Mr Tilson, an agency worker, recently lost his claim for unfair dismissal against Alstom Transport in the Court of Appeal. Initial success at the Employment Tribunal was overturned at the Employment Appeal Tribunal (EAT) and the Court of Appeal upheld the EAT’s decision.
On 23rd August 2004, Mr Tilson began working for Alstom Transport, a train business operating out of North West London, as a technical engineer at their Wembley depot. He was subsequently promoted to Fleet Health Manager at the Golders Green depot up until his relationship was summarily terminated by Alstom on 7th November 2006. At this point Mr Tilson alleged the termination constituted an unfair dismissal.
It was not disputed that throughout Mr Tilson’s period of service with Alstom that he was fully integrated into its business. Other features of his working arrangements included:
Being responsible to a line manager;
Certain employees reported to him;
Worked Monday – Friday;
Was authorised to recruit staff including permanent employees;
Responsible for the business and operational aspects to his job;
Was authorised to discipline and dismiss permanent employees;
Signed timesheets for permanent employees;
Ordered materials for and on behalf of Alstom;
Represented Alstom in negotiating contracts;
Was given a company phone, computer and network access;
Had to apply to the line manager before taking annual leave;
Was given full access to technical information and operational reports;
Personal service was a requirement and he had no right of substitution.
Ignoring the agency arrangements, Mr Tilson was performing work in the same way as any other employee would do. There was however a complex agency relationship in place under which the contractor provided his services, i.e:
Alstom Transport
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Morson Human Resources Ltd
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Silversun Solutions Ltd
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Tilson
Alstom’s case was that although a casual observer might have assumed that Mr Tilson was one of their employees, in fact he was not and it was his choice that he should not be. Mr Tilson had been offered a permanent job as an employee under an employment contract but he had refused this unless he was guaranteed significantly more hours than employees typically worked. This was because he was on a significantly higher rate of pay under the agency arrangements than he would have received as an employee and it was perceived there were associated tax advantages in this arrangement.
For his claim to employment rights to succeed it was necessary for Mr TIlson to show that a contract of service should be implied and such a contract should only be implied when it is necessary to do so. It was not permissible for a tribunal to conclude that because a worker does the kind of work that an employee does, or of a kind that other employees do, the worker must be an employee. Nor was it legitimate for a tribunal to imply a contract because it objects to the practice of employers entering into arrangements of this kind in order to avoid incurring the obligations they owe to their employees.
The contract between Alstom and Morson fully explained why Mr Tilson was working for Alstom and the only proper inference was that the parties would have acted in exactly the same way if there had been no contract between them. The Court of Appeal agreed with the EAT that this conclusion was strongly reinforced by the conduct of the parties.
There may be those who might think this ruling strikes a blow to IR35 but it must be remembered that this was an employment law case and the approach to employment status differs to that for tax. Whilst some employment law cases are useful in defining and clarifying certain aspects of status, had this case been heard by a Tax Tribunal it is most likely that Mr Tilson’s wishes would have come true. IR35 requires the construction of a hypothetical contract between contractor and end client and the approach is quite the reverse from this case. So whilst the decision is interesting it’s employment status but not as we know it!
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