Montgomery v Johnson Underwood Ltd [2001] EWCA Civ 318 (9 March 2001)

Neutral Citation Number: [2001] EWCA Civ 318 Case No: A1/2000/2085 IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL Royal Courts of Justice Strand, London, WC2A 2LL Friday 9th March 2001 B e f o r e : LORD JUSTICE BROOKE LORD JUSTICE LONGMORE and MR JUSTICE BUCKLEY ____________________ JENNIFER LEE MONTGOMERY Applicant/ Respondent - and - JOHNSON UNDERWOOD Ltd Respondent/ Appellant ____________________ (Transcript of the Handed Down Judgment of Smith Bernal Reporting Limited, 190 Fleet Street London EC4A 2AG Tel No: 020 7421 4040, Fax No: 020 7831 8838 Official Shorthand Writers to the Court) ____________________ Charles Samek (instructed by Eyton Morris Winfield for the Appellant) Ramby de Mello (instructed by Murria Solicitors for the Respondent) MR. A BARRY ATTENDED IN PLACE OF MR. DE MELLO AT THE JUDGMENT ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Mr Justice Buckley: This is yet another case raising the troublesome question whether an individual was employed under a contract of employment. In early 1995 Mrs Montgomery, the Respondent to this appeal, telephoned the Appellant, Johnson Underwood Ltd. (JU), an employment agency. She was looking for a part-time job as Receptionist/Telephonist and had seen the agency's advertisement in the Daventry Express. She told them she was looking for something more permanent than the two week position, as it turned out to be, that had been advertised and sent her CV in order to register. On 30th May 1995 a Carla Panter of JU telephoned her and said she 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. On 1st June 1995 she started work at O&K. Thereafter JU caused payment for hours worked to be made directly into Mrs Montgomery's bank account. The amount was calculated in accordance with time sheets approved by O&K. Mrs Montgomery worked on weekday afternoons and all was well for almost 2½ 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. Mrs Johnson, a director of JU, duly attended O&K's office on 12th November 1997 and told Mrs Montgomery that it was over. She was offered another position but, so far as I am aware, did not pursue it. None of this is contentious. The Proceedings Mrs Montgomery lodged an Originating Application with the Bedford Industrial Tribunal dated 19th November 1997. In it she claimed compensation for unfair dismissal and named JU as the employer, subsequently adding O&K. Both Respondents put in Appearances and each denied that Mrs Montgomery was its employee. A preliminary issue was ordered and heard by the Tribunal on 20th February 1998. In effect, the question was whether Mrs Montgomery was an employee of either of the Respondents and thus whether either would be a proper Respondent for the purpose of an unfair dismissal hearing. The Tribunal unanimously decided that: "There was no basis upon which we could hold the Applicant 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)." The Tribunal's Extended Reasons were promulgated on 5th March 1998. 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. Judgment was delivered on 18th April 2000. The Decision was: "We have reached the following decisions on the appeals: a. A unanimous decision that Mrs Montgomery's appeal should be dismissed, and b. A majority decision that JU's appeal should be dismissed. It follows that the Decisions of the Employment Tribunal in each of the cases under appeal stand." Dr Grieves CBE and Mr Willis agreed. Charles J gave full reasons for his minority view. An appellant's Notice on behalf of JU was filed on 16th May 2000 and the EAT granted permission on 25th May 2000. O&K took no part in the appeal to this court and the only issue was the Industrial Tribunal's Decision, supported by the majority of the EAT, that Mrs Montgomery was employed by JU. Approach of this Court The parties agreed and I accept, that in common with the EAT's position in relation to the Industrial Tribunal, this court can only interfere if the Decision involved an error of law or was perverse. Mr Samek, for JU, urged that if we decided to allow the appeal we should hold that Mrs Montgomery was not employed by JU rather than send the case back to the Tribunal. Mr de Mello, for Mrs Montgomery, accepted that and in the circumstances of this case I agree. In the recent appeal Carmichael v National Power plc (HLE) [1999] 1 WLR 2042 in which the leading speech was delivered by Lord Irvine of Lairg, Lord Chancellor, Lord Hoffmann added: "A few words only on the troublesome distinction between questions of fact and questions of law. p. 2048 D." While accepting that the construction of documents is a question of law and that consequently if a contract is contained solely in a document or documents its meaning and effect is a question of law Lord Hoffmann pointed out that the rule does not apply: "Where the intention of the parties, objectively ascertained, has to be gathered partly from the documents but also from oral exchanges and conduct. In the latter case, the terms of the contract are a question of fact." From his citation of Moore v Garwood (1849) 4 Ex 681, it is clear that in such a case he was endorsing the view that: "The real intention and meaning of the parties . . . . . ." is a question of fact. In Clifford v Union