In SD (Aberdeen) Ltd v Wright and ors, the Employment Appeal Tribunal (EAT) held that a tribunal was entitled to conclude that two companies were associated employers as both were controlled and represented by the same “principal actor” who could have shed light on their legal structure at the hearings but who failed to turn up to do so.
Mr Wright worked for an entity trading as “AMPM” which was made up of a number of other entities including SD which traded as “AM-PM Leasing” and CPL which traded as “AM-PM Serviced Apartments” from 20 May 2014 until 23 August 2016 when he was dismissed. Although the arrangement between Mr Wright and the various entities was initially on an ad hoc, informal basis, he worked exclusively for CPL and SD from May 2014. He was paid weekly by CPL and was also given full pay on the days he was unwell. However, there was no contractual documentation whatever.
After his employment was terminated, he brought a number of tribunal complaints, including unfair dismissal, against 19 respondents or organisations as he was not sure of the precise name of the legal entities for whom he had worked during this period. A preliminary hearing was fixed to determine (1) whether he was an employee and if so (2) the identity of his employer.
Section 231 of the Employment Rights Act 1996 states that two employers “shall be treated as associated if (a) one is a company over which the other (whether directly or indirectly) has control or (b) both are companies over which a third person (directly or indirectly) has control”.
The tribunal held that Mr Wright had worked for CPL between 20 May 2014 and 3 September 2015 and SD from 3 September 2015 until 23 August 2016. As he was required to carry out the work personally and as he had received sick pay and “holiday days”, the tribunal held that he was an employee.
However, to bring a claim of unfair dismissal, Mr Wright also had to show that he had at least two years’ continuous service. The tribunal held that he did as the relationship between the two companies (CPL and SD) was “so close” that from time to time he took instructions from both the director overseeing CPL (Mr Kerr) and the business associate running SD (Mr Harrison). In addition, CPL had paid his wages throughout the period from May 2014 until his dismissal in August 2016 at a meeting at which both Mr Kerr and Mr Harrison were present.
The tribunal was therefore satisfied that the two companies were “associated employers” in terms of section 231, giving Mr Wright the necessary continuity of employment to bring his unfair dismissal claim.
The EAT held that the tribunal was entitled to find that the companies were associated as there was clear evidence of an “extremely close working relationship” not just between Mr Kerr and Mr Harrison as individuals but also between the two companies CPL and SD. In addition, the tribunal had found that the reason CPL was able to make regular payments to Mr Wright even when he was working for SD was that Mr Kerr had control of both companies.
Although Mr Kerr could have shed light on the legal structure of the two companies, he had failed to appear in order to challenge the argument put forward by Mr Wright. In those circumstances, there had been sufficient material put before the tribunal about who was effectively in control of both companies. It therefore dismissed the appeal.
It is not unusual for someone to be unsure who actually employs them, and often it is a deliberate ploy by the business. Here, Mr Wright received neither written contract of employment nor wage slips, and Mr Kerr and Mr Harrison ran the business in a way that was described as “confusing”, “opaque” and showing a “general lack of transparency”. Mr Kerr then acted as SD's solicitor and either missed or ignored several opportunities to clarify that murky set of affairs. The EAT called that “frankly astonishing” and took it as an implied admission of the claimant’s case which, in turn, effectively ended SD's defence of Mr Wright’s claim.
We won’t ever know if a different approach would have produced a different result, but this case does underline the importance of engaging with the issues, and it reminds us of the old saying that lawyers who act for themselves have a fool for a client.