Case summary: Blakely v On-Site Recruitment Solutions Ltd


    Much publicity has already been made of this case (which was supported by Unite) and has been referred to in some commentary as a “ground breaking legal victory”. The conclusion of the Employment Appeal Tribunal’s (EAT) decision was that the case should be remitted to a freshly constituted employment tribunal. As such it is perhaps better to view this case a stark reminder to agencies and companies engaging individuals that contracts, and the individuals’ understanding, are key (as opposed to viewing this case as setting any new precedent).

    The Facts:

    The facts of this particular case are somewhat confused by the lack of contractual documentation agreed between the parties prior to the commencement of the services.  
    The claimant was a pipefitter providing services to an end client, through an agency (On-site) and via, what is described as, an umbrella company (Heritage).   
    From the facts established at the initial Tribunal Hearing the claimant received his pay via the umbrella company and received a payslip detailing Employer’s NI, retained HP, company management margin and referring to him as an employee. At some point after the commencement of the engagement the umbrella company sought to introduce a set of terms which confirmed the claimant’s position as a self-employed subcontractor.  Terms the claimant did not sign or agree.
    The claimant, with the backing of his Union, sought to bring a claim for unlawful deductions and holiday pay citing both the umbrella company and the agency as respondents.
    The Employment Tribunal’s Decision:
    The ET concluded that the claimant was not a worker of the agency as the claimant had no contract with the agency (which is a pre-requisite of worker status).
    The ET further concluded that the claimant was not a worker of the umbrella company as it determined he was not providing services to the umbrella company “in any meaningful sense”.  It found that the umbrella company was simply administering the tax and payroll for the claimant.

    The Appeal:

    Appeal to the EAT was made on four grounds:
    1. The Tribunal erred in concluding there was no intention to create legal relations (which is necessary for a contract) between the parties;
    2. The Tribunal erred in finding there was no undertaking to provide work or services personally to the umbrella or agency;
    3. The Tribunal erred in its approach in failing to identify a business undertaking of the claimant to the umbrella or agency being a client or customer or the claimant;  and,
    4. The Tribunal failed to apply the correct approach, having due regard to the Autoclenz judgement, in respect of assessing the reality of the engagements compared to the written terms. 

    The EAT’s Decision:
    In respect of the first point of appeal, in order to determine there was no intention to create legal relations, due regard must be given to all parties, it stated “The Tribunal seems to have reached its conclusion about intention without any regard to the C laimant's intentions. Any conclusions about the absence of intention to create legal relations could only have validity if it could be said that both parties shared that intention”.  
    The EAT went on to conclude “It is not in dispute that the first question to be answered in a limb (b) worker case is whether there is a contract. If that question has been approached incorrectly, as it has in my view, then the rest of the judgment cannot stand”.
    Nonetheless, the EAT went on to comment on the further points of appeal.  It found, in respect of the second ground, that personal service was not considered fully due to the incorrect decision of the Tribunal in respect of the first ground of appeal.
    In respect of the third ground of appeal, the EAT commented that the ET had approached this question too narrowly, and it focused too heavily on who was in receipt of the claimant’s services. “One can agree to provide services for one party by undertaking work for a third. The Tribunal's analysis, focusing as it did only on the question of which party the work was done for, seems to have excluded that possibility.” It also went on to comment that another possibility may have been that the umbrella company was an agent for the agency.
    Of the final ground of appeal the EAT held that given the considerable lack of written documentation, the scope of any disagreement between written terms and what actually happened in practice was very limited.  This ground could therefore not succeed.
    The EAT concluded its judgement by stating that the appeal succeeded  in respect of the first ground of appeal and that, in effect, grounds 2 and 3 succeed ed in consequence of the finding of the first ground of appeal.  
    Accordingly the EAT called for the case to be remitted to the Employment Tribunal  in front of a freshly constituted Tribunal.

    Case commentary:

    This case suffers from a lack of clear contractual evidence between the parties. While the company was referred to as an “umbrella” company (and further a payroll company), it is not clear from the findings of this case how it was intended the individual was engaged. If the intent was that the individual is not working for the agency, it does not appear that the individual understood or had it explained to him correctly that by working for an “umbrella” company he is not working for the agency.
    If the intent was that the individual was to be a self-employed subcontractor then the information in respect of his pay was entirely unsuitable. It suggests that perhaps a type of hybrid arrangement may have been intended – whereby the individual is engaged n a self-employed basis but by virtue of s44 ITEPA (2003) tax legislation requires the operation of PAYE.  
    The introduction of the amended s44 ITEPA (2003) has created many complications and creates more of a disparity between tax and employment law (as it requires a company to operate tax and national insurance on all individuals who it cannot be demonstrated are free from supervision direction or control as to the manner in which it provides the services, but does not by default establish employment or worker status).
    What this case highlights is that agencies must undertake compliance screening of the companies they engage to provide services and must preserve the contractual chain. An agency should be confident that such companies have contracts in place with the individual which is signed and agreed prior to the commencement of the services.
    Agencies must also not “step-through” the commercial chain. If an agency is contracting with a commercial contracting company or umbrella company, it must be remembered that their contract is with the company and not with any individual that happens to operate through that company. The individual works for (or provides services to) the umbrella/commercial contracting company, not the agency. Agencies should not be communicating with any individuals directly on any matters relating to services or pay; that is the job of the company the individual is engaged/employed by.  
    It is clear in this case there was a fundamental lack of contractual documentation and clarity over the services provided by the umbrella company and how the individual was engaged by that company. While sham contracts will never work to protect parties, a true and accurately drafted contract which confirms the commercial terms will provide clarity and protections for all parties. It must also be remembered, however, that even the most accurate of contracts will begin to fail where the parties begin to operate a way that is not supported by, or contradicts, the contract.     
    If you would like any advice on how to strengthen your working practices or contractual terms, please contact us at or call us on 03450 600035.