As I noted in my last post on this topic, it is rare to find a factor in an employment relationship that provides a knock-out point as to the nature of that relationship. However, the exception that proves the rule is tax. There is remarkably little authority on the importance of this point but my experience is that tribunals give considerably more weight to it than is strictly allowed, and for good policy reasons. It would be highly unfortunate for a person to be able to obtain the tax advantages of self-employed status with the enhanced statutory rights of an employee. The closest judicial statement in support of this proposition is from Lord Denning in Massey v Crown Life but the actual ratio of the case is rather weak, in that the label adopted by the parties is only used as a tie-breaker where there is ambiguity.

In fact, tax status can be highly significant even if the other factors point strongly in favour of an employment relationship. This is because, strictly speaking, if the parties conspire to say that someone is self-employed but their understanding is that he is really an employee, they are committing a fraud upon the Revenue, which would taint the contract with illegality in any event. In such a situation, whether the employee could enforce his rights would depend upon the level of his knowledge of the fraud and the extent to which he participates in it and benefits from it. Tribunals often have precisely such considerations in mind when making decisions about employment status and, although employers save National Insurance contributions, the employee is the main beneficiary of such an arrangement.

This means that self-employed people who had a strong bargaining position when they were negotiating their contracts, and a good understanding of any potential tax advantages, will be unlikely to persuade a tribunal that they are employees. Accountants, for example, stand no chance. The strongest claims in this area will be those in which an employer has imposed self-employed status on an employee either ignorant or indifferent about a potential benefit to him. Usually, these cases involve relatively low-paid workers in industries where everyone is nominally self-employed or where an employment contract has ended and been replaced, at the behest of the employer, with a virtually identical contract for services.

It is common in Employment Tribunals for there to be an application to substitute one respondent for another, most frequently because of a mistake, but it is unusual for a tribunal to be asked to substitute the name of a claimant. These are the facts of Enterprise Liverpool v Edwards, a recent decision of the Employment Appeal Tribunal. The situation arose because a claim for failure to consult about a TUPE transfer can only be brought by an individual employee if no union or other employee representative has standing to bring the claim. The claimants issued proceedings when they should have been issued by the union and then sought to have the union added as a party in their place. This was yet another set of circumstances which, regrettably, had not been anticipated by the drafters of the Employment Tribunal Rules, which expressly allow for the addition of respondents but not the addition of claimants.

It was held that the tribunal had been correct to allow the amendment and there was further judicial endorsement of the judgment in TGWU v Safeway, a decision which Judge Peter Clark described as “surprisingly not yet reported,” a surprise that will doubtless be shared by many practioners, given its obvious importance and the repeated approval of the Employment Appeal Tribunal. Its classification of amendments makes it much clearer when it is not appropriate to take the three month time limit into account, making it easier to obtain amendments that amount to a simple relabelling. As employment law becomes more complex and pleadings are regarded as increasingly important, a sensible approach to amendments is the only way to make things fair for parties who cannot afford expensive lawyers.

There was an interesting story in the Daily Mail a few weeks ago in which the government was criticised for making fake applications for several jobs to find out whether candidates from ethnic minorities were being put at a disadvantage. This was done in part because of a proposed amendment to the Equality Bill that CVs should be required to exclude the name of the applicant to reduce the risk of unconscious discrimination on the grounds of race. I confess that I fail to see what the fuss was all about. No action was ever taken against any of the employers involved in the research and, indeed, the only possible negative consequence for them was the need to process two or three additional applications. Similar research has been done by academics and journalists dozens of times before and the only possible criticism is that it was wholly unnecessary given the evidence of discrimination in the earlier studies.

In my opinion, anxiety about this sort of research reflects a certain defensiveness we all share about unconscious discrimination. We rightly condemn racism but this can prevent us from acknowledging that we are capable of racism ourselves, which is entirely the wrong approach. We evolved in a world full of conflict and so fighting discrimination means fighting our own innate tendencies towards in-group bias (and if you do not think that this applies to you, click here). Excluding names from CVs is a great way of doing this. However, just as an overweight person will never succeed in becoming thin if he or she is embarrassed to exercise, it is important not to be ashamed of the truth about our unconscious tendencies or otherwise it will be impossible for us to be able to tackle them with any seriousness.