of Democratic Mineworkers [1991] IRLR 518, Mann LJ, with whose judgment Lord Donaldson MR and Woolf LJ agreed, adopted a slightly different approach but, happily, reached the same conclusion. He noted that where the only relevant material was documentary the question whether A is employed by B or C is a matter of law but otherwise is a mixed question of law and fact. At paragraph 7 on page 520 he said this: "This description (a mixed question of law and fact) does not, however, in my judgment mask the reality that the answer to the question is determined by the determination and evaluation of the relevant material. This is the task of the Industrial Tribunal and is not for either the Appeal Tribunal or this Court. Neither can interfere with the resolution of an issue of fact unless the resolution contains an explicit or implicit misdirection in law. . . . . . In the present case therefore the question is not whether the Industrial Tribunal were "wrong" but whether their conclusion betrays a self-misdirection." This case was not cited to us, but since the conclusion is not contrary to either Counsel's position, I have taken the liberty of quoting briefly from it. Thus in a case such as the present one in which the contract, if any, between JU and Mrs Montgomery is to be found partly in the standard conditions but also the objective inferences which can reasonably be drawn from what the parties said and did not just at the end of May 1995 but subsequently, it was for the Industrial Tribunal to decide whether JU employed Mrs Montgomery. It is for this court to decide whether the majority judgment of the EAT was correct in concluding that the Tribunal had correctly directed themselves in law. I include subsequent words and conduct as a legitimate source from which inferences may be drawn as to the parties' intentions, because the Tribunal here seemed to have tapped that source, in particular the fact that Mrs Montgomery worked at O&K for 2½ years. That such inclusion is proper is plain from the speech of the Lord Chancellor in Carmichael 's case with which all their Lordships agreed and also Lord Hoffmann's speech at p.2051: "Evidence of subsequent conduct, which would be inadmissible to construe a purely written contract (see Whitworth Street Estates (Manchester) Ltd. v James Miller & Partners Ltd [1970] AC 583) may be relevant on similar grounds, namely that it shows what the parties thought they had agreed. It may of course also be admissible for the same purposes as it would be if a contract had been in writing, namely to support an argument that the terms have been varied or enlarged or to found an estoppel." Notwithstanding the above considerations, whether the presence or absence of any specific term, once established as a matter of fact, has a particular legal effect is obviously a question of law. That becomes important in this case. I am not intending to detract from the Tribunal's task of generally weighing the evidence, ascertaining the true intention of the parties and thus deciding by whom a particular individual was employed. But in carrying out that process the Tribunal must correctly direct themselves if the law attaches a particular significance to any aspect of the agreement. Mr Samek, in effect, submitted that the Tribunal failed to do that with respect to two terms or facets, in particular, of the arrangement between JU and Mrs Montgomery. He referred to the "mutuality of obligation" and the concept of "control". The Law I consider the safest starting point to be the oft quoted passage of MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pension and National Insurance [1968] 2 QB 497 at 515: "I must now consider what is meant by a contract of service. A contract of service exists if these 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 service." MacKenna J made plain that provided (i) and (ii) are present (iii) requires that all the terms of the agreement are to be considered before the question as to the existence of a contract of service can be answered. As to (ii) he had well in mind that the early legal concept of control as including control over how the work should be done was relevant but not essential. Society has provided many examples, from masters of vessels and surgeons to research scientists and technology experts, where such direct control is absent. In many cases the employer or controlling management may have no more than a very general idea of how the work is done and no inclination directly to interfere with it. However, some sufficient framework of control must surely exist. A contractual relationship concerning work to be carried out in which the one party has no control over the other could not sensibly be called a contract of employment. MacKenna J cited a passage from the judgment of Dixon J in Humberstone v Northern Timber Mills (1949) 79 CLR 389 from which I take the first few lines only: "The question is not whether in practice the work was in fact done subject to a direction and control exercised by any actual supervision or whether any actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions." In Nethermere (St. Neots) Ltd v Gardiner and Another [1984] ICR 612 CA the court again considered what if any "mutual obligations" the law required for a contract of service to exist. It