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Motorola Ltd v. (1) Davidson (2) Melville Craig Group Ltd EAT/46/00 reported EAT 5th September 2000 One area of IR35 which is causing some concern to the clients, is the threat of being lumbered with employee rights. Although in many cases the clients are still saying that IR35 is not their problem, they would be wise to take account of cases such as this one. This case is also interesting in that it has been decided purely on the basis of 'control'. Although, to say it was decided on the basis of the Control Test would be an exaggeration, as you will see as you read on. Davidson began working at Motorola in November 1996 and in December 1998 his assignment was terminated after a disciplinary hearing. Davidson decided to claim unfair dismissal but, who was ultimately responsible for the unfair dismissal. Davidson had a contract with Melville Craig, a recruitment business, which stated that he was a temporary worker working under a contract for services. Motorola asserted that they had believed all along that Davidson was an employee of Melville Craig and that he had never had a contract of employment with Motorola. The Employment Tribunal held, in a unanimous decision, that Davidson was in fact an employee of Motorola and that accordingly his claim for unfair dismissal should proceed against only Motorola. Motorola appealed. The solicitor for Motorola, in his infinite wisdom, decided to address the Employment Appeal Tribunal (EAT) on the matter of "control" only. A curious decision as on the facts Motorola were bound to lose. It has long been established that the Control Test is not a definitive test and is by all accounts out-moded. Still, it was on this point that the EAT proceeded being referred to the well known dictum of MacKenna J in Ready Mixed Concrete (south East) Ltd v. Minister of Pensions [1968] 1 All ER 433: "I must now consider what is meant by a contract of service. A contract of service exists if the following three conditions are fulfilled: (i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of serviceMr Hurley for Motorola again asserted that he wished to proceed only on the basis of 'control' excluding the other two very valid points made by MacKenna J. The court ascertained that Melville Craig had an arrangement with Motorola whereby they specifically selected individuals based on Motorola's criteria. The court was shown the Operating Agreement for the Supply of Temporary Workers between Motorola and Melville Craig. This document provided that Melville Craig would take such measures as were necessary to ascertain whether the prospective candidate met the specified standards. This included requiring them individual to sign a Confidentiality Agreement and a Computer Software Agreement. This in itself, the court stated, was an exercise of control by Motorola. The court appear to be a little misguided on this point. It is actually a criteria of the Conduct of Employment Agencies and Employment Businesses Regulations 1976 that enough information is given by the hirer, in this case Motorola, for the employment business to select the appropriately qualified individual. That is not 'control' that is merely a matter of commercial common sense and of course legislative compliance. If this were part of the 'control test' then many, many individuals would be affected. The EAT then looked at the working practices of Davidson during his time at Motorola. Davidson went through a Motorola induction course, worked at the Motorola site, received instructions from other Motorola employees, used Motorola's tools, wore their uniform, arranged absences from work with the Motorola manager and if he had a grievance contacted his Motorola supervisor. When there was cause or perceived cause for a disciplinary hearing it was the Motorola manager who convened it. Davidson was at first suspended and then dismissed following the discussion. Looking at control from Davidson's side, the EAT found that he was in a position to chose for any reason or none not to work for Motorola and that would not be a breach of contract with Motorola. The latter comment should be noted for its indication that the EAT were presuming there was an implied contract that Davidson could breach with Motorola. It would in fact be the contract with Melville Craig that Davidson would have breached if he did not turn up for work. There was, however, a provision in the Operating Agreement that Motorola could inform Melville Craig that a worker was unacceptable and that Melville Craig would ensure that that worker did not return. In the Employment Tribunal this point was referred to were the Tribunal stated: "…The reality of the situation is that the real decision was taken by Motorola by their advising Melville Craig that they no longer wanted Mr Davidson…"The EAT and the Employment Tribunal concluded from this that, in practical terms, because Motorola could decide that the worker they had on site was not fulfilling the contractual obligations as to performance, that this was some indication of control. It is generally accepted that if any party is not fulfilling its performance obligations the contract would be terminated but, to say that this is a matter of control, would render almost every service provider an employee. There was no notice requirement, there was no mutuality of obligations on any of the parties and both contracts reflected a contract for services. The EAT went on to say that although MacKenna J spoke of control in terms of rights, which is of course correct in law, they saw no good reason to ignore the practical aspects of control that fall short of direct legal rights. They followed this by stating that in a sense no employer has control over an employee as a matter of effective legal right. Whatever the man's contract may say, if he chooses not to do as he is told and leaves the job the employer has no real power to insist that it be obeyed. The EAT appear to have had an aberration at this point. The contract in law is all important, it is very clearly stated in a number of cases that if there is a properly formed contract which is not a sham and "…the express terms of the contract deal fully with the matter one may look no further." (Zuijus v. Wirth Brothers Pty (1995) 93 CLR 561). Despite this, the Employment Tribunal with which the EAT concurred, stated that they could not see "…[any] contractual obligation upon Mr Davidson as not amounting to a sufficient right of control residing in Motorola simply by reason of the obligation being owed by Mr Davidson only to Melville Craig, given that Melville Craig was itself under contractual obligations to Motorola in respect of individuals supplied to Motorola to ensure that they did not return to Motorola if Motorola wished them not to." Mr Hurley, for Motorola, at this point insisted that the reality of control and its exercise was irrelevant, one must look only to the right or power to control. In that he was correct but, the ET thought otherwise. Mr Hurley also sought to rely on a case Serco Ltd v. Matthew Blair and Others EAT unreported 31st August 1998. In that case the issue was whether a contract of employment existed between two temporary workers and the client to which the agency had assigned them. The EAT held that a contract of employment could not possibly exist because, due to the involvement of three parties viz, the temporary workers, the agency and the client company, the requisite mutual trust and confidence between employer and employee was not present. The EAT in the current case dismissed Serco purely for the reason that they were looking solely at the question of control and that this was in response to Mr Hurley's limited argument on that point. In Serco the EAT added that "…it is important to note how the dismissal was effected, not by the appellants but by the agency, albeit on the request of the appellants." Unfortunately in this case Motorola made the mistake of dismissing Davidson themselves and it appears to be on this point that the EAT concluded that amongst other things that gave them a sufficient degree of control to enable the worker to fairly be called a servant. The EAT did point out that they had concentrated solely on the issue of "control" at the behest of Mr Hurley for Motorola. Continuing to say "…as to whether we would have concluded, more widely, we say nothing; Motorola chose to argue only as to the "control" component and we, too, have limited observations to that subject." Accordingly they dismissed the appeal and it stands that Motorola is the 'employer' and the party who Davidson should look to in the matter of unfair dismissal. This case is astounding both in the ineptitude of Mr Hurley's argument in restricting the issue to 'control' and in the EAT's apparent complete disregard for the doctrine of precedent, the importance of the written contract and the issues surrounding the area of law concerning contracts for services. I await an appeal. |
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