1971 Act, as referred to in Broadbent  v  Crisp.

	 At paragraph 8 of their review decision the Tribunal refer back to the case of Broadbent  v  Crisp and confirmed their decision that Mr Ross was a worker within the Act.  They said:-

		"8  .... There is a slight difference in the wording in the definition referred to in paragraph 5 above, [that is in the 1971 Act] from that in Section 8(2)(c) of the Wages Act 1986 in that, in the latter, contracts with business customers as well as with professional clients are excluded.  However in our view, on the facts stated in paragraph 6, the respondents are not customers (or clients) of Mr Ross in any meaningful sense.  A person supplying services to a customer (for example a domestic plumber) will normally decide what he wants to do and how to do it and charge the customer accordingly.  The customer will not give directions or provide supervision or carry out quality checks, as the respondents have done in this case".

	Before us, in the absence of Mr Ross who did not appear, Mr Stocker for the Appellants has repeated a number of arguments which were raised before the Industrial Tribunal.  

	First, he pointed to Mr Ross's possession of a 714 certificate as evidence that he was a self-employed person in business on his own account.  We agree that the possession of a 714 certificate is a factor which points to self-employment, but it is only one factor to be taken into account when deciding whether a person is a worker within Section 1 of the 1986 Act.

	Second, Mr Stocker referred us to an extract from Croner's Employment Law.  The extract appears to be from an addition dated October 1988 and it says this:

		"The Wages Act 1986 contains provisions which govern the employer's right to make deductions from wages or salaries.  The rules apply to all those who work under a contract of service or apprenticeship .... as well as certain non-employees `where the individual undertakes to do or perform any work or services for another party who is not a client or customer of any profession or business undertaking carried on by the individual'.  The latter category of worker might include, for example, a casual worker who is not an employee, or an agency worker hired to a third party, but would not include individuals operating their own business and performing work personally for customers or clients. .... ".

	With due respect to the editors, we have not found the reference to Croners Employment Law to be of any assistance in determining the question before us.

	Third, Mr Stocker relied upon an extract from the Construction Industry Revenue handbook.  Paragraph 160 of this handbook, the precise status of which is not clear to us, says this:

		"There are some special terms used in the construction industry.  For example, a `contra' is a charge for goods or services supplied by the contractor to the sub-contractor; and a `set-off' represents money withheld by the contractor, with or without the sub-contractor's agreement, where the contractor considers he has a claim against the sub-contractor for some breach of the sub-contract".

	We regret to say that we find this extract of no assistance.  It does not help us to determine whether Mr Ross was running a self-employed business on his own account in the true sense of the word, or whether he was a worker within the definition of that term in the 1976 Act.

	As did the Tribunal before us, we have looked at the terms of the contract.  Clause 1 provides that: 

		"1.  Payment will be in accordance with the schedule of rates applicable to contract, and will be inclusive of subsistence and travelling allowances.  Contract specific pay schedules will be provided as appropriate".  

	We consider that that is a provision which points against Mr Ross being in business on his own account, in the true sense of the word.  He is obliged to accept the rates offered by Filcom.  

		"2.  Payment will be made weekly by cheque or bank giro credit seven days in arrears".

	Mr Stocker confirmed to us today that it was Filcom's practice to operate on a week in hand basis.  It appears to us that that is not consistent with the position of Mr Ross as a truly independent contractor in business on his own account.  

	Paragraphs 4, 5 and 6 refer to Mr Ross as a contract staff member.  It seems to us that somebody who is described as a member of staff is unlikely to be a true independent contractor.  

	On the back of the contract are a number of general conditions.  Condition A provides that all specialised plant, equipment and tools will be provided by the company.  Once again, this points away from real independence.  Paragraph C provides that the order, that is the order under which Mr Ross is invited to work, may be cancelled by contract staff members at seven days' notice in writing and by Filcom Ltd at one week's notice in writing.  Paragraph D provides that failure to give the required period of notice referred to above, may result in the forfeiture of the payment due for the final week worked (i.e. week in hand).  Both of those provisions, in our view, point away from independence.  

	At the foot of the contract the following words appear:

		"I confirm that I will provide the services specified in this order and in accordance with the conditions stated".

	It is signed by Mr Ross, Contract Staff Member.  There, there is a clear indication that this is indeed a contract for the provision of personal services.

	In our judgment the Industrial Tribunal applied its mind to the appropriate law and took into account relevant facts.  We consider that the decision as to whether Mr Ross was a worker is one of fact and degree and that the Industrial Tribunal were entirely justified in reaching the conclusion which they reached, for the reasons which they gave, in particular, in paragraph 8 of their review decision.

