When successive contracts amount to continuous employment

Nadine Quashie '“ a former law student and university women's officer '“ brought a claim of unfair dismissal against Stringfellows nightclub after she was dismissed as an 'exotic dancer' for alleged drug offences.

Over an 80-week period Quashie had been required to work at least two Mondays and two Saturdays each month, and to attend a staff meeting every Thursday, which was unpaid. She could take annual leave when she wished, but needed to inform Stringfellows, and if it was for more than four weeks would need to re-audition. Quashie was paid in 'heavenly money', a voucher given to her by the club's patrons and which Stringfellows then converted into real cash, minus various deductions such as payment for a 'house mother', and various fines, for example if she did not attend the Thursday meeting.

Quashie's claim for unfair dismissal was rejected by the employment judge who determined that she was not an employee. This has now been overturned by the EAT (see solicitorsjournal.com 1 May 2012), which proceeded by separating out whether Quashie was an employee on the nights she was working, and then whether this extended over the whole period she had been working. Although undoubtedly entertaining on its facts, this decision will be pored over by employment lawyers for more mundane reasons too.

An employee on the nights ?she worked?

The EAT began by considering if Quashie was an employee on the individual nights she worked. The well-known tripartite test for an employee is that they are:

(1) required to perform the work personally;

(2) under sufficient control by the employer; and

(3) that there is a mutuality of obligation between the parties.

This criteria are then subject to a 'reality test' to determine if overall, examining all the factors, an employment contract is an accurate description of the relationship.

Before the EAT Stringfellows conceded that there had been a contract between the parties on the individual nights Quashie was dancing. However, they denied this was an employment contract because there was no 'wage-work bargain'. In particular, Stringfellows did not pay Quashie directly and Quashie sometimes received nothing.

Rejecting this, and overturning the decision of the employment judge that the relationship lacked the mutuality of obligation required, the EAT held that whether the contract was an employment contract or some other contract depended only on the level of control Stringfellows had over Quashie when she was working. An employment contract did not require the mutuality of obligation to be that of a work-wage bargain, it was sufficient that there was a mutuality of obligation. Here the EAT identified five different obligations, but essentially that Quashie was obliged to dance and Stringfellows obliged to give her that opportunity and pay her in accordance with their agreement. That Quashie was paid whatever she earned (which was sometimes nothing), and that she received her earnings from patrons directly in 'heavenly money' was irrelevant. The EAT emphasised that in determining Quashie's employee status mutuality of obligation was very much secondary to the considerable control exercised by Stringfellows over Quashie when she attended the club. The facts found by the employment judge on the level of control meant that this contract was an employment contract.

Umbrella contract

However, to claim unfair dismissal Quashie needed to establish that the employment contracts she had on each night were linked under what is termed an umbrella contract. In deciding that they were linked, the EAT relied primarily on two sections of the Employment Rights Act 1996 (ERA).

First, section 230 ERA defines an employee as someone who has 'entered into' a contract of employment. This occurred when Quashie's name appeared on the rota, because from then she had a contractual obligation to attend. It followed that most of the short gaps between her nights working did constitute periods of employment because she was already on the rota for another evening.

But Quashie had six gaps of between two and six weeks when she was not rostered, and so needed something else to link her employment during these breaks. Relying on section 212(3)(c) ERA, an employee's employment is continuous for the purposes of calculating their overall period of employment if, despite performing no work in any particular week, their employment is regarded as continuing (for example, a typical pre-arranged holiday). The employment judge had found that both parties did expect the arrangements to continue after Quashie returned from her breaks, and, looking at the relationship as a whole, including Quashie's continuing obligation to attend the Thursday meetings, and the requirement that she notify Stringfellows if she was going away, meant that this condition was fulfilled.

HHJ McMullen ruled that if he was wrong on this there was still a continuing employment contract because of the regular performance of work and the employment judge's findings on Quashie's expectation of work.

Both findings on Quashie's status are generous to employees, and reflect the increasing desire of the courts to bring workers into the employee fold despite the wording of any written documents governing the relationship.

Wider definition

In deciding it was sufficient Stringfellows provided Quashie with an opportunity to earn, irrespective of whether she did, the EAT has widened the number of individuals who can be classed as employees. Of particular interest, as the EAT noted, are interns who frequently work for nothing or for something other than wages. As a result of rejecting so explicitly the requirement an employee is paid wages, it is more likely interns can be classed as employees and therefore able to claim unfair dismissal (and also other rights such as the minimum wage and holiday pay). This is particularly significant when considering it was accepted that the entertainment industry at large and both parties to the contract when it was originally agreed regarded Quashie's position to be one of self-employment, and demonstrates again the extent to which the courts are more concerned with what actually took place.

The findings on umbrella terms are also generous, and will enable more individuals to have sufficient length of service to claim unfair dismissal. Many workers in the arts and entertainment industry are on repeated short-term contracts which overlap and extend, and this has become increasingly common in many industries in the private and public sector. With the qualifying period for claiming unfair dismissal having increased on 6 April 2012 from one year to two years, we can expect more individuals to attempt to link their contracts under an umbrella contract to ensure they have the necessary length of service.

The findings that Quashie's six breaks of two to six weeks supported rather than undermined her employee status is interesting for two reasons. First, while Quashie had to notify Stringfellows of any breaks she did not need their agreement even though Stringfellows would otherwise have had a contractual obligation to provide her with work. Second, these breaks, both in number and length, far exceed the requirements for annual leave laid down in the Working Time Regulations or what any typical employment contract would allow. Many employers will be surprised that such breaks would not vitiate against continuous employment. Relatedly, although here Quashie did not work for any other employers during these breaks, her contract allowed her to, and following HHJ McMullen's reasoning this would not have affected her continuous employment with Stringfellows.

As HHJ McMullen noted, that the main documents in the case, including what purported to be the full contractual terms, were never seen by Quashie, will frustrate many seeking to rely on this judgment. The extremely unusual facts will also complicate the extent to which this decision will apply to more mainstream occupations.

The case has been remitted to a new employment tribunal to consider Quashie's claim of unfair dismissal, along with Stringfellows' cross appeal on illegality which also succeeded before the EAT. Stringfellows' application to appeal to the Court of Appeal was rejected by the EAT; it is understood they have made a further application to the Court of Appeal.