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Who's the employer? Is it always clear cut?

Napthens - February 1st 2021

Identity of Employer: Clark v Harney Westwood & Riegels and others

It would be easy to think that the identity of an employer should be fairly easy to determine. However a recent case has demonstrated that it is not always clear cut, for example, where an employee is engaged by one company in a group but carries out work for another. Here, the Employment Appeals Tribunal (EAT) considered how the correct employer should be determined when its identity is in dispute between the parties.

Facts

The Claimant, a barrister, was dismissed from her job with a Cayman Islands legal partnership, HWR, described by the tribunal as having a 'shambolic approach' to their dealings with the Claimant. Her agreement, business cards and all documentation she received identified her as having been employed by HWR. However, unbeknownst to the Claimant, HWR had obtained a work permit for her to work for a different, locally owned firm, HB . This was due to Cayman law providing that permits can only be obtained by entities that are at least 60% Cayman-owned which HB was and HWR was not. Both temporary and full work permits were issued by the Cayman Islands Department of Immigration naming HB as the Claimant's employer.

The Claimant brought a breach of contract claim in an English employment tribunal against HWR. The Claimant’s claim was out of time, hadn’t been through early conciliation and the Respondents disputed employing her. The tribunal at first instance dismissed the Claimant’s claim on several grounds, finding that the Claimant was employed by HB, not HWR. The Claimant appealed this decision and the appeal was considered by the EAT.

Previous cases considered by the EAT.

In Autoclenz Ltd v Belcher and others [2011 ] IRLR 820, the Supreme Court held that the starting point for ascertaining the intention of the parties is usually the written contract. However, where the written document does not reflect the true intentions of the parties, or was a sham, it may become necessary to look beyond the written document to the course of dealings between the parties and their subjective beliefs about the contractual arrangement.

Similarly, In Dynasystems for Trade and General Consulting Ltd and others v Moseley UKEAT/0091/17, the EAT upheld an employment tribunal's decision that an employee was in fact employed by a UK company rather than the Jordanian company stated to be his employer in his contract of employment. In considering whether the contract accurately reflected what had been initially agreed, the tribunal had been entitled to take into account later events.

Determining the correct employer was also considered in two earlier cases: Clifford v Union of Democratic Mineworkers [1991] IRLR 518 and Secretary of State for Education and Employment v Bearman and others [1998] IRLR 431. In Clifford, the Court of Appeal held that whether A is employed by B or by C is a question of law where the only relevant evidence is documentary. However, where the relevant evidence is an amalgam of documents and facts, the question of law is a mixed question of law and fact. In Bearman, the EAT stressed the importance of starting with the written contractual arrangements, and then considering whether the position changed thereafter and, if so, how.

Held

The EAT allowed the Claimant's appeal in relation to the correct identity of her employer and the territorial jurisdiction of the Employment Tribunal, confirming the correct identity of the employer is HWR which, as a company registered in England and Wales, was subject to the tribunals jurisdiction. However, the Claimant’s claim was ultimately dismissed as the EAT found that the ET was right to hold that it did not have jurisdiction to hear the claim due to the Claimant's failure to comply with early conciliation and to present the claim in time.

Summarising the principles set out in the above case law, the EAT held that, when determining the identity of the employer, documents created separately from the employment contract of which one party is unaware should be treated with caution. It would be a rare case where a document about which a party had no knowledge could contain persuasive evidence of the intention of that party.

The EAT gave guidance on identifying the employer. That is:

  • when the evidence is only documentary, the issue is a question of law, but with a mix of documents and facts (i.e., most disputes), it is a mix of fact and law;
  • the starting point will be any written agreement drawn up at the start of the relationship, then checking if that truly reflects the intention of the parties;
  • if a party alleges that the documentation doesn't show the true employer, consider whether there was a change, and how it happened; and look at how the parties acted during the relationship;
  • the EAT cautioned against giving weight to documents created without one party's knowledge, which might point to one party's private intentions rather than what was agreed.

Comment

The case highlights the importance of ensuring all written contracts of employment reflect the true employment relationship between the parties. If the identity of the employer does change, this should be clearly documented and the relevant employees notified of this change. It is also important to ensure that any changes are documented in writing and that the Company does not rely on verbal agreements which are difficult to evidence should issues arise at a later date.