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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Thorpe v Dul & Ors [2003] UKEAT 0630_02_0107 (1 July 2003) URL: http://www.bailii.org/uk/cases/UKEAT/2003/0630_02_0107.html Cite as: [2003] UKEAT 630_2_107, [2003] UKEAT 0630_02_0107

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APPEARANCES

 

For the Appellant	MR D THORPE The Appellant Glendale Orton Wiston Peterborough PE62 6YL
For the First Respondent For the Second Respondent For the Third Respondent	MR J HORAN (of Counsel) Instructed by: Melton Citizens Advice Bureau 3A Park Road Melton Mowbray Leicestershire LE13 ITT MR C McGRATH (of Counsel) Instructed by: Brooksby Melton College Brooksby Campus Brooksby Melton Mowbray Leicestershire LE14 2J MR C SHELDON (of Counsel) Instructed by: Learning & Skills Council Cheylesmore House Quinton Road Coventry West Midlands CV1 2WT


 


THE HONOURABLE MR JUSTICE WALL

Introduction

1. The two important and interrelated points raised by this appeal were formulated by HH Judge Peter Clark at the preliminary hearing on 22 September 2002 in the following way:

"What precisely is the effect of a relationship created by a modern apprenticeship agreement in terms of employment law protection of the apprentice and the person with whom he is placed to work? Mr O'Dempsey (who appeared on that occasion for the Appellant, under the ELAAS scheme) submits that the modern apprenticeship as opposed to the traditional form of apprenticeship may or may not include a contract of employment. If it is right that no contract of employment is created between the Applicant and the person with whom he is placed, it brings into question first whether or not the relationship amounts to a contract of service or apprenticeship within the meaning of section 230(2) of the Employment Rights Act 1996 for the purposes of unfair dismissal protection and similarly for the purposes of applying the TUPE rules.

Secondly, a question arises as to whether breach of the terms of a Modern Apprenticeship Agreement amounts to breach of a contract of employment or other contract connected with employment for the purposes of section 3(2)(a) of the Employment Tribunals Act 1996 and consequently Article 5 of the Extension of Jurisdiction Order 1994. It seems to us that this is a point which requires full argument at a hearing at which both parties are present."

The appeal

2. The appeal in which these points arise is by Mr David Thorpe (the Appellant) against the decision of the Employment Tribunal held at Leicester on 22 January 2002 and promulgated three days later on 25 January 2002. Before the Tribunal was an application brought by Mr Kazimierz Luke Dul (Mr Dul) against the Appellant and Brooksby Melton College (the College).
3. Mr Dul's Form IT1 claimed unfair dismissal/wrongful dismissal/unauthorised deduction of wages against both the Appellant and the College. The Tribunal found that Mr Dul had no claim against the College, and that claim was dismissed. However, as against the Appellant, the Tribunal found that Mr Dul had been unfairly dismissed. The Appellant was ordered to pay compensation to Mr Dul in the sum of £250. This was made up as to a basic award of £50 (one half of a week's pay at £100 per week) and £200 for loss of his employment rights. In addition, the Tribunal found that the Appellant was in breach of a contract of employment with Mr Dul, and was ordered to pay damages of £5,683, made up as to £3,683 "net loss of earnings to the end of apprenticeship" and a figure of £2,000 "loss of benefits of apprenticeship at end of apprenticeship". The Tribunal added: -

"Despite the fact that we consider (Mr. Dul) has contributed to his dismissal by 50%, we do not consider it would be equitable to reduce these sum, although we would have reduced any compensatory award under the unfair dismissal head. As we consider the applicant has been adequately compensated under the breach of contract award we make no further award for unfair dismissal".

4. Before the Tribunal, Mr Dul was represented by a member of the local Citizens Advice Bureau. The appellant appeared in person (as he has appeared before us) and the College was represented by its Chief Executive, Mr Gray. It will thus be seen that the Tribunal did not have the benefit of argument from any legally qualified representative. This, in our judgment, was unfortunate, because as a consequence it was not until the preliminary hearing of this appeal that the real point of the case emerged, and was articulated by HH Judge Clark in the terms set out above.
5. At the preliminary hearing, the EAT further directed that the Registrar of the EAT write to the relevant Government department inviting it to be joined as a party to the appeal, or to make submissions at the full hearing. That invitation was accepted, and we have had the benefit – denied, of course, to the Tribunal – of full argument from Mr Clive Sheldon on behalf of the Learning and Skills Council (LSC). We are extremely grateful to him for his full, clear, helpful and fair submissions.