also discussed "control" in that context. Stephenson LJ at page 623 cited a sentence from Stable J's judgment in Chadwick v Pioneer Private Telephone Co Ltd [1941] 1 All ER 522, 523d: "A contract of service implies an obligation to serve, and it comprises some degree of control by the master." He then cited the passage in Ready Mixed Concrete that I have given and at letter G on 623 continued: "There must, in my judgment, be an irreducible minimum of obligation on each side to create a contract of service. I doubt if it can be reduced any lower than in the sentences I have just quoted and I have doubted whether even that minimum can be discerned to be present in the facts as found by the Industrial Tribunal . ." The sentences referred to were, of course, those from MacKenna J's judgment that I have quoted. 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. Clearly as society and the nature and manner of carrying out employment continues to develop, so will the court's view of the nature and extent of "mutual obligations" concerning the work in question and "control" of the individual carrying it out. In the nature of things the lead in this process will be taken by Employment Tribunals and the EAT. They have been carefully set up and constituted to be well suited to the task. However, since the concept of the contract of employment remains central to so much legislation which sets out to adjust the rights of employers and workers, including employees, it must be desirable that a clear framework or principle is identified and kept in mind. It is inevitable that different Tribunals will, from time to time, reach different conclusions on very similar facts. But unless the objectives of clarity and predictability in law are to be abandoned altogether, the principles upon which they base their decisions should be as clear as possible and adhered to. For my part, I regard the quoted passage from Ready Mixed Concrete as still the best guide and as containing the irreducible minimum by way of legal requirement for a contract of employment to exist. It permits Tribunals appropriate latitude in considering the nature and extent of "mutual obligations" in respect of the work in question and the "control" an employer has over the individual. It does not permit those concepts to be dispensed with altogether. As several recent cases have illustrated, it directs Tribunals to consider the whole picture to see whether a contract of employment emerges. It is though important that "mutual obligation" and "control" to a sufficient extent are first identified before looking at the whole. In the present case Mr Samek submitted that the Tribunal, purporting to follow McMeechan v Secretary of State for Employment [1997] ICR 549 , failed to do this; that they reduced the two basic and essential facts to no more than material for the melting pot and thus found a contract of employment when one or both were absent. I agree with Mr Samek that if that happened, the Tribunal misdirected itself in law. The Tribunal's Reasons The Tribunal's understanding of the law is set out in paragraphs 17-25 of their Extended Reasons: On our understanding of a complex matter in an uncertain area, the law as to "who is an employee?" has developed pragmatically according to the purpose in hand. Various concepts have been expounded and given variable weight at different times and in particular circumstances. These include a number of tests such "control", "integration", "economic reality" and "mutuality of obligation". We take from these certain underlying principles in our approach to the question. The first is that the issue must be judged in the context in which the question arises. The second is that to arrive at an answer will usually involve a balancing exercise after examining all the circumstances of the particular case to determine what are the relevant factors, evaluate the weight to be attached to each (since invariably there will be conflict between them) and finally, judge when taken together and in context whether an employment relationship is or is not revealed. . . . . . . . . . . . . In the leading judgment in McMeechan , Waite LJ stated (at paragraph 9 of IRLR report): "This Appeal involves a familiar but elusive question - what marks the difference between a contract of service and a contract of services? Many attempts have been made to provide criteria which will simplify the task of the industrial tribunals as they wrestle with it in particular instances. The distinction of stating, in a concise form, the balanced approach which the law requires to be adopted in all these cases belong to the chairman of the industrial tribunal whose direction was approved by the majority in this court in O'Kelly v Trusthouse Forte (1983) IRLR 369 at 382, 84. The direction was to: "Consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account." . . . . . . . . . . . . . . . From that perspective in the particular case, after balancing the various indicia in the "factual matrix" Waite LJ concluded (paragraph 43): "(4) When those indications are set against each other, and the specific engagement is looked at as a whole in all its terms, the general impression which emerges is that the engagement involved in this single assignment gave rise - despite the label put on it