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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Community Dental Centres Ltd v. Sultan- Darmon  UKEAT 0532_09_1208 (12 August 2010)
Cite as:  UKEAT 0532_09_1208,  IRLR 1024,  IRLT 1024
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|At the Tribunal|
|On 2 July 2010|
THE HONOURABLE MR JUSTICE SILBER
MS J L P DRAKE CBE
MR T HAYWOOD
Transcript of Proceedings
|For the Appellant||MR ANDREW STAFFORD QC
(One of Her Majesty's Counsel)
Outset UK Limited
|For the Respondent||MRS RENATA DARMON-SULTAN
UNLAWFUL DEDUCTION FROM WAGES
The Claimant (who was a dentist) entered into a contract to provide dental services for the Respondent. The Employment Tribunal found that he was not an "employee" within the meaning of section 230(3) of the Employment Rights Act 1996 but that he was a "worker" within the meaning of that provision. The Respondent appeals.
Held (allowing the appeal):-
The Claimant was not a "worker" as he did not "undertake to do or perform personally any work or services" as required by section 230(3) because there was no obligation on the Claimant to do work as he could delegate his duties.
Dicta in Byrne Brothers (Formwork) Limited v Baird and Others  IRLR 96; James v Redcats (Brands) Limited  IRLR 296; Express and Echo Publications Limited v Tanton  IRLR 367; Jorzca v Premier Groundworks  All ER (D) 22  and Archer-Hoblin Contractors v MacGettigal  UKEAT/0037/09/0307  applied.
Dicta in Redrow Homes (Yorkshire) Limited v Buckborough  IRLR 34 not followed.
THE HONOURABLE MR JUSTICE SILBER
a. Georges Sultan-Darmon ("the Claimant") was in relation to the Respondent a "worker" within the meaning of the Employment Rights Act 1996 ("the Act")and that he was therefore entitled to pursue a claim for wages or unlawful deductions; and that;
b. The Claimant was not an "employee" as defined in the Act of the Respondent.
"an individual who has entered into or works under (or, where the employment has ceased worked under) –
(a) a contract of employment, or
(b) any other contract whether expressed or implied and (if it is expressed) whether orally or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract who's status is not by virtue of a contract that of a client or customer of any profession or business undertaking carried on by the individual".
The decision of the Employment Tribunal
(a) The Respondent had for some years been contracted to provide dental services to a Primary Care Trust in Devon at practice premises in Northam;
(b) The Claimant first entered into a contractual relationship with the Respondent in 2002 when the Respondent was owned by another company but after transfers, the Respondent company retained its own independent legal identity and the Claimant's contractual relationships have always been with the Respondent and no other company;
(c) The Respondent had a contractual relationships with the PCT to supply dental services and for that purpose, dental surgeons were engaged;
(d) The contract into which the Claimant entered was described as "licence agreement and contract for service" and it specifically stated that the Claimant's status was "a self-employed independent contractor dentist with full clinical freedom and accepting full clinical responsibility";
(e) The contractual provision for payment stated "[the claimant] will be self-employed; [the respondent] can if required introduce [the claimant] to an Accountant who specialise in dentists' financial affairs";
(f) In an annex to the licence agreement, it was provided that nothing in the agreement should constitute a partnership between the Claimant and the Respondent and that each party should be seen, as far as possible, as an independent contractor;
(g) Under the terms of the agreement, the Claimant was obliged to be registered with the General Dental Council and to hold appropriate risk insurance. The Employment Tribunal found that it was the intention that the Claimant would be directly responsible to the appropriate professional and regulatory bodies for his own professional conduct as a dentist;
(h) The evidence of the Claimant was that he always had complete clinical independence and that he had sole authority to decide in consultation with his patient upon the nature and extent of any treatment which the patient should receive. Thus the Respondent could not dictate to the Claimant what he had to do or how to do it although the Claimant was subject to a clinical audit by a dental practitioner engaged by the Respondent for that purpose;
(i) The Respondent took responsibility for the provision of day-to-day dental services; and it supplied the premises, the basic equipment and the support staff (such as receptionists and dental nurses) leaving the Claimant only to provide his own work wear and such additional small tools as he might in his discretion require;
(j) Although the Respondent introduced the patients to the Claimant, the contract gave the Claimant fairly extensive rights to decline to treat any individual but it defined the hours of which the Claimant was required to provide dental services under the National Health Service Scheme. The contract also limited the amount of time which the Claimant could take off and it required him to participate in an emergency on-call roster;
(k) The Claimant was paid initially on the basis of work actually done although there was a small capitalisation allowance depending on the number of patients registered to him which remained more or less constant. He was paid gross and he was expected to pay his own tax and national insurance which he did whilst making modest claims for items such as work wear and professional expenses, which were set off against his tax liability. He did not receive holiday pay and nor did he receive money to compensate for work which he would have done when he was away on holiday and he also received no sickness pay although he could benefit under a Government Scheme which provided payment to sick dentists;