	The Appellants have raised a second point in the Notice of Appeal relating to the withholding of the sum of £66.89 pending the provision of a 715 voucher in respect of a previous payment.  So far as we can see, no arguments were addressed to the Industrial Tribunal on this specific point, but it has been argued before us that the Appellants were entitled to deduct or withhold this sum under Section 1(5)(c) of the Wages Act.  Subsection 5 of Section 1 provides:

		"(5)  Nothing in this section applies -

			(c)  to any deduction from a worker's wages made by his employer in pursuance of any requirement imposed on the employer by any statutory provision to deduct and pay over to a public authority amounts determined by that authority as being due to it from the worker, if the deduction is made in accordance with the relevant determination of that authority;". 

	Thus, the prohibition on deductions under Section 1(1) does not apply if the employer is obliged to withhold money in order to pay it, for example as contended here, to the Inland Revenue.  However here, Mr Ross was in possession of a 714 certificate, and the company was not under any obligation at the behest of the Inland Revenue to deduct tax at source.  Thus, it appears to us that this ground of appeal must also fail.  

	That disposes of both grounds raised in the Notice of Appeal.  However, the Appeal Tribunal observed the presence of another issue not raised in the Notice of Appeal which may have been of some merit if argued.  At paragraph 6 of the decision the Tribunal refer to Filcom's contention that they had a claim against Mr Ross in respect of the cost of remedial work which they had had to carry out, following dissatisfaction with his work at the Coombe Martin premises.  Their entitlement to claim the cost of rectification arose under paragraph G(2) of the general conditions of contract on the back page of Mr Ross's contract, to which we have already referred.  Paragraph G(1) provided:

		"G.  Imperfect work and remedial action.

			(1)  When practicable and subject to the requirements of the Company, contact staff will be required to carry out all work necessary to correct any faulty work for which they are responsible.  Such remedial work will be carried out entirely at their own expense.  Additionally, they will be liable for the cost of all materials used in the performance of such remedial work.

			(2)  Under those circumstances where remedial work is not carried out by the contract staff responsible for the faulty work, they will be held liable for all costs associated with the performance of the remedial work".

	Mr Stocker, it appears, had contended before the Industrial Tribunal that the Company was entitled to deduct the cost of the remedial work, (assuming that the Wages Act applied) under Section 1(1)(a) of the Act.  His contention was that the deduction was authorised by a relevant provision of the worker's contract.  

	The Tribunal rejected that contention and said this:

		"6 .... Mr Stocker seemed to be unable to appreciate the distinction between Mr Ross's attracting liability to pay for remedial work and the respondent [Filcom] becoming entitled to make a deduction from Mr Ross's wages for this purpose. ....". 

	In other words, the Tribunal took the view that it was not sufficient that there should be a term of the contract which made an employee liable to pay his employer a sum of money, but in addition the term of the contract must go on and specify the employer's right to make the deduction in terms.  

	The Tribunal were conscious of the fact that there was no authority available to them on this point and that Mr Stocker had been unable to refer them to anything in support of this contention.  They suggested, in their Reasons, that if any further support could be garnered for this proposition, that that would in itself warrant a review of their decision.  

	In the event, this point was not pursued at the review, which is unfortunate because by that time the decision of the Employment Appeal Tribunal in Fairfield Ltd  v  Skinner had been reported at [1992] ICR 836.  The facts of that case were similar to those of the present case.  The head note reads:-

		"The applicant, a van driver, was employed on terms which included provisions that he would have a limited mileage allowance for private use; that he would be liable for the insurance policy excess for damage caused to the van when in private use and for private telephone calls.  He was summarily dismissed and sums were deducted from wages owed to him for the cost of repairs to a damaged van door and for telephone calls and private mileage over the free allowance.  On his application to an industrial tribunal alleging that the employers had unlawfully made deductions from his wages, contrary to section 1(1) of the Wages Act 1986, an industrial tribunal concluded that his contract of employment contained provisions which would have entitled the employers to make the deductions in accordance with section 1(1)(a) of the Act of 1986 had the evidence shown that factually that they were entitled to do so, ....".  

	However, on the particular facts of the case, the Tribunal were not satisfied that those sums were deductible.  The appeal to the Employment Appeal Tribunal concerned mainly the question of whether the Tribunal had been entitled to examine the evidence as to whether, on the facts the amount sought to be deducted had been properly deducted.  However, it is implicit in the decision of the Appeal Tribunal that the Industrial Tribunal's conclusion that in principle the sums could be deducted under Section 1(1)(a) was correct.  

	In other words, the Employment Appeal Tribunal was accepting that it was sufficient if a term on the contract made the employee liable to the employer for a sum of money, and that it was not necessary for the term of the contract to go on and specify the employer's right to deduct the outstanding sum from wages.  

	Thus, the decision of the Industrial Tribunal in this case is inconsistent with the decision of the Employment Appeal Tribunal to which we have just referred.  However, this issue is not before us.  It was not raised in the Notice of Appeal.  In the absence of Mr Ross it was not possible to allow Filcom leave to amend their Notice of Appeal and we can say no more on this issue.

	This appeal must be dismissed.