Labour & European Law Review Weekly issue 200 13 January 2011
Tilson v Alstom Transport
Tribunals can “imply” a contract of employment between agency workers and “end users” in certain circumstances. In Tilson v Alstom Transport the Court of Appeal said, however, that they could not imply a contract if the parties would have acted in exactly the same way had there not been a contract.
Mr Tilson started working for Alstom as a technical engineer in August 2004 but his “relationship” with the company was terminated summarily in November 2006.
The relationship was complex in that Alstom paid his salary to a payroll company, Silversun. It had a contract to provide his services to a human resources company, Morson which, in turn, had a contract with Alstom.
A clause in the contract between Silversun and Morson said that neither Morson nor Alstom could exercise “any supervision, direction or control” over Mr Tilson in the “manner or performance” of his work.
Whilst working at the company, Mr Alstom had his own line manager; he had employees reporting to him; he had the power to recruit permanent staff; he was authorised to discipline and dismiss permanent employees; he signed time sheets for them; he worked full time; he had to notify his line manager before taking holiday; and he had to turn up personally to do the work required of him.
The company offered him a permanent job at one point but he turned it down, saying there were more tax advantages to his current arrangement under which he paid his own tax and National Insurance.
On termination of the relationship, he claimed unfair dismissal but the company said that as he was self-employed the tribunal could not hear his claim.
Tribunal and EAT decisions
However, the tribunal disagreed, saying that the contract between Silversun and Morson was “not a genuine reflection of the relationship between the parties”, as Mr Tilson was clearly under the supervision, direction and control of Alstom in that he was fully “integrated” into the company.
As the contract between the two was a sham and the relationship between Mr Tilson and Alstom could not be explained by the contractual arrangements in place, the tribunal said it had to imply a contract to make sense of it and this could only be a contract of service.
But the EAT disagreed, saying that even if the clause was a sham, it did not invalidate the entire contract. Nor was there enough evidence to substantiate a finding of an implied contract of service. It pointed in particular to Mr Tilson’s refusal to become an employee which, it said, showed that he considered himself to be an independent contractor.
Court of Appeal decision
And the Court of Appeal agreed with the EAT.
Relying on James v Greenwich Borough Council (weekly LELR 55), the Court said that a contract should only be implied when it was necessary to do so. It was not open to a tribunal to imply a contract just because it objected to employers “entering into arrangements of this kind in order to avoid incurring the obligations they owe to their employees.”
The contract between Morson and Alstom under which Morson undertook to provide the services of Mr Tilson fully explained why he was working for Alstom. There was no evidence that Alstom acted inconsistently with the terms of that contract.
It agreed with the EAT that just because a clause in the contract between Silversun and Morson was bogus, that did not mean the entire contract was invalid. In any event, Alstom was not a party to that contract.
Instead, it said that the only proper inference to make was that the parties would have acted in exactly the same way if there had not been a contract and that “was fatal to the implication of a contract”, a conclusion strongly reinforced by the conduct of the parties themselves.
Mr Tilson’s case was not helped by the fact that he turned down a contract of employment. Arguably, the label that individuals put on their employment relationship should not be decisive. Even so, this case suggests that employees cannot expect to have their cake and eat it by taking the tax advantages of self-employment when it suits them but then arguing for employee status when it doesn’t. In any event, following James v Greenwich Borough Council it is very difficult for agency workers to be able to successfully argue that they are employed by the end-user. This case is just another illustration of that.