Status and the Agency - The 'Montgomery' Case
March 2001

Montgomery v. Johnson Underwood Ltd [2001] Case No. A1/2000/2085
Court of Appeal


In the Employment Appeal Tribunal
(1)Montgomery (2) Orenstein & Kopple Ltd v. Johnson Underwood Ltd. [2000] EAT 716/98


In the Court of Appeal on the 9th March 2001, it was held that Montgomery was not an employee of the employment agency Johnson Underwood Ltd (JU).

This case began back in 1997 when Montgomery was dismissed from her position as a telephonist/secretary with a company Orenstein & Kopple Ltd (O&K). Montgomery's services had been supplied by JU under a standard agency contract to O&K. Having been dismissed Montgomery claimed unfair dismissal against firstly JU named as the employer and subsequently adding O&K. Each company denied being the employer of Montgomery. The preliminary issue was whether Mongomery was an employee of either company and thus which company would be the proper Respondent for the purpose of an unfair dismissal hearing.

The Employment Tribunal unanimously decided that: "There was no basis upon which we could hold the Applicant Montgomery to have been an employee of the Second Respondent.(O&K)." and that: " We are satisfied that the Applicant was an employee of the First Respondent (JU)."

JU and Mrs Montgomery appealed, 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. The judgment was delivered on 18th April 2000 where the EAT decided unanimously that Montgomery's appeal should be dismissed. There was, however, only a majority decision that JU's appeal should be dismissed: Montomery being the employee.

Mr Justice Charles, in his minority view, decided that Montgomery was not an employee of JU and that their appeal should have been dismissed. His Lordship wrote a very interesting piece on his minority judgment entitled "Employee or independent contractor: the approach or test to be applied at law." In his view the EAT, in adopting and following the case of McMeechan v. Secretary of State for Employment [1997] IRLR 353, had failed to recognise and therefore to take into account that for there to be a contract of service there must be an irreducible minimum of obligation on each side Stephenson LJ in the Nethermere case at [1984] ICR 623G and more recently the Carmichael case in the House of Lords. In addition, in stating that they considered themselves bound by the judgment in the McMeechan case the Employment Tribunal erred in law.

The majority view, however, applies and the case went to the Court of Appeal. This time it was as between Montgomery and JU as her perceived employer. The Court of Appeal, in their infinite wisdom, followed the minority view of Mr Justice Charles in the EAT and held that Montgomery was not an employee of JU.

Mr Justice Buckley stated the following:
"In Carmichael's case the Industrial Tribunal had held that the Applicant's case: "Founders on the rock of absence of mutuality." The Lord Chancellor at 2047A said this:

"If this appeal turned exclusively - and in my judgment it does not - on the true meaning and effect of the documentation of March 1989, then I would hold as a matter of construction that no obligation on the CEGB. to provide casual work, nor on Mrs Leese and Mrs Carmichael to undertake it, was imposed. There would therefore be an absence of that irreducible minimum of mutual obligation necessary to create a contract of service."

He then cited the Nethermere case and Clark v Oxfordshire Health Authority [1998] IRLR 125 at 128 per Sir Christopher Slade. While it is true that control was not in issue in Carmichael, the Lord Chancellor's reference to Nethermere was to the judgment of Stephenson LJ at page 623C-G. That is the very passage that cites MacKenna J in Ready Mixed Concrete and concludes with Stephenson LJ's reference to "an irreducible minimum" which thus expressly included "control".

There can be no doubt the Lord Chancellor was approving that passage and I am easily persuaded we should follow it. It has been cited with, at least apparent approval, in several other recent decisions, including those in this Court and The Privy Council.
Lord Justice Longmore concurred and made the following comment:
"I agree. I was at one time during the hearing of the appeal somewhat troubled by the fact that Mr Samek's argument led to the conclusion that Mrs Montgomery was neither an employee nor an independent contractor. It is absurd to suppose that Mrs Montgomery as a telephonist working at O&K's office could be an independent contractor; it might be natural, therefore, to conclude that Mrs Montgomery was an employee and, if so, that she was an employee of JU, the employment agency…I am satisfied that this approach is wrong."

Lord Justice Brooke concurred and made this comment:
"I am not surprised that the lower tribunals sought to achieve for Mrs Montgomery the rights under modern employment law which they correctly held that O&K was not willing to accord to her, but if the result of overturning their decisions is not a happy one, the remedy lies with Parliament."
So, as it stands Mrs Montgomery is neither an employee of the client O&K or the agency JU.

Another comment which was of great interest considering the Judicial Review as to the uncertainty of IR35 was the one made by Lord Justice Brooke:
"There is one other unhappy feature of this case that I wish to mention. Mrs Montgomery's contract was terminated in November 1997 and she lodged her originating application with the local industrial tribunal a week later. It has taken nearly 40 months since then for the question whether she was employed by either of the respondents to be resolved. Much the greatest part of this delay occurred at the level of the Employment Appeal Tribunal. The relevant timetable reads:

1998 5th March Extended Reasons given by Industrial Tribunal.
8th April Notice of Appeal to EAT
22nd July Preliminary Hearing: permission to proceed
20th October EAT order: Chairman of IT to comment on affidavits
9th November Chairman's comments delivered
1999 14th April 11 pages of transcribed notes of evidence received by EAT
10th November Hearing before EAT
2000 18th April Judgment delivered by EAT.

It is sad to see delays on this scale still besmirching the administration of justice. I direct that the judgments in this case be sent to the President of the Employment Appeal Tribunal so that he can consider what administrative steps need to be taken, if necessary by requesting more resources, or the allowance of more time for the preparation of judgments, to ensure that the law's delays do not cause so much hardship in future. And this was, after all, only a preliminary issue. "
This comment seems to say it all.