An interesting case in which an employment tribunal had to decide whether a worker was an employee or an independent contractor is the English case of Stringfellows Restaurants Ltd vs Quashie (2012).
Here, Ms Quashie worked from time to time for over a year as a lap dancer in two clubs run by Stringfellows. In December 2008, she was told she would no longer be allowed to work for the company because she was believed to have become involved in drugs. She brought a claim for unfair dismissal.
As an important preliminary issue, it had to be decided whether she was an employee under the Employment Rights Act 1996 which contains similar provisions in the matters under discussion as our Employment Rights Act.
The Employment Rights Tribunal described in some detail how the lap dancing club operated. The dancers had to pay the club a fee each night before commencing their shift. They were then paid in “Heavenly Money” by the customers, which is a form of voucher that avoids actual cash being exchanged between the dancers and the customers.
The dancers would give the “Heavenly Money” they collected to the club which would take a percentage, including a commission fee, and give the dancers the remainder.
The dancers had to do certain free dances and would receive fines if they were late or failed to perform the free dances.
The club agreement, which the Employment Tribunal found that the claimant did not in fact receive, referred to the dancers as independent contractors.
However, she did receive a booklet entitled Welcome To Stringfellows: The Carbaret Of Angels, which contained most of the material found in the club agreement and therefore she was bound substantially by the the terms of the agreement.
The Employment Tribunal held that she was not an employee.
The Employment Appeal Tribunal (EAT) held that she was an employee. Judge McMullen QC said the club was under an obligation to pay dancers and it did not matter that the dancers were paid by a third party in “Heavenly Money”. He emphasized also that Ms Quashie was obliged to work on the nights she attended the club. He held that the only proper inference was that she was an employee.
She appealed to the Court of Appeal.
The Court of Appeal, whose judgment was delivered by Lord Justice Elias, began by addressing the law. It referred to relevant sections of the Employment Rights Act 1996 defining “employee” and “a contract of employment”, corresponding provisions of which can be found in the Barbados Employment Rights Act.
The definitions are: “Employee” means an individual who has entered into or works under (or where the employment has ceased, worked under) a contract of employment.
A “contract of employment” means “a contract of service or apprenticeship whether expressed or implied and (if it is expressed), whether oral or in writing”. Justice Elias continued: “There is voluminous case law seeking to encapsulate the essence of the contract of employment and to distinguish it from other forms of working relationship.
“The distinction is important because some rights, including the right to claim unfair dismissal, are conferred on employees whereas others are conferred upon workers, a more widely defined category. All employees are workers but not all workers are employees.
“Various tests for identifying when a contract of employment exists have been proposed in the cases, although none has won universal approval.
“These tests include, to use the shorthand descriptions, the following: the control test (which focuses on the nature and degree of control which is exercisable by the employer); the business integration test (whether the work provided is integral to the business or merely accessory to it); the business or economic reality test (whether in reality the worker is in business on his or her own account, as an entrepreneur); and the multiple or multi-factorial test, involving an analysis of many different factors of the relationship.”
No obligation
Justice Elias agreed with the tribunal’s finding that the club was under no obligation to pay the dancer anything. He said the main evidence was that she negotiated her own fees with clients and took the risk that she would be out of pocket and received back from the employer only monies received from clients after deductions.
He said: “There was nothing inherently implausible in the finding of the tribunal that the club was obliged to pay nothing.
“Indeed, the dancer herself understood the arrangement in that way, at least when she was first engaged. It is what the terms of the agreement say, and the judge found that it was her understanding.”
He continued: “The Employment Tribunal’s conclusion was strongly reinforced by the fact that the terms of the contract involved the dancer’s accepting that she was self-employed, and she conducted her affairs on that basis, paying her own tax.
“In addition, and again consistent with that classification, she did not receive sick pay or holiday pay. It is trite law that the parties cannot by agreement fix the status of their relationship – that is an objective matter to be determined by an assessment of the relevant facts. But it is legitimate for a court to have regard to the way in which the parties have chosen to catergorize the relationship, and in a case where the position is uncertain, it can be decisive . . . .
“It follows, in my judgment, that the fact the parties here intended that the dancer should have self-employed status reinforces the conclusion of the employment judge in this case.
“I do accept that there were mutual obligations in play when the dancer was at work; and indeed she had a duty, at least once on the rota, to work on certain days. I also accept that it can be readily implied that the appellant was under some obligation to allow her to dance when she was at work.”
The judge was particularly influenced by the fact that the dancer took the economic risk which he said was “a very powerful pointer against the contract being a contract of employment.
Indeed, it is the basis of the economic reality test, described above . . . . [I]t would be an unusual case where a contract of service is found to exist when the worker takes the economic risk and is paid exclusively by third parties.
On any view the tribunal was entitled to find that the lack of any obligation to pay did preclude the establishment of a contract here.”
Stringfellow’s appeal to the Court of Appeal was allowed. Ms Quashie was found to be self-employed.
This was a case in which the decision was heavily influenced by the economic reality test and the multiple test, where the court examines and assesses all the relevant factors which make up the employment relationship in order to determine the nature of the contract.
Happy New Year to all!