by the parties - to a contract of service between the temporary worker and the contractor." In paragraph 25 the Tribunal observed that in two recent cases with broadly similar facts to the present case the EAT had in one found a contract of employment but not in the other. One decision pre-dated and one post-dated the Court of Appeal in McMeechan. From those passages there is no sign that the Tribunal directed themselves that sufficient "mutual obligation" in respect of the work and "control" was required. There is no reference to the Ready Mixed Concrete case. The McMeechan case was also concerned with work obtained through an employment agency. A significant part of the judgment of Waite LJ in the Court of Appeal was taken up with identifying the difference between an overall contract governing the relationship between the agency and the individual and the specific contract which could arise when a particular assignment was found with a client of the agency which the individual accepted. The court concluded that it was necessary to look at the particular contract even if the overall contract was not a contract of employment. We are not concerned with that question in the present case because both parties accept that the relevant contract for present purposes is that arising out of Mrs Montgomery's work for O&K. There was no real evidence of and no finding by the Tribunal that an overall contract came into being. After the passage which I quoted above under paragraph 20 of the Tribunal's Reasons, Waite LJ said this: "The empiricism of that approach does not preclude recourse to familiar touchstones which have been found useful over the years. Harvey on Industrial Relations gives a useful summary of them at paragraphs 10 - 53. I do not need in this judgment to mention more than one of them. It is usually referred to as the criterion of mutual obligation. The principle which it enshrines is that if there be an absence on the one side of any obligation to provide work and an absence on the other side of any obligation to do such work as may voluntarily be provided then that provides a powerful pointer against the contract (assuming that in such circumstances any contract has arisen at all) being one of service." The Tribunal expressly state that they were following the guidance in McMeechan in arriving at their Decision. It seems that they understood Waite LJ's judgment (perhaps correctly) as indicating that the task in hand is to weigh up all the factors and reach a conclusion without reminding themselves that MacKenna J's first two criteria must be met as an irreducible minimum. Certainly the passages cited from McMeechan could be so read. However, it could also be that Waite LJ simply assumed the principle and moved straight to the next stage of weighing all the factors. It follows from what I have said that if he did intend to reduce the "criterion of mutual obligation" and by inference "control" as well to no more than matters to be weighed up with all the other factors, with great respect I disagree. More to the point I consider such an approach to be contrary to the Ready Mixed Concrete case itself (which, of course, would not have bound the Court of Appeal) but also to Nethermere and Carmichael in particular. Further consideration of the Tribunal's reasons confirms my view that they mis-directed themselves. First, under "Submissions" in paragraph 26, they described Mrs Summers' (who appeared for JU) suggestion as to how they should approach their task as "almost impeccable". It seems that the approach suggested was to: " Draw a list of features from the relationship which the evidence here established (being essentially the standards and conditions), setting those inconsistent with a contract of employment against those consistent with one." Second, under "Conclusions", they proceed to list the pros and cons as Mrs Summers had suggested. Quite properly at paragraph 37 they consider "all aspects of the relationship", decide that Mrs Montgomery "could not possibly be carrying on business on her own account" and that: "the Tribunal's unanimous decision is that in this long term specific assignment the Applicant was an employee of the First Respondent." However, nowhere is there any real indication that they considered the irreducible minimum for a contract of employment. Indeed, simply included in their list of factors against a contract of employment is: "(i) Little or no control, direction or supervision." and at paragraph 35 they say this: "The absence of mutuality of obligation appears to us largely irrelevant to the specific engagement. We take that view respectfully following the reasoning in McMeechan (paragraph 41)." That paragraph may not be as dramatic as it appears at first sight. Waite LJ in McMeechan was referring to specific terms in the agency's standard conditions which expressly excluded relevant obligations, but which were clearly only relevant to any over-riding arrangement between the parties and thus there was nothing for them to operate on in the context of a specific contract. As against that there are no similar terms in the standard conditions here and thus it is not entirely clear to what the Tribunal was referring in this context. They do not identify the mutuality of obligation or its absence which