I am a big fan of the Industrial Relations Law Reports, which I find is much fresher than the Industrial Case Reports and feel it selects a better choice of cases. I still await the day when one of my cases is reported in it and I was disproportionately excited to discover the inclusion this month of Dumfries and Galloway Constabulary v Adams, which cites a case in which I was involved. Rather tangential, I know.

I greatly enjoy the commentary of Michael Rubenstein in the ‘Highlights’ section and, indeed, he was part of the inspiration for me in starting this blog. Therefore, it was disappointing to also find out that he thinks that Buckland is a good decision. The moral as always is not to be too dependent upon heroes.

I did promise to report back on this case when the judgment appeared and I apologise for the fact that it has taken me a week to do so. However, this is partly due to the fact that the only really new and interesting point is obiter. This is not the first case to say that a failure to apply Malcolm will not invalidate a finding of disability discrimination where there has been a failure to make reasonable adjustments prior to the dismissal. See my comments about Stafford and Rural Homes v Hughes here. Nonetheless, Justice Cox does provide more detailed reasoning, applying the principle from Clark v Novacold that a person can claim all losses flowing from a failure to make adjustments, including loss of earnings if it results in a dismissal. It is worth noting that this point from Clark v Novacold was not disapproved by the House of Lords in Malcolm and was tacitly approved by them in Archibald v Fife.

The key obiter point is that a dismissal can itself be a failure to make reasonable adjustments, contrary to Clark v Novacold, due to a change in the statutory language which allows reasonable adjustments to be pleaded in a wider range of circumstances. It does not make a difference in this case but there are some cases where it could be important, particularly long-term sick leave cases where there are no adjustments that could be made to allow an employee to return to work but it is reasonable to allow more time to recover before dismissing. More crucially, however, it will hopefully reduce some of the concerns about time limits post-Malcolm. If this decision is approved, employees will no longer have to worry about exactly when a failure to make adjustments occurred and can simply bring a claim within three months of dismissal. Nevertheless, because it is obiter, they would be advised to remain cautious.

Employment status can appear to be a very confusing issue. It proliferates authorities containing such exotic terms as ’mutuality of obligations’, the ‘control test’ and the ‘economic reality’ test. Witness statements often contain a vast shopping list of details about the nature of the employment relationship from the layout of the office  to the ownership of the company fax machine. There have been decisive shifts in the short history of Employment Tribunals so that, in the 1980s, they were quick to find shams while, more recently, they have been reluctant to depart from the literal wording of a written contract.

The problem is one that exists throughout contract law in general that the nature of an agreement is not always the same as what appears in a written contract. However, in complex commercial disputes, the parties have usually received advice throughout to avoid the sort of ambiguity which can arise in such situations. In employment disputes, especially where small employers are concerned, this is often not the case, making the task of the tribunal a particularly difficult one. A further complication is that people exploit the system. Employers give employees contracts that do not reflect the true relationship between the parties while employees bring claims suggesting that this has happened when it has not.

In this context, the historical trends are easy to explain. In the beginning, employers suffered the brunt of their own attempts to obscure real employment relationships but, as employees began to succeed in these cases, the temptation for them to bring speculative claims became overwhelming. Regrettably, this explains why dark law is unavoidable. Courts and tribunals cannot simply say that one particular point is determinative of employment status because, if they did so, such dicta could be exploited by unscrupulous parties. Tribunals have to stay one step ahead of the people who appear before them and this means that they can not always say what they are looking for. Blame dodgy lawyers for this one.

