| Date | 9 April 2003 |
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| Judgment | Byrne Brothers (Formwork) Limited -v- Baird and Others, EAT 18 September 2001 |
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| The Issue | Whether building workers employed under a labour only subcontract agreement may be regarded as employees of the main contractor, and therefore entitled to benefits accruing under employment legislation. |
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| Implication |
Despite the existence of subcontracts that purport to designate building operatives as subcontractors, the Employment Tribunal may hold self employed workers to be employees entitled to benefits such as holiday pay. |
printThe case of Byrne Brothers -v- Baird and Others may eventually have wide reaching implications for the use of self-employed workers in the UK construction industry. Baird and three of his colleagues were labour only formwork carpenters. They started to work for Byrne in 1999. On starting to work they were required, along with all other labour only subcontractors, to sign Byrne's standard form of subcontract agreement. The subcontract agreement consisted of a series of boxes for completion and did not explicitly contain any statement concerning the subcontractor's primary obligations. The only substantive provisions within the agreement were a declaration that the subcontractor agreed to abide by the company's health and safety policies and that he did not suffer from any medical condition that would prevent him from carrying out the services to be provided under the subcontract. The subcontract also expressly stated that the labour only subcontractor was entering into a subcontract for 'services' with Byrne and therefore the subcontractor acknowledged that the subcontract would not constitute a contract of employment. It went on to state that the subcontractor would not be entitled to holiday, sick pay or pension rights. Such subcontracts are widespread in the building industry and it is generally thought that this will be sufficient to exclude the possibility of granting employee status to 'labour only' labourers or craftsmen. Baird and his colleagues worked exclusively for Byrne at a site in Milton Keynes. They worked up until Christmas 1999 and resumed work after the New Year. In accordance with their subcontractor status and the terms of the agreement which they had signed, they did not receive any pay in respect of that period. However, in March of the following year Baird and his colleagues presented claims in the Employment Tribunal claiming that they were entitled under the Working Time Regulations 1998 to holiday pay for the period of the 1999/2000 Christmas and New Year break. Their claim, which originally involved a much larger number of applicants, was supported by their trade union, UCATT. Whether they would be entitled to such pay depended upon whether Baird and his colleagues could be classified as 'workers' within the definition contained in the Working Time Regulations as follows; "A worker means an individual who has entered into or worked under (a) a contract of employment or (b) any other contract whereby the individual undertakes to do or perform personally any work or services for another party …. whose status is not .... that of a client or customer". That rather clumsy definition appears in other employment legislation, including that Wages Act 1986, the Employment Rights Act 1996, the National Minimum Wage Act 1988 and the Employment Relations Act 1999. When the matter came before the Employment Tribunal it was submitted on behalf of Baird that the subcontract documents did not reflect the reality of their working relationship with Byrne. The Tribunal found as a fact that none of the applicants had read or understood the subcontract documents. Nevertheless the Tribunal held that Byrne and his colleagues were bound by the subcontract documents and concluded that none of the applicants had worked under a contract of employment as defined in part (a) of the definition contained within the Working Time Regulations. It then fell to the Tribunal to decide whether part (b) of the definition applied. Here the Tribunal held in favour of Baird, stating that he was obliged to personally perform work or services for Byrne and that he did not do so in the capacity of a 'business undertaking' of which Byrne could be said to be the customer. Accordingly the Tribunal held that the applicants were all 'workers' for the purpose of the Regulations and were entitled to the benefits which the Regulations bestowed. Against this background the matter came before the Employment Appeal Tribunal. The EAT held that there were two main issues to resolve. Firstly, whether the applicants under the subcontracts were obliged personally to perform work or services for Byrne. The Tribunal held that that was a matter of common sense. When an individual carpenter or labourer is offered work on a building site the understanding of both parties is that it is the individual personally who will be attending to do the work. The Tribunal was satisfied that it was plain that the subcontract did require the applicants personally to perform work or services for Byrne. Secondly, the Tribunal had to decide whether the status of Byrne by virtue of the subcontract was that of 'customer' of a 'business undertaking' carried on by each of the applicants. The Tribunal recognised that in one sense every self-employed person carries on a business. However according to the Tribunal the intention behind the Regulations was plainly to create an intermediate class of protected worker who on the one hand is not an employee, but on the other hand cannot in some narrower sense be regarded as carrying on a business. Although it was clear that each of the applicants submitted accounts to the Inland Revenue and took advantage of their entitlement to set-off business expenses, this did not of itself mean that they were a 'business undertaking'. In conclusion the appeal was dismissed. Notwithstanding the terms of the subcontract which each of the applicants had entered into they were to be regarded as 'workers' for the purpose of the Regulations and accordingly their claim for holiday pay and other similar benefits as employees of Byrne succeeded.
CJ-0313
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