Labour & European Law Review Weekly Issue 284 30 August 2012
To make a claim for unlawful deduction from wages under the Employment Rights Act 1996 (ERA), claimants have to show they are workers. In Hospital Medical Group Ltd v Westwood, the Court of Appeal held that although there is no test that can be universally applied, the 'integration test' will often be the most appropriate.
Mr Westwood was an experienced GP with an interest in minor surgery. He was approached by the Hospital Medical Group (HMG) in 2005 to carry out procedures relating to hair restoration and started doing a number of sessions per week shortly afterwards, while continuing his work as a GP and also doing separate advice work at a transgender clinic.
He then signed an agreement for a fixed term of three years in November 2007 which stated that he was a self-employed independent contractor who had to carry out the work himself and pay his own tax and national insurance.
In August 2010, HMG summarily terminated the agreement by e-mail, saying that other clinicians had expressed concerns about his work. Mr Westwood claimed unlawful deductions from wages and unpaid holiday pay, on the basis that he was a “worker” within the relevant statutory definition.
The ERA provides for two different definitions of “workers”. The first is under section 230(3)(a) which states that a worker is someone who enters into, or works under a contract of employment.
The second is under section 230 (3)(b) which states that a worker can also be an individual working under any other contract whereby the individual undertakes to do the work personally “for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.
In Cotswold Developments Construction Ltd v Williams, the EAT said that whether someone actively markets their services as an independent person to the world in general (and therefore has a client or customer); or whether the individual is recruited by a principal to work as an integral part of the principal’s operations, will in most cases demonstrate whether the person is a worker (or not) within section 230(3)(b). This is known as the “integration” test.
Tribunal and EAT decisions
The tribunal held that although Mr Westwood did not satisfy the definition under section 230(3)(a), as he was a self-employed independent contractor, he was a worker as defined under section 230(3)(b). He was engaged personally to carry out the work for himself and had no right to delegate that work.
Most importantly, even though he was an independent contractor in his own right, engaged by HMG (who introduced their patients to him), the tribunal held that HMG was not Mr Westwood’s client or customer.
The EAT agreed, saying that the decision was "plainly and unarguably right". HMG appealed arguing that as the company was his client or customer, he could not come within the definition of worker in section 230(3)(b).
Decision of Court of Appeal
The Court of Appeal rejected the appeal and endorsed the views of the Supreme Court in Autoclenz Ltd v. Belcher (a case won by Thompsons).
It said there were three requirements necessary for a person to qualify as a “worker” under section 230(3)(b) - the individual has to enter into, or work under, a contract with another party for work or services; the individual undertakes to do or perform personally the work or services for the other party; the other party must not, by virtue of the contract, have the status of a client or customer of any profession or business undertaking carried on by the individual who is to perform the work or services.
The Court also approved of the EAT’s approach in applying the “integration” test. It decided that, although Mr Westwood was not working for HMG under a contract of employment, he was clearly an integral part of the firm’s undertaking when providing services in respect of hair restoration, even though he was in business for himself.
The Court considered that if Parliament had intended to exclude people in business on their own account from the definition of being a “worker” within section 230(3)(b) it would have done so explicitly.
This case adds some helpful guidance to understand when an individual will be deemed a “worker” under section 230(3)(b) ERA. Whilst it is important to note that the Court of Appeal was careful to state there is not a “single key to unlock the words of the statute in every case” on this employment status issue, it said that the “integration” test from the Cotswold case will often be appropriate, as it was here.