In the absence of written terms, tribunals can only imply a contract if it is “necessary” to do so. In Smith v Carillion and Schal International Management Ltd, the Employment Appeal Tribunal (EAT) held that the test of necessity still holds true when deciding whether a contract of employment with an end user in a tripartite agreement (as here) could be implied.
Basic facts
Mr Smith worked on a number of building sites in the late 1990s and early 2000s where he was also the shop steward and/or safety representative. His services were provided through two employment agencies to John Mowlem (subsequently taken over by Carillion) and Schal (which was owned by Carillion), although none of the terms were ever put in writing.
In 2009, the Information Commissioner’s Office uncovered an organisation called the Consulting Association which had compiled a database of "blacklisted" workers. There was evidence that John Mowlem had used that list. Several of the contracts Mr Smith worked on were brought to an end before their normal contract date.
Mr Smith brought claims under section 146 of the Trade Union and Labour Relations Consolidation Act(the right not to be subject to detrimental treatment on grounds of trade union activities); and section 44 of the Employment Rights Act 1996 (the right not to be subject to detrimental treatment because of activities as a health and safety representative).
Tribunal decision
In the absence of any written agreement the tribunal had to decide whether a contract could be implied between Mr Smith and Carillion.It noted that it was bound by the decision in James v Greenwich LBC and so could only imply a contract if it was “necessary” to do so. In other words, if the facts made sense without a contract, it could not imply one.
The tribunal then considered the factors put forward by Mr Smith as being indicative of an employment contract - that he was interviewed before being appointed to an assignment; that all his assignments were long-term; that he was fully integrated into the management set-up and subject to a significant degree of control; that Carillion decided he should be dismissed; and the fact that there were no written terms.
However, the tribunal held that these factors were not inconsistent with an agreement between him and the agency and an agreement between the agency and Carillion. It was not therefore necessary to imply a contract with Carillion. Furthermore, there was no evidence that the agreement with the agency was a sham as per the Supreme Court in Autoclenz v Belcher.
EAT decision
The EAT agreed with the tribunal. It was right to apply the test of "necessity" when deciding whether a contract with an end user in a tripartite agreement (as here) could be implied. The decision in Autoclenz did not allow tribunals to take a different approach. This case had therefore been correctly decided and could not be overturned.
Having applied the law the EAT expressed its concern that Mr Smith appeared to have suffered an injustice as a result of being blacklisted.