The Facts

6. Mr. Dul was born on 22 April 1983. He was thus 16 when, on 19 July 1999, he entered into a tri-partite written agreement with a company then known as and owned by one Ray Larrington (Mr. Larrington), and the Leicestershire Training and Enterprise Council (the Council). That agreement is headed "MODERN APPRENTICESHIP AGREEMENT", and we will refer to it henceforth as "the MAA". It describes Mr Dul as "the Apprentice", Mr Larrington as "the Company" and the Council as "the TEC".
7. The MAA identifies the "responsibilities" which each party has under it. The Company's responsibilities are the following:-

"(i) To jointly with the Apprentice, agree an Apprenticeship Plan, regularly review progress made in training and agree any changes needed to the Plan;

(ii) To provide, as far as is reasonably practicable, the experience, facilities and training necessary to achieve the training objectives specified in the Apprenticeship Plan;

(iii) To use reasonable endeavours, with the assistance of various local groups/local networks, to arrange alternative, suitable training for the remainder of the training period with another company if the Apprenticeship is terminated due to redundancy;

(iv) To use all reasonable endeavours, with the assistance of various groups/local networks, to arrange employment elsewhere should the employer be unable to provide employment after the completion of the Apprenticeship;

(v) To undertake their legal and contractual responsibilities for the health and safety of the Apprentice;

(vi) To ensure that the Equal Opportunities principles laid down in the Framework are adopted."

8. The Apprentice's responsibilities are the following:-

"(i) To behave in a reasonable manner and promote the Company's best interests at all times;

(ii) To jointly with the Company, agree an Apprenticeship Plan, regularly review progress made in training and agree any changes needed to the Plan;

(iii) To commit him/herself to the successful completion of the Apprenticeship;

(iv) To behave in a responsible manner and in accordance with the requirements of Health and Safety legislation relating to the individual's responsibilities;

(v) To comply with the Company's Terms and Conditions of Employment."

9. The TEC's responsibilities are defined as follows:-

"(i) To ensure the content of the Apprenticeship Plan complies with the national/local and industry/sector criteria for the Apprenticeship registered with the National Training Organisation;

(ii) To ensure that the Apprenticeship training meets with the approved quality standard;

(iii) To use all reasonable endeavours, in conjunction with other Employers and Training Suppliers, if the Company is unable to complete the Apprenticeship, the Apprentice is offered the opportunity to transfer to another Supplier under the terms of another Apprenticeship Plan, substantially similar to the existing Plan;

(iv) To ensure that the training meets the TEC Quality Assurance process, including Health and Safety obligations required of TECs and their suppliers;

(v) To ensure that the Employer observes Equal Opportunities practice outlined in the Framework;

(vi) To provide agreed funding and support for the duration of the Apprenticeship."

10. The circumstances in which Mr. Dul came to work for/was placed with the Company do not emerge from the documents before us or from the Tribunal's reasons. In his Form IT1, Mr Dul gives the commencing date for his employment with the Company as 19 July 1999, the same date as the MAA, so that it is reasonable to assume that Mr. Dul began to work for the Company as a consequence of the MAA. Although the narrative in Box 11 of Mr. Dul's Form IT1 uses the language of employment, one of his complaints, following this "dismissal" is that

"neither the employer nor the apprentice provider have found me an alternative place to continue my education and training"

11. The business of the Company principally involved the repair and supply of hydraulic machinery for agricultural use, although it also carried out some general engineering work. The Appellant was Mr Larrington's son in law and managed the Melton Mowbray branch. He was the only employee at the Melton Mowbray branch in July 1999 when Mr Dul joined him under the MAA.
12. In the summer of 2000, Mr Larrington decided that he wanted to retire. The Appellant says that on or about 30 March 2001 he was made redundant by Mr. Larrington and dismissed. He was under the impression that the same happened to Mr. Dul. The Appellant thereupon decided to set up his own business and purchased the stock, plant and equipment of the Company from Mr Larrington at cost. The Appellant commenced business under his own name on 2 April 2001.
13. The Tribunal found that before he decided to set up in business on his own, the Appellant spoke to Mr Dul and told him that he wanted him to continue working for the business and to complete his apprenticeship. The apprenticeship, it seems, was due to last 36 months from July 1999. The Appellant told Mr Dul that he would be paid £80 per week as opposed to the £100 per week he had been receiving hitherto. That, however, would be reviewed after six months.
14. The Tribunal found that as part of Mr Dul's apprenticeship he was required to attend the College. At least initially, his attendance was poor. He did not take his examinations in his first year and failed them in his second year. Mr Dul had had one final written warning from the College dated 2 April 2000. This was because he had been missing his lessons at College. He was told that his employment would be on a three month probationary period from that point. Thereafter, Mr Dul did not appear to have any further warnings.
15. The important events of 2 April 2001 and thereafter are related by the Tribunal in the following paragraphs of their reasons:-

"(f) On Monday 2 April 2001, which was the first day of work under (the Appellant's) business, (Mr Dul) attended for work in an upset and distressed state. He informed (the Appellant) that he had been arrested for driving a motor scooter with excess alcohol over the weekend. He was due to appear in court on Thursday 5 April and expected to be disqualified. The previous autumn (Mr Dul) had been involved in a serious criminal offence, but had been supported by (the Appellant). On that occasion he was subject to a fine and a community service order. On 2 April 2001, it was clear that (Mr Dul) was not able to concentrate on his work and after a discussion (the Appellant) told him to go home. Nothing was discussed about the wages during that period. (The Appellant) was concerned about the position and indicated that a discussion would have to be made (sic) about (Mr Dul)'s future. He wrote a letter of support for (Mr Dul) for use in the court case. It was agreed with (Mr Dul), that (Mr Dul) would come in on the following Saturday morning after the case had been heard to discuss the position with (the Appellant).

(g) (Mr Dul) did not have a driving licence when his apprenticeship commenced. It was not a condition of his employment that he should be able to drive and it was not necessary for his employment that he should be able to drive. However, (the Appellant) hoped that once (Mr Dul) was able to drive he would be in a position to attend customers' premises to carry out work and for that purpose the licence would be very useful for the business, particularly with it being such a small business. (The Appellant)'s anticipation was that (Mr Dul) would, in due course, progress through the business. (The Appellant) had a heart attack and had been away from work for several months in the early autumn 2000. During that time (Mr Dul) had carried out most of the work at the Melton Mowbray branch and both (the Appellant) and Mr Larrington were very satisfied with what he had done. He was generally a good apprentice. He had good appraisals from (the Appellant). Despite what (the Appellant) said, we are not satisfied that (Mr Dul)'s attitude to work had changed significantly before the drink/driving incident. It is clear that up to that time (the Appellant) anticipated (Mr Dul) would work for him for the foreseeable future.

(h) (Mr Dul) was disqualified from driving for 18 months. He did not attend the meeting which had been arranged for Saturday 7 April. We prefer (the Appellant)'s evidence that a message was left on his answer machine after 12 o'clock on Saturday to say (Mr Dul) would see him on Monday. (Mr Dul) went in to see (the Appellant) on Monday 9 April. He said that he had not turned up on Saturday because he did not work Saturdays, it had been raining and he had not got up until 10.30. (The Appellant) told (Mr Dul) that this was not satisfactory. (The Appellant) asked (Mr Dul) whether if the roles were reversed he would have continued to employ (the Appellant) and (Mr Dul) agreed he would not. In view of (Mr Dul's) failure to attend for the meeting on Saturday and his attitude as to why he had not attended, coupled with the difficulties that the business would have in the future, if (Mr Dul) was unable to drive, (the Appellant) decided he would terminate (Mr Dul)'s employment and told him so. As he was of the view that the employment had merely been offered and never commenced, he did not consider it necessary to give (Mr Dul) any notice nor was (Mr Dul) paid for the previous week."

The Tribunal's approach

16. The Tribunal identified four issues which it had to decide. They were:-

(1) whether the College had any contractual liability to Mr Dul, and if so whether it was in breach of contract;

(2) whether there was a transfer of undertaking from the company to the Appellant in order to give the Tribunal jurisdiction to consider Mr Dul's unfair dismissal claim;

(3) whether Mr Dul was unfairly dismissed;

(4) whether the Appellant was in breach of contract with Mr Dul in terminating his apprenticeship contract;

17. The Tribunal answered those questions in the following way. As to the first issue, it held that whilst the College was not the employer of Mr Dul and therefore could have no liability in relation to any unfair dismissal, it could have a liability in respect of the breach of a contract of apprenticeship. Whilst the MAA was not a contract of employment between Mr Dul and the College, the Tribunal had jurisdiction in relation to it because Mr. Dul's claim could properly be described as a claim for damages for breach of a contract "connected with employment" within section 3(2) of the Employment Tribunals Act 1996. The Tribunal could, accordingly consider an application for a breach of that contract. However, the Tribunal concluded that as there was in fact no contract between Mr Dul and the College, he could not bring a claim for breach of contract against the College, so that the answer to both parts of the first question was "no".
18. In relation to the second issue, the Tribunal found that there was a TUPE transfer between the company and the Appellant in July 1999. The Tribunal found, in relation to the third issue, that Mr Dul had been unfairly dismissed.
19. In relation to the fourth issue, the Tribunal found that although the Appellant was not a party to the MAA, he accepted that Mr Dul's apprenticeship was going to continue with him. Since an apprenticeship agreement did not have to be in writing, and both parties had agreed that the MAA would continue, its term was the balance of the 36 months. Relying in particular on two cases Dunk v George Waller & Son Ltd [1970] 2 All ER 630 and Wallace v CA Roofing Services Ltd [1996] IRLR 435, the Tribunal found that contracts of apprenticeship were special contracts which had provisions different from general contracts of employment or training. It held that it was not open to the Appellant under a contract of apprenticeship to terminate the contract except under the terms of the agreement or for serious misconduct. On the Tribunal's findings there had been no such serious misconduct entitling the Appellant to terminate the apprenticeship contract. Accordingly, the act of termination was a breach of contract. The Tribunal then went on to consider compensation for Mr Dul, and awarded him the total sum of £5,933, calculated in the manner set out in paragraph 3 of this judgment.