they had in mind. It could be that they considered that mutuality of obligation was satisfied by Mrs Montgomery's acceptance of the offer to work for O&K against JU's promise to pay for work done but they do not say so. I am satisfied that the Tribunal's approach to these two essential ingredients of a contract of employment was wrong in law. Mr de Mello submitted that "control" could be found by virtue of Clause 5 of the standard conditions applicable to Mrs Montgomery. That condition reserved to JU the right to terminate her "service" if she failed to perform with the degree of technical and professional skill to be anticipated. He submitted that clause should be read with Clause 4 of the terms and conditions between JU and the client, O&K. That clause simply provides that JU will make every effort to meet the client's reasonable requirements by ensuring a reasonable standard of skill and integrity and reliability from their temporary workers. Without more, I would not be inclined to regard those clauses alone as amounting to "sufficient control". But that is not really in point because the Tribunal here made a very clear finding of fact concerning the lack of control which I have quoted above. It is not open to this court to go behind such a clear finding which in my view is fatal to the Tribunal's Decision that Mrs Montgomery was employed by JU. The EAT's Decision The majority cited the relevant passage from Ready Mixed Concrete , but went on to say that "guidance given by the authorities is to consider all the pros and cons of whether there was a contract of service". On that basis they conclude that the Tribunal did not err in law nor was their decision perverse. In other words they endorsed the Tribunal's approach which, for the reasons I have given, I believe was wrong in law. In his "minority view" Charles J refers to Carmichael , Nethermere and Express and Echo Publications Ltd v Tanton [1999] IRC 693 and reaches the conclusion, with which I have agreed, that a contract of employment must meet the irreducible minimum identified by MacKenna J in Ready Mixed Concrete . In paragraph 39 he identifies other errors of law which I will comment on briefly. Charles J held that the Tribunal took into account an irrelevant consideration by having regard to the actual length of Mrs Montgomery's service with O&K. It is true that the Tribunal did not explain clearly what if any inference they drew from this fact but to my mind it does have some potential relevance. For example, it suggests that the parties had come to accept that the assignment had a degree of permanence. It might be considered as lending some support to Mrs Montgomery's evidence that she was at the outset looking for a position of some permanence. In Carmichael it seems to me that both the Lord Chancellor and Lord Hoffmann encouraged tribunals to take a realistic view of circumstances generally. The Lord Chancellor referred to subsequent words and events as a legitimate source from which inferences might be drawn as to the parties intentions. Lord Hoffmann, in the passage I have already quoted, explained why such matters could be admissible. I agree with Charles J that since legislation, in effect, requires an employment agency to treat the individual as an employee for National Insurance and tax purposes, the fact they have done so takes the matter no further. In fairness to the Tribunal it is clear that they did not place much reliance on this factor and in other cases it would be a material fact. I also agree with the Judge that the Tribunal appear to have taken little, if any, account of the absence of any review or grievance procedures as between the agency and Mrs Montgomery. These factors were present in the McMeechan case and doubtless played a not insignificant part in the final decision. Charles J decided that in the circumstances of this case and in particular since there was no relevant dispute on the facts and neither party wished the EAT to remit the matter to the Industrial Tribunal it was appropriate to express his own view on the issue. I agree with him. Charles J found that in the context of the specific assignment to O&K the mutual obligation was that JU provided work for Mrs Montgomery through its contract to provide services to O&K and she promised to do that work. He decided that was insufficient. For my part I would accept that an offer of work by an agency, even at another's workplace, accepted by the individual for remuneration to be paid by the agency, could satisfy the requirement of mutual obligation. I put it no higher because it would be necessary to look at the circumstances carefully and realistically. It may, for example, be more difficult to find that necessary mutuality in a very short assignment as opposed to one which was or had become more permanent. Since I have reached the conclusion that I have on "control", I prefer to say no more on this aspect of the matter, particularly as it was not really explored before the Tribunal. As to "control", Charles J also decided this was absent. He decided that the degree of control that JU had over Mrs Montgomery was not of a nature or degree to make JU her master. He pointed out that any control was, at most, indirect in respect of how the work was performed and as to when and where Mrs Montgomery