The Appellant (Mr. Giannelli) was originally employed by the Respondent (Edmund Bell & Co. Ltd.) from February 1988. In the summer of 1997 he decided to leave that employment and become a commercial agent for the Respondent and other Principals. This was designed to help him increase his income and to allow him to sell other products on behalf of other principals to his existing customers without compromising his position with the Respondent. The Appellant entered into a sales agency agreement with the Respondent on 1 August 1997.
In September 1999 the Appellant agreed to stop working for one of his other principals which meant that he would suffer a loss of commission. The Respondent agreed to pay him a retainer of £8,500 per annum for an initial period of 6 months to be reviewed thereafter. The retainer was meant as a cushion until such time as his commissions increased through selling the Respondent’s products. The new terms of the arrangement between the parties provided that the Appellant would not take on any more agency agreements nor expand his existing ones. The Respondent continued to pay the retainer until 2004. On 19 May 2004 the Respondent wrote to the Appellant that the retainer was being terminated with effect from 1 June. This led to the complaint being lodged alleging unlawful deductions from his wages.
The judgment of the lower employment tribunal, held on 1 December 2004, decided that the commercial agent was not a worker within the definition of the Employment Rights Act 1996 and, accordingly, the tribunal did not have jurisdiction to hear his complaint in relation to unlawful deduction from his wages under s. 13 of the ERA 1996.
Then the commercial agent appealed against the lower employment tribunal decision.
The Employment Appeal Tribunal had to decide whether the appellant (Mr. Giannelli), who acted as a commercial agent on behalf of the respondent (Edmund Bell & Co. Ltd.) and a number of other companies was a worker within the definition set out in s. 230 of the ERA 1996*.
The EAT held that the lower employment tribunal failed to consider the precise terms of the agency agreement in order to determine the degree of control and dependency between the parties and whether a commercial agent, in the circumstances, was a “worker” within the definition of the Employment Rights Act.
The EAT said that the essential test was to determine the level of control and dependence, including the economic dependence between the parties.
In considering control and dependence several factors had to be determined: whether the agent acted for more than one principal, the terms of the agency agreement, whether specific tasks had to be carried out personally by the agent and whether he had agreed not to take on any further contracts with third parties.
According to the EAT the lower tribunal failed to consider the effect of the change of arrangements in 1999 in relation to the payment of retainer and most importantly the imposition of the condition that the appellant would not take on any more agencies nor expand his existing ones.
For all the above-mentioned reasons, the EAT held that the lower employment tribunal had not suitably considered these factors and remitted the case for re-hearing by the employment tribunal.
* 230. – (1) In this Act ’employee’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment. (2) In this Act ‘contract of employment’ means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing. (3) In this Act ‘worker’ (except in the phrases ‘shop worker’ and ‘betting worker’) means an individual who has entered into or works under (or, where the employment has ceased, worked under): (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services 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; and any reference to a worker’s contract shall be construed accordingly. (4) In this Act ’employer’, in relation to an employee or a worker, means the person by whom the employee or worker is (or, where the employment has ceased, was) employed. (5) In this Act ’employment’: (a) in relation to an employee, means (except for the purposes of section 171) employment under a contract of employment, and (b) in relation to a worker, means employment under his contract; and ’employed’ shall be construed accordingly.