The Notice of Appeal

20. The Appellant initially filed a Notice of Appeal in manuscript, but following the preliminary hearing before the EAT on 27 September 2002, amended grounds of appeal were filed in the following terms:-

"1. The Employment Tribunal erred in law in assimilating the legal status of the Modern Apprenticeship to that of an (indentured) apprenticeship in the Employment Rights Act 1996.

(i) The Modern Apprenticeship may or may not include a contract of employment. As those who are not employed can be placed with the employer as a Modern Apprentice.

(ii) The Employment Tribunal made no relevant finding as to whether the Modern Apprenticeship of Mr Dul included a contract of employment.

(iii) The Modern Apprenticeship document made available to the tribunal did not contain the minimum requirements of an apprenticeship (see Edmond v Lawson [2000] ICR 567 at 579 f and following).

2. The Tribunal erred by applying:-

a) The Transfer of Undertakings (Protection of Employment) Regulations 1981.

b) Section 98 of the Employment Rights Act 1996

c) Section 3 (2) of the Employment Tribunals Act 1996

before and without determining the true legal status of Mr Dul's Modern Apprenticeship Agreement.

3. The Employment Tribunal erred in failing to apply the 50% reduction for contributory fault to the sums awarded for unfair dismissal"

The argument advanced by the Appellant

21. The Appellant submitted that the modern apprenticeship was quite different from the traditional, indentured, apprenticeship, as the briefing given by the LSC made clear. There is no set time to complete modern apprenticeships and the length of time taken depends on the ability of the individual apprentice. It followed, the Appellant submitted, that the modern apprenticeship could be extended or reduced at will.
22. The Appellant argued that giving a contractual guarantee to the balance of the modern apprenticeship period must be a non sequitur since it gave more to those whose ability was poor and who had their apprenticeship period extended, and less to those who were competent who had the apprenticeship period reduced. It would therefore directly reward poor performance and indirectly penalise good performance.
23. The traditional, indentured apprenticeship was between the apprentice and the employer for a fixed period, sometimes with parental consent. The objective was the apprentice becoming a time served tradesman with that company. The modern apprenticeship was a partnership between industry and Government: a training and enterprise quotation, using business as a facility in lieu of formal Government training centres to carry out training in a significantly wide range of sectors such as retail and hotels. The trainee could move from one company to another, unlike the indentured apprenticeship, where the apprentice stayed with one company.
24. The Appellant described the word "apprenticeship" in this context as being used like a marketing concept to sell the training scheme. The aim was to reduce social exclusion and address future skill shortages. That was quite different from the formal indentured apprenticeship scheme. The Tribunal, he argued was accordingly quite wrong to apply section 3(2) of the Employment Tribunals Act 1996 to the MAA.

The argument on behalf of the Learning and Skills Council (LSC)

25. On behalf of the LSC Mr Clive Sheldon argued that the term "modern apprenticeship" was a term of art designed to describe a government programme itself designed to equip young people aged between 16 and 24 who had left full time education, or were already in employment, with practical skills for work. It was, he submitted, a combination of training and on the job experience. It was not to be confused with the traditional concept of apprenticeship. The term "modern apprenticeship" was, he submitted, in effect, a marketing term (as the Appellant had submitted). It was, however, in reality a synonym for a training scheme.
26. There were, Mr. Sheldon argued, two types of modern apprenticeships. There was firstly the "Foundation Modern Apprenticeship (FMA)"; and, secondly, the "Advanced Modern Apprenticeship (AMA)". The FMA lasted normally for at least 12 months, during which time the apprentice/trainee will gain a National Vocational Qualification (NVQ) at Level 2, relevant, identified Key Skills and, where available, a technical certificate. The apprentice would either be employed and receive a wage, or would be on a work placement, where he or she would receive a weekly training allowance.
27. The AMA normally lasted for at least two years. The apprentice in this case would be in full time employment earning a salary, and would work towards a qualification at NVQ Level 3, together with, once again, identified relevant Key Skills and, where available, a technical certificate.
28. Mr. Sheldon told us that apprentices/trainees joined the system in a variety of ways. Some participants would already be in employment with company A, and would be encouraged to participate in the Modern Apprenticeship programme by company A, who would receive funding to provide the training or through a training provider. Others would make contact with a training provider, who would arrange for them to be placed with company B for the on the job portion of the Modern Apprenticeship programme. Others would join company C as an employee, and would also join the Modern Apprenticeship programme at the same time.
29. Mr Sheldon advised us that the identified key skills were communication, application of number, information technology, working with others, improving learning and performance, and problem solving. The key skills worked on by the modern apprentice would vary between industries, depending on the relevance of the skill to the industry concerned, and the particular training framework that they were following. Communication and application of number were mandatory within all MA frameworks, with minimum Levels of 1 for the FMA and 2 for the AMA.

The Learning and Skills Act 2000 and the Role of the LSC

30. Mr. Sheldon submitted that the statutory framework for modern apprenticeships is to be found in the Learning and Skills Act 2000, which established the LSC, the national body responsible for the funding, planning and continuous improvement of all post 16 learning, apart from higher education.
31. The LSC enters into arrangements with training providers (for example colleges of further education and private providers) for the provision of training (other than higher education) suitable to the requirements of persons who are above the compulsory school age but have not attained the age of 19 (section 2 (1)(a)); together with training suitable to the requirements of such persons (section 2(1)(b)); and organised leisure time occupation connected with such education and training. For the purposes of section 2 of the Act, training includes both full time and part time training and training includes vocational, social, physical and recreational training (section 2(5)). Similar duties are imposed in relation to education and training for persons over the age of 19 and the LSC is empowered by section 5 to secure the provision of financial resources (inter alia) to persons providing or proposing to provide post 16 education or training and to persons receiving or proposing to receive post 16 education or training.
32. The LSC took over responsibility for planning and funding work-based learning from the various Training and Enterprise Councils (TECs). This included the modern apprenticeship programme for which the TECs had previously been responsible. Some TECs entered into written arrangements with the companies with whom the modern apprentices were placed, but not with the modern apprentices themselves: others entered into written arrangements with modern apprentices and companies – as in the instant case.

The Legal Status of MAAs

33. Mr Sheldon submitted that modern apprenticeship arrangements were training arrangements. It followed that, in themselves, MAAs were not contracts of employment or contracts of apprenticeship as those terms are defined by section 230 of the Employment Rights Act 1996 (ERA). Whilst it was possible that a modern apprentice could, in certain circumstances, be an employee, he would not be an apprentice as that term had been hitherto understood by the courts.
34. Mr. Sheldon submitted that two questions had to be asked in any situation where modern apprenticeship arrangements/agreements arose. These were:-

(1) Was there a contract at all with respect to the modern apprenticeship arrangement?

(2) If there was, what was the nature of the contract?

35. Mr Sheldon submitted that in many cases there would not be a contract with respect to the modern apprenticeship arrangements. He submitted that there would usually be no intention to create legal contractual relations between the parties. Alternatively, if there was a contract, then ordinarily the modern apprenticeship arrangements would not be that of employment or apprenticeship; rather, the contract would be for training. In these circumstances, it would fall outside the provisions of the Employment Rights Act. Mr Sheldon referred us to a number of authorities, which we will examine in due course.

The case for Mr. Dul

36. For Mr Dul, Mr John Horan submitted that the term "modern apprenticeship" had no statutory definition, and no definition at common law. He submitted that the proper approach was to look at the modern apprenticeship agreement signed in this case and decide its status.
37. Mr. Horan submitted that the commitments to which the various parties agreed plainly accorded with the minimum requirements of an apprenticeship at common law. For this proposition he relied on the decision of the Court of Appeal in Edmond v Lawson [2000] IRLR 391, 396. He submitted further that the point that the MAA was not a contract of employment was not one which the Appellant had taken before the Tribunal, albeit the Tribunal appeared to have had it in mind when deciding whether or not there was a contract of employment. In any event, even if not found by the Tribunal, his submission was that the MAA was an apprenticeship agreement at common law and therefore fell within the statutory definition of a contract of employment provided under section 230(2) of the Employment Rights Act 1996 – that is to say that it was "a contract of service or apprenticeship" whether expressed or implied and (if it is expressed) whether oral or in writing.

The case for the College

38. Addressing us on behalf of the college, Mr McGrath agreed with the submissions made by Mr Sheldon. He identified two types of apprentices. They were either placed by the College with companies; alternatively they were employed by a specific employer and released by that employer for training. The College provided the training for both groups. He was clear that the placed apprentices were not employed.
39. Mr. McGrath argued that the Modern Apprenticeship was quite different from the traditional form of apprenticeship. Placements used the premises of an employer for on the job training and the College for off the job training, but were not employed by the employer whose premises they used: employed Modern Apprentices were trained using their employer's premises for the on the job training, and the College for off the job training. The latter were, however, employed under a contract of employment with their employer.
40. The College supported the view of the LSC that the prime purpose of the modern apprenticeship was training for a particular job, and not to learn a trade or profession. He argued that the phrase "agreement connected with employment" contained in section 3 of the Employment Tribunals Act 1996 could only relate to an indentured apprenticeship, a pupilage at law, articles in accountancy (or similar) and not to the concept of the modern apprenticeship. The modern apprenticeship, although entitled an apprenticeship was, in reality, a national training scheme leading to a national vocational qualification, and not a trade or profession as outlined.

The relevant provisions of the Employment Rights Act 1996

41. Section 230 of the Employment Rights Act 1996 provides, where relevant, as follows:-

"(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 expressed or implied and (if it is expressed) whether oral or in writing.