provided her work and skill. There is considerable force in those considerations. Whether, in any given situation, "sufficient control" to constitute the one party an employer exists, is a matter for the Tribunal. I am not prepared to say that an assignment provided and paid for by an agency could never, as a matter of law, give rise to "sufficient control". That is a matter which would call for a practical approach to and consideration of the arrangement between the parties and how they operated it. From the bare facts recited by the Tribunal in this case, I would have been inclined to agree with Charles J that insufficient control was present. However, as I have already said, there is a clear finding by the Tribunal and since I do not think we should go behind it, that is the end of the matter. Finally, I would observe that there appears to be considerable uncertainty concerning the status of individuals who find work through employment agencies. This is apparent from the remarks of both the Tribunal and the EAT. Their view seems to be shared by those in the agency business. Mrs Johnson, a director of JU, said in evidence before the Tribunal: "Temps are not employed by the clients nor by us. We are not allowed to treat them as self-employed. I do not know what their status is. No one in the agency business knows the answer. They're in limbo." I agree with the passage in the EAT's judgment in which they comment on this uncertainty: "It follows that in line with the comment made by the Employment Tribunal in paragraph 39 of their Extended Reasons it seems to us that it would be sensible for the relevant Government Department and Parliament to give further consideration to the position of employment agencies, their clients and the individuals who work for such clients on the introduction of the agency. We are of this view notwithstanding that in the Employment Relations Act, 1999 an agency worker is defined and included within the definition of worker (see Section 13 of that Act). Indeed, we comment that the power conferred by section 23 of that Act on the Secretary of State for Trade and Industry to extend the protection of employment legislation to a specified description of individuals might be put to important use in this respect. Continued confusion about whether there exists any protection at all in certain cases against unfair dismissal assists nobody." I would allow this appeal and hold that Mrs Montgomery was not employed by JU. Lord Justice Longmore: 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. Some such reasoning may lie behind the decisions of the employment Tribunal and the EAT; but I am satisfied that this approach is wrong. In the context of a claim for unfair dismissal, an applicant must show that she (or he) is an employee of the defendant sued. In a case where (as here) the tribunal has found as a fact that there was "little or no control, direction or supervision", on the part of JU, a conclusion that Mrs Montgomery was the employee of JU cannot stand. Whatever other developments this branch of the law may have seen over the years, mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment, see Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, 623 per Stephenson LJ approved in Carmichael v National Power Plc [1999] 1 WLR 2042 , 2047 per Lord Irvine of Lairg LC. Here, part of that irreducible minimum is absent and, accordingly, whatever contractual arrangements were enjoyed by Mrs Montgomery, she cannot have been an employee of JU. Lord Justice Brooke: I have great sympathy with the Industrial Tribunal and with the lay members of the Employment Appeal Tribunal if they considered that the decision of this court in McMeechan v Secretary of State for Employment [1997] ICR 549 freed them from the obligation of identifying the irreducible minimum requirements of a contract of employment, as identified by this court in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, 623. As Buckley J has shown, however, the concept of an irreducible minimum of obligations was expressly applied by Lord Irvine of Lairg LC, with whom the other members of the House of Lords agreed, in Carmichael v National Power plc [1999] 1 WLR 2042 , and there is a consistent line of authority contained in decisions of this court, binding both on this court and on inferior tribunals, to the effect that the three elements of a contract of service identified by McKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 , 515 must be present before a contract of service can be identified, whatever other elements there may be which point one way or another. See also Clark v Oxfordshire Health Authority [1998] IRLR 125 per Sir Christopher Slade at para 22, and Express & Echo Ltd v Tanton [1999] ICR 693 per Peter Gibson LJ at p 698. If, therefore, Waite LJ's judgment in McMeechan is being interpreted as meaning that this line of authority has lost its potency today, that interpretation of it should not be followed. 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. 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. For the reasons given by Buckley J, I agree that this appeal should be allowed. ORDER: Appeal allowed with the costs. (Order does not form part of approved Judgment) BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII