UT/2020/000377 - [2024] UKUT 00099 (TCC)

The FTT’s conclusion at FTT [355] is an important one. Although there is a reference in FTT [358] to the FTT considering the remaining steps in the RMC test to test its conclusion, the FTT’s conclusion that there is an absence of sufficient mutuality of obligation in the arrangements effectively decides the case in favour of Mr Alcock.

We have set out some criticisms of elements of the process that the FTT adopted in reaching that conclusion in our analysis above. However, in our view, more fundamentally, in adopting that process and applying a similar process to the other aspects of the RMC test, the FTT has not followed its self-direction to adopt the three-stage process it set out at FTT [41] nor has it engaged in the steps required of it to answer the question that was before it under section 49 (1)(c)(i). It has not constructed a hypothetical contract by asking itself what the contract terms would have been if Mr Alcock and the end clients had concluded their contracts directly. As a consequence, it has not properly considered whether the resulting hypothetical contracts would be employment contracts.

Our more specific concerns are set out below.

For these reasons, we agree with Mr Stone that the FTT erred in law in not properly constructing a hypothetical contract for each of the engagements and in failing to apply the employment status test to those terms. Those are fundamental steps dictated by section 49(1)(c). We reject Mr Paulin’s submission that the FTT properly followed the three-stage test set out in Atholl House CA or should be regarded as meeting the requirements of section 49(1)(c).

Mr Paulin has quite properly drawn our attention to the injunctions in the case law to the effect that appellate courts and tribunals should be reluctant to disturb evaluative judgments of fact-finding tribunals. Those submissions give us pause for thought.

We accept that we should be slow to conclude that, having directed itself at FTT [41] that it should follow the same three-stage approach as was, after the Decision was released, endorsed in Atholl House CA, the FTT, a specialist tribunal, failed to follow that approach.

We acknowledge that the FTT’s task in ascertaining the terms of the hypothetical contracts was a difficult one. A significant difficulty came from the fact that the ULCs and LLC were, viewed singly, very different arrangements. The ULCs between the end clients and the agency were concerned, to a significant extent, with setting a framework under which the end client could obtain, on an “as needed” basis, the services of skilled professionals to whom the agency had access. The LLCs, by contrast, needed to operate in circumstances where the end client had identified a need for skilled professionals for a particular identified task and the agency had agreed to provide those professionals. Thus, a key function of the LLCs was to ensure that skilled professionals such as Mr Alcock would actually be made available and would be able to perform the tasks that the end client had identified. It was therefore far from straightforward to distil the terms of hypothetical contracts from a combination of surrounding circumstances and the LLCs and ULCs whose preoccupations were very different.

The problem with the process of reasoning in the Decision, however, is not simply that the FTT’s findings as to the terms of the hypothetical contracts appear in pages coming later in the Decision than apparent conclusions as to the nature of the hypothetical contracts. It would certainly have been more logical for the terms of the hypothetical contracts to be set out first, before being subjected to the RMC test, but the way in which the FTT chose to order the Decision does not itself demonstrate an error of law.

For reasons that we have given above, however, in our view, the FTT failed to follow its self-direction. More fundamentally, the FTT failed to address the questions posed by section 49(1)(c). It did not construct hypothetical contracts by asking itself what the contract terms would have been if Mr Alcock and the end clients had concluded their contracts directly, and, as a consequence, it did not properly consider whether the resulting hypothetical contracts would be employment contracts. In our view, those were material errors of law. The effect was that the FTT’s conclusions were not appropriately grounded in findings as to the terms of the hypothetical contracts.

Having found that the Decision involves errors of law, we are required by section 12(2) of the Tribunals, Courts and Enforcement Act 2007 to consider whether to set aside the Decision. We can only reach a conclusion on that issue by considering whether the errors that we have found in the approach of the FTT have had a material effect on the outcome of this case. For that purpose, we need to consider other grounds of appeal.