Having said all of this, there are some general predictions which can be made. We are certainly in a form rather than a substance phase which means that there is a marked reluctance to look beyond the agreement as recorded in contractual documents. There is often little to be gained from showing, for example, that a uniform is provided to a worker. On its own, this is unlikely to be a knock-out point for establishing an employment relationship, especially where other factors would support the opposite conclusion. An overwhelming amount of evidence, all pointing in the same direction, is usually required. However, there are some exceptions and, in particular, certain industries which use sham contracts a lot, especially to avoid holiday pay, find it much harder to rely upon the literal wording of a contract.

A key role of the House of Lords is preserving consistency in the interpretation of statutes across many different areas of law. While it is sometimes criticised, containing as it does no employment lawyers, for losing sight of industrial reality, it can also provide a refreshingly straightforward approach. Such is the case in SCA Packaging v Boyle, which concerns the meaning of the word ‘likely’ in determining, for the purposes of the Disability Discrimination Act, whether or not the adverse effect of an impairment is likely to recur or whether such an effect would be likely to exist in the absence of corrective measures.

In doing so, it prefers the decision on appeal from the Northern Ireland Court of Appeal to previous authority from the Employment Appeal Tribunal sitting in England and it expressly rejects the Guidance issued by the Secretary of State, perhaps the only instance of a decision of a higher court being more generous to claimants than statutory guidance. The unanimous conclusion of their Lordships is that ‘likely’ means ‘could well happen’ rather than ‘more probable than not’ so disability is easier to prove.

Some criticisms of the case management decisions made by the original tribunal could also have some far-reaching implications. The Law Lords suggest that there should not have been a preliminary hearing on the question of whether or not the Claimant was disabled, Lord Rodger of Earlsferry dissenting on this point. Both Lord Hope of Craighead and Lord Brown of Eaton-under-Heywood then go much further and make some more general remarks, stating that a pre-hearing review should not be used if there is no knock-out point which would probably decide the case or if there is likely to be a substantial factual overlap between the issues to be decided in the preliminary hearing and the full hearing. If this case is followed, it will surely result in rather fewer pre-hearing reviews being used by employment tribunals.

The case of Nationwide Building Society v Niblett is another well-reasoned decision by Judge Richardson which will hopefully clear up some confusion about the case of Bournemouth University v Buckland that I have highlighted in a previous post. Firstly, it emphasises that the Fairbrother line of cases, which appear to bring the reasonable range of responses test into constructive dismissal law, do not encroach upon the trust and confidence approach. Even if an employer has acted outside the range of reasonable responses, the tribunal must still determine whether or not trust and confidence has been breached.

While refusing to be drawn on the correctness or otherwise of Buckland, the judgment states that, “We find it very difficult to envisage circumstances in which an employer will be in breach of the implied term of trust and confidence unless the employer’s conduct has been unreasonable. The mere fact of unreasonable conduct is, as we hope we have demonstrated, never sufficient,” which is perfectly consistent with the approach taken by Lord Denning in the famous case of Western Excavating v Sharp.

In my view, the major source of the confusion is the idea that being outside the reasonable range of responses means something more than merely being unreasonable, an idea that is thoroughy rejected in this case. Judge Richardson states that a range of reasonable responses means nothing more than that there is more than one reasonable way of doing things. An analogy can be drawn with negligence where, in road traffic accident cases, there is usually only assumed to be one thing that a reasonable driver would do while, in clinical negligence cases, there may be more than one reasonable body of medical opinion which a doctor could follow. Managing employees is more complicated than driving but is probably less complicated than medicine so the decisions of employers are somewhere in between.

However, this does not quite explain the decision in Fairbrother because, in that case, the tribunal had found that the employer had acted unreasonably. The problem is that, although the Employment Appeal Tribunal referred to a range of reasonable responses, it was really applying a distinct but overlapping concept of unfair dismissal law, the idea that a process can overall be fair, notwithstanding the fact that it contains elements of unreasonableness. For example, a botched dismissal can be rendered fair if it is upheld after an appeal that is conducted properly. This is the real controversy of Fairbrother, although even then it can be argued that cases where a fair process breaches trust and confidence will be very rare. After all, when they are considered objectively, fairness and trust are strongly related concepts.