(l) The Claimant was entitled to undertake private work using the Respondent's premises with the fees being shared equally with the Respondent. The Claimant had to meet some of the costs of the laboratory work generated as a result of the treatment of patients while the liability for bad debts was split equally between the Claimant and the Respondent. The Claimant was also obliged under the contract to indemnify the Respondent for costs incurred by his negligent use of equipment as well as in respect of any acts or omissions committed by the Respondent staff while working under the Claimant's supervision;
(m) The contract contained a provision under the heading Absence which stated that "In the event of your failure (through ill health, maternity leave or other causes excluding up to 30 days' annual holiday allowance) to utilise the facilities for a continuous period of more than 5 days you shall make arrangements for the use of the facilities by a locum tenens acceptable to [the respondent] and in the event of your failure to make such arrangements [the respondent] shall have authority to appoint a locum tenens if possible to act on your behalf who should be your servant or agent and shall be paid by you";
(n) The Employment Judge was satisfied the Claimant did not avail himself of that provision although other dentists engaged on similar terms had on occasions engaged a locum to act for them and in particular dentists who took maternity leave;
(o) There were changes over the years to the basis and method of remuneration with the dentists being paid a set numeration per month and a further change was made when all dental work was broken down into what were described as different units of dental activity with the Claimant together with other dentists similarly engaged being given targets of the number of units to be attained per month. Failure to reach the required number of units would lead to a reduction in the amount paid to the Claimant while if the Claimant undertook more units than the target he would be paid an additional sum;
(p) There was then a fresh form of contract offered to the Claimant in 2004 which he declined to sign. It was common ground at the hearing in front of this Appeal Tribunal that neither party was bound by any agreement from the 2004 draft and so nothing more needs to be said about it.
(q) The agreement came to an end in January 2009 and the present claim was then brought.
a. "I was not satisfied that there was in fact a sufficient mutuality of obligation here. The respondent undertook to introduce patients to the claimant but there was no guarantee that any particular number of patients would be introduced or even the claimant would necessarily get his fair share as compared with other dentists engaged in other same terms and conditions. Furthermore there was no obligation upon the claimant – at least under the terms and conditions of the contract which he regarded as binding upon him – to treat any patient who he decided he did not wish to treat. Although as a matter of commercial common sense it was in the interest of the respondent to introduce patients to the claimant and it was in the interests of the claimant to treat those patients, there was no legal obligation on either side which was sufficiently clearly enforceable to amount to a mutuality of obligation" ;
b. "Secondly I was not persuaded that the control which the respondent undoubtedly exercised over the claimant's environment necessarily amounted to the degree of control which effectively created the position of master and servant…it did not purport to control the claimant in the exercise of his professional discretion. To put it bluntly, it did not tell the claimant that he had to fill one tooth, draw another, or engage in or desist from any particular treatment. I do not regard the process of clinical audit as that sort of conduct; I took the view that it simply amounted to monitoring by the respondent of the claimant's performance to ensure that it was maintaining its own contractual obligations to provide a competent dental service to members of the public";
c. "Moreover, it seemed to me there were a number of other areas which show the relationship between the parties was inconsistent with there being a contract of service"  . Those areas included the facts that as (i) an employee is not required to provide his own professional indemnity insurance but is covered by the public liability insurance policy held by his employer; (ii) "an employee is not, in my experience, required to indemnify his employer in respect of damage done by him to his employer's equipment or in respect of the negligent actions of employees of the employer acting under his supervision" (iii) these were matters which would normally be dealt with under the Respondent's internal disciplinary procedure but it was clear that they never applied to the Claimant; (iv) the Claimant did stand a financial risk in the course of his contract if he failed to complete the number of units; and (v) he bought equal responsibility with the Respondent for bad debts. Those factors were "wholly inconsistent with the claimant working under a contract of employment"; and
d. The original contract expressly excluded the idea of employment and there were other significant but determinative factors such as the Claimant enjoying self-employed status.
a. He was satisfied under the terms of the contract a locum could be supplied and occasionally was supplied but not by the Claimant. He did not conclude that the contractual provision relating to the appointment of a locum to do the dentist work for him and at his expense "was in any way a sham";
b. The obligation on a worker in section 230 of the Act is to do or perform personally any work but in this case the Claimant was obliged to provide the services of a dental surgeon either by turning up to work himself or by supplying a locum with the right of the Respondent to appoint a locum if the Claimant failed to supply the locum and that locum selected by the Respondent would be regarded as the Claimant's servant or agent and for whose remuneration the Claimant would be solely responsible;
c. "In other words, therefore, the claimant had by provision of work or services, personally to ensure the dental work he contracted to carry out was achieved" ;
d. Although the Claimant was a self-employed sub-contractor he "had nonetheless entered into a contract whereby he undertook to do or to perform personally work or services for the respondent"; and that
e. He therefore came to the conclusion "that it was more likely than not" that the Claimant had met the statutory definition of a "worker".
"We accept that mutuality of obligation is a necessary element in a 'limb (b) contract' as well as in a contract of employment. The basis of the requirement of mutuality is not peculiar to contracts of employment: it arises as part of the general law of contract."
"As the EAT observed recently in the case of James v Greenwich Council  IRLR 168 paragraph 54, typically the focus on mutuality of obligations arises in circumstances where a worker is employed intermittently by an employer and the question arises whether there is a contractual relationship in the period when the worker is not actually working. This is important for establishing continuity of employment (although sometime s.212 of the Employment Rights Act 1996 will assist in that regard). The only obligations which in practice are likely to arise are some duty on the employer to offer work and some duty on the worker to accept work if offered. If there are no mutual obligations of any kind, there can be no contract. That is a simple principle of contract law, not unique to contracts of employment."
"9… [The Respondent] introduced the patients to him, although the 2002 contract gave him a fairly extensive right to decline to treat any individual; and it identified the hours within which the claimant was required to provide dental services under the National Health Scheme. The contract limited the amount of time over the course of the year which the claimant could take off and required him to participate in an emergency on-call roster.
17… Firstly, I was not satisfied that there was in fact a sufficient mutuality of obligation here. The respondent undertook to introduce patients to the claimant but there was no guarantee that any particular number of patients would be introduced or even that the claimant would necessarily get his fair share, as compared with other dentists engaged upon the same terms and conditions within the same practice, of such patients as did approach the practice for treatment. …Furthermore there was no obligation upon the claimant – at least under the terms and conditions of the contract which he regarded as binding upon him – to treat any patient whom he decided he did not wish to treat. Although as a matter of commercial common sense it was in the interests of the respondent to introduce patients to the claimant and it was in the interests of the claimant to treat those patients, there was no legal obligation on either side which was sufficiently clearly enforceable to amount to a mutuality of obligation" (emphasis added).
"In the event of your failure (through ill-health, maternity or other cause excluding up to 30 days annual holiday absence" to utilise the facilities for a continuous period of more than 5 days you shall make arrangements for the use of the facilities by a locum tenes acceptable to [the respondent] and in the event of your failure to make such arrangements [the respondents] shall have authority to appoint a locum tenes if possible to act on your behalf who shall be your servant or agent and shall be paid by you".
"22. The respondent's wife, in her final submissions, maintained firmly that it was not possible to provide a locum and that that would not have been permitted, but there was no evidence whatsoever to that effect and persuasive evidence from the respondent's witnesses to the contrary. I was satisfied on the evidence that under the terms of the contract a locum could be supplied, and on occasions was supplied, although not, as I found, by the claimant. Is this, then, fatal to the claimant's argument that he was at least a worker if not an employee?
23. On the one hand, it follows from what I have said already that I did not conclude that the contractual provision relating to the appointment of a locum to do the dentist's work for him and at his expense was in any way a sham, and in this context I reminded myself of the conclusions in the recent case of Redrow Homes (Yorkshire) Ltd v Buckborough  IRLR 34 which the respondent's representative helpfully supplied. That authority, however, considered not only the circumstances in which one might or might not conclude that the "personal services" provision in a contract amounted to a sham; it also went on to consider more generally the question of the nature and extent of the obligation to perform services personally. In that case, which involved bricklayers and a claim for holiday pay, the relevant clause was this:
"For the avoidance of doubt the obligation to perform the work is not personal to the contractor and their obligations may be performed by other labour. Further the contractor is required to provide other labour if it is necessary to carry out the works or to maintain the rate of progress stipulated by the company."
Although the Employment Appeal Tribunal took the view that on that form of words the obligation to provide other labour to Redrow could not be described as an undertaking personally to do or perform work, it went on to conclude that the alternative requirement: to perform services, should embrace a wider concept than that of work and concluded that the obligation upon the claimants to provide labour was justifiably and correctly described as an obligation personally to perform a service for Redrow, thereby relieving Redrow in the absence of a contractor from having to find other labour, or having to find other labour if a contractor was not able to maintain the required rate of progress.
24. The obligation on a worker under the definition in s.230 is to undertake to do or perform personally any work or services for another party to the contract. Under the contract which subsisted between the claimant and the respondent in this case, the claimant was obliged to provide the services of a dental surgeon either by turning up to work himself, or by supplying a locum if he were to be absent for a period in excess of 5 days (subject to the exclusion in respect of holiday). Moreover, if he failed to supply that locum then the respondent would take it upon itself to appoint such a locum who would, as a matter of contract, be regarded as the claimant's servant or agent and whose remuneration would be at his sole charge. In other words, therefore, the claimant had, by provision of work or services, personally to ensure that the dental work he had contracted to carry out was achieved."
"In the event that the contractor is unable or unwilling to perform the services personally he should arrange at his own expense entirely for another suitable person to perform the services".
"31. In these circumstances, it is, in my judgment, established on the authorities that where, as here, a person who works for another is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer. [The claimant] has submitted to us that though the personal services to the [contracting party] was a material consideration, it was not conclusive. I am afraid that that proposition cannot stand in the light of the authorities."
"Surprisingly there is, we were told, no authority which addresses the difference between "work" and "services" in the definition of "worker" in Regulation 2(1). We take the view that the obligation to provide other labour to Redrow could not, on any ordinary understanding of those words, be described as an undertaking personally to do or to perform work; but Parliament must be taken to have intended by the relevant words of Regulation 2(1) that the alternative – to perform services –should embrace a wider concept than that of work; and in our judgment the obligation on the Claimants to provide labour, while not an obligation personally to perform work, was justifiably and correctly described by the Tribunal as an obligation personally to perform a service for Redrow, relieving Redrow in the absence of a Claimant from having to find other labour or to find other labour if a Claimant was not able to maintain the required rate of progress".
"In conclusion, we consider that where a party has an unfettered right for any reason not to personally perform the contractual obligations under a contract but can delegate them to someone else, he cannot be a "worker" within the meaning of the WTR even though the person actually performing the contractual obligations has to meet certain conditions. The position would be different if the right not to perform the contractual obligation depended on some other event such as where that party was "unable" to perform his or her obligation (see MacFarlane and James (supra)."
"have the right to send someone with similar experience and qualifications in your place. You will be paid for the work they do and you must then arrange to pay the substitute yourself. You must notify the [person for whom the work was to be done] of the substitute for security and Health and Safety purposes."
"43. In my judgment on a proper construction of the substitution clause, [the contractor] was given an unfettered right to delegate the performance of his duties. As a matter of law such a right is inconsistent with an obligation to perform personally any work or services within the meaning of the Working Time Regulations 1998."
"the right or obligation to employ a substitute will not necessarily mean that there is no obligation on the part of the 'contractor' to perform personal services unless that right to employ a substitute is unfettered" [77(c)].