(3) In this Act "worker" (except in the phrases "shopworker" 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 expressed or implied and (if it is expressed) 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 ….. employment under a contract of employment, and

(b) in relation to a worker, means employment under his contract;

and "employed" shall be construed accordingly".

Other relevant statutory provisions.

42. Mr Sheldon also referred us to section 26(1A) of the Employment Act 1988, (inserted by section 149 and Schedule 9 paragraphs 1, 14 of the Learning and Skills Act 2000 with effect from 1 October 2000) which empowers the Secretary of State to make regulations providing (inter alia) that trainees receiving payments from the LSC under section 5(1)(c) of the Learning and Skills Act 2000 were, in specified cases or as described in or determined under any order made, to be treated in respect of training as being or as not being employed; and that where they were treated as not being employed they were to be treated in such other manner as may be specified, described or determined. No such regulations have, however, been made.
43. We were also referred to the National Minimum Wage Act 1998 (NMWA 1998) and the National Minimum Wage Regulations 1999 (the Regulations) from which it is clear that a worker who has not attained the age of 26, who is employed under a contract of apprenticeship or who is to be treated as employed under a contract of apprenticeship and is within the first 12 months after the commencement of that employment or has not attained the age of 19 does not qualify for the national minimum wage in respect of work done for his employer under that contract. The Regulations also provide that a person is to be treated as being employed under a contract of apprenticeship if and only if he is a worker within the meaning given by NMWA 1998 section 54(3) and engaged under the Government arrangements known, as at 1 October 2000 as (inter alia) modern apprenticeship. Section 54(3) of the 1998 Act is in identical terms to section 230(3) of ERA 1996.

The Authorities

44. Dunk v George Waller & Sons Ltd [1970] 2 All ER 630 remains the leading case on what can be described as an apprenticeship in the traditional meaning of that term. In that case, there was an agreement of apprenticeship for four years as an engineering technician. It was terminated by the employer when it still had 15 months to run. The apprentice was paid £10 per week under the agreement and in addition was entitled to training, instruction and the benefit of experience in the employer's work. If he had served the full apprenticeship, he would have been entitled to a certificate. More importantly, however, if he had served the full period and this would have given him a better start to his career in that, at any rate for two years, he would have earned more than those who had never served an apprenticeship.
45. The Court of Appeal allowed the apprentice's appeal against the judge's award of nominal damages for termination of the contract of apprenticeship. It held that since the object of an apprenticeship agreement was to enable the apprentice to fit himself to get better employment and wages, he was entitled to damages for the diminution of his future prospects by the loss of a benefit of the training for which he had stipulated, in addition to damages for loss of earnings and training during the remainder of the agreement. He was, accordingly, given damages of £180 for loss of future prospects based on a figure of £2 per week for the best part of two years.
46. At [1970] 2 All ER 630 at 634, Widgery LJ (as he then was) said:-

"A contract of apprenticeship is significantly different from an ordinary contract of service if one has to consider damages for breach of contract by an employer. A contract of apprenticeship secures three things for the apprentice: it secures him first, a money payment during the period of apprenticeship, secondly that he shall be instructed and trained and thus acquire skills which will be of value to him for the rest of his life, and, thirdly, it gives him status because the evidence in this case made it quite clear that once a young man, as here, completes his apprenticeship and can show by certificate that he has completed his time with a well known employer, this gets him off to a good start in the labour market and gives him a status the loss of which may be of considerable damage to him."

47. In Wiltshire Police Authorities v Wynn [1980] ICR 649, the Court of Appeal had to decide upon the employment status of police cadets. It decided that they were neither apprentices nor employees. They were, accordingly, in a statutory class of their own. In analysing the distinction between a contract of service or employment and a contract of apprenticeship in this context, Lord Denning MR referred to R v Inhabitants of Laindon[1799] 8 Term Rep 379 and R v Inhabitants of Crediton[1831]2 B & Ad 493 in which the question to be considered was whether or not a pauper had been employed under a contract of service, or under a contract of apprenticeship. He said:-

"The courts drew a distinction according to which purpose was the primary purpose: and which was secondary. If the primary purpose was work for the master – and teaching a trade was only a secondary purpose – it was a contract of service. But if teaching a trade was the primary purpose – and work for the master was only secondary – then it was a contract of apprenticeship.

The distinction between the cases where teaching and learning is the primary purpose - and the cases where the work done is the primary purpose - is helpful in the present context."

48. In the same case, at [1980] ICR 658, Waller LJ said:-

"The purpose of an apprenticeship would be to learn a craft or a trade or a profession. When an apprenticeship is completed, the apprentice becomes qualified in that trade or profession. A police cadet is not. He or she is just in the position of someone who is completing their education and who is being familiarised to some extent so that their interest in the police service is being kept up, but they are in no way at the conclusion of their cadetship qualified to become a police constable."

At [1980] ICR 660, Dunn LJ stated that:

"the essence of an apprenticeship is to qualify the apprentice for his particular trade or calling".

49. In Daly v Allied Suppliers Ltd [1983] IRLR 14, the Applicant was on a Youth Opportunities Programme Scheme sponsored by the Respondent. She made a complaint to a Tribunal alleging that the Respondent had discriminated against her. The Tribunal held that it had no jurisdiction to entertain the complaint since the Applicant was not "employed" by the Respondent within the meaning of the predecessor to section 230 of ERA 1996. The Tribunal held that it had no jurisdiction to entertain the Applicant's claim and its decision was upheld by the EAT. It decided that a person taking part in a work experience scheme as part of the Youth Opportunities Programme was not a person employed by the respondent company within the meaning of Sections 4 and 78 of the Race Relations Act. For there to be "employment" within the meaning of Section 78, there had to be a contract, either of service or of apprenticeship or a contract personally to execute any work or labour. In the present case, there was no such legal contract, notwithstanding that the parties accepted certain obligations towards each other while the relationship between them existed. The Respondent was taking part as sponsors in a form of training which was organised by the MSC. The Applicant was availing herself of the facilities for training which the Scheme provided.
50. The question in Edmonds v Lawson QC and others [2000] IRLR 391 was whether a pupil barrister who had attained the age of 26 was a "worker" for the purposes of the NMWA 1998 and was therefore entitled to be remunerated at the minimum hourly rate set out in the regulations. NMWA 1998 section 1(2)(a) provides that a person qualifies for the national minimum wage if he is an individual who is a worker. As we have already pointed out, the term "worker" in NMWA 1998 section 54(3) has the same meaning as that contained in section 230(3) of ERA 1996.
51. For the Applicant in that case, it was submitted that a pupil worked under a contract of apprenticeship and therefore under a contract of employment within NMWA 1998 section 54(3)(a). Alternatively it was submitted that she was a worker because she worked under "any other contract" falling within NMWA 1998 section 54(3)(b). For the Respondents it was argued that there was no contract between the Applicant and the Respondents since there was no intention to create legal relations and no consideration flowing between the parties. Alternatively, if there was a contract, it could not be properly described as a contract of apprenticeship.
52. Sullivan J held that there was a contract between the parties which could be described as a contract of apprenticeship and that therefore the claimant was a worker within the meaning of the Act and entitled to payment at the statutory minimum rate. The defendants appealed to the Court of Appeal and the claimant cross-appealed against the Judges rejection of her alternative submission that, if not a contract of apprenticeship, the contract fell within section 54(3)(b).
53. The Court of Appeal allowed the Respondents' appeal and dismissed the cross appeal. It held that there was a legally binding contract between the claimant and the members of the defendant's barristers chambers, but that it was wrong to categorise that contract as a contract of apprenticeship. The Applicant was not, accordingly, a worker for the purposes of the Act.
54. The cardinal features of a contract of apprenticeship, or any equivalent relationship, were mutual covenants under which the master undertook to educate and train the apprentice or pupil in the practical and other skills needed to practice a skilled trade or learned profession, and the apprentice or pupil bound himself to serve and work for the master and comply with all reasonable directions. There was nothing in the documents regulating the relationship of pupil barristers and pupil masters, however, which imposed any duty or obligation on the pupil to do anything not conducive to the pupil's own training and development. Where such obvious care had been taken to express the duties of pupil master and pupil, it would not be right to imply any such duty. The freedom of a pupil who attained a provisional practising certificate to practise for the second six months of pupillage for his or her own sole benefit and reward, and not for the benefit of the chambers or the pupil master was inconsistent with orthodox employment or an apprenticeship relationship.
55. However, the Applicant did not fall within NMWA 1998 section 54(3)(b). She did not undertake to do or perform any work or services for any member of the defendant's chambers. To the extent that on an ad hoc basis she undertook any work for any member of chambers for which by virtue of the code of conduct she was entitled to be paid, the beneficiary of her work was a client of the claimant for the purposes of the professional practice carried on by her.
56. At paragraph 34 of the judgment of the court, given by Lord Bingham of Cornhill LCJ, the following was said:-

"Since the issue in this case is whether pupil barristers aged over 26 are entitled to be paid the national minimum wage, it cannot be conclusive that pupils are not now generally paid. This is true even of funded pupils since, as we understand, chambers grants are treated as professional earnings for tax purposes only in part. But the fact that the generality of barrister pupils have been unpaid, not just in the distant past but also in modern times, is in our view of significance in determining whether a relationship of or equivalent to apprenticeship exists. For although trade apprentices have always received reduced wages, reflecting both the value of the practical training they receive and their reduced productivity, they have always in modern times received some wages and in earlier times received board and lodging. In Dunk v George Waller & Sons Ltd [1970] 2 QB 163 at 169, Widgery LJ said:

"A contract of apprenticeship secures three things for the apprentice: it secures him, first, a money payment during the period of apprenticeship…"

While solicitors' articled clerks may once have been in very much the same position as pupil barristers, they have in more recent times been entitled to payment. The fact that pupil barristers have up to the present been unpaid in our view reflects the lack of expectation that they will render services of value; hence the requirement in the Code of Conduct that, if they do produce work of value, they shall be paid."

57. The issue in Wallace v CA Roofing Services Ltd [1996] IRLR 435 was whether or not the claimant was an employee or an apprentice. The claimant was taken on as a trainee by the defendant company. There was no written contract of apprenticeship, but his written statement of terms and conditions stated that his job title was "apprentice sheet metalworker. It also contained a provision that "at the end of your apprenticeship your employment will terminate unless there is a suitable vacancy that we can offer you at the time". The claimant was paid the apprentice rate of pay and his pattern of work was typical of apprenticeship, with the emphasis on training. He was dismissed after 19 months on the ground of redundancy.
58. Sedley J (as he then was) held that on the particular facts the claimant was an apprentice. He held that although modern legislation had assimilated apprenticeships to contracts of employment, the contract of apprenticeship remained a distinct entity at common law. Its first purpose was training. The execution of work for the employer was secondary, and in such a relationship the ordinary law as to dismissal did not apply. The contract was for a fixed term, and was not terminable at will as a contract of employment was at common law.
59. The only case relating to what may be described as a modern apprenticeship is Whitely v Marton Electrical Ltd (unreported) a decision of this Tribunal in a constitution presided over by Mr Recorder Underhill QC and delivered on 26 November 2002. In that case, the appellant was engaged by the respondents on 25 October 1999 under what was known as a "modern apprenticeship pact". This was a standard form of agreement promoted by the National Training Organisation embodying the principles and procedures set out in a document known as a "Modern Apprenticeship Framework". The Pact was entered into and signed by three parties – the apprentice himself, the employer and a local Training and Enterprise Council (TEC). The broad concept was that the employer undertook to train the apprentice in the relevant skills (in the instant case as a qualified installation electrician) as in a traditional apprenticeship, under the general supervision of the TEC.
60. Relevant clauses of the Pact provided

"(a) that the apprentice agreed ………. subject to the Modern Apprenticeship Framework be an employee of the employer and comply with the employer's terms and conditions of employment for the duration of the apprenticeship training plan and

(b) the employer agreed ……. subject to the Modern Apprenticeship Framework to employ the apprentice for the duration of the plan."

61. The Respondents dismissed the Appellant with effect from 2 June 2000 as a result of a downturn in orders. The Appellant was unable to find a new apprenticeship until September 2000. He claimed that the Respondents were not entitled to dismiss him until the conclusion of his training, and sought damages in respect of his loss during the period between June and September. The Respondent's case was that the Appellant was entitled only to one week's notice of dismissal.
62. The Appellant submitted that his was not an ordinary contract of employment, but a contract of apprenticeship. He relied on the decision of Sedley J in Wallace v CA Roofing Services Ltd, which confirmed that contracts of apprenticeship are distinct in character from contracts of employment and are terminable only on the conclusion of the agreed period of training and not by prior notice, whether by reason of redundancy or otherwise (save where the employer's business closes or undergoes a fundamental change in its character). That submission was accepted by the EAT. It held that the Pact explicitly and consistently used the language of apprenticeship, and was obviously intended to achieve, with some adaptation to modern conditions, the same purposes as an old-fashioned apprenticeship contract. Accordingly, the Respondents were not entitled to dismiss the Applicant.

Analysis and Discussion

63. Where does this wealth of material leave us? The difficulty, it seems to us, is that the Tribunal assumed that the MAA in the instant case was a contract of apprenticeship. It held, accordingly, that it was not open to an employer under an apprenticeship contract to terminate the contract except under the terms of the agreement itself or for serious misconduct. The Tribunal did not, accordingly, address the issue identified by His Honour Judge Clark at the preliminary hearing, namely the nature and effect of the relationship created by an MAA in terms of the protection afforded to the "apprentice" and to the person with whom he is placed to work.
64. On the available evidence, it is clear to us that the MAA in this case is not a contract of apprenticeship in the traditional sense and as described in Dunk v George Waller & Sons Ltd. In such an agreement, the employer receives the apprentice into his service for a fixed term for the purpose of the apprentice acquiring, under the employer's control, a practical knowledge of the employer's trade or business. The employer pays the apprentice, and the apprentice agrees to observe and be subject to the employer's conditions of employment. This is a contract of service between employer and apprentice, which gives rise to the rights and obligations identified in Dunk v George Waller & Sons Ltd.
65. In our judgment, the MAA is something different. We accept Mr. Sheldon's submission that the MAA and the scheme on which it is based is a combination of training and job experience. Whilst in no sense conclusive, it is notable that the word "training" is predominant throughout the MAA and that the funding for it is provided by the TEC.
66. Whilst it is possible that there was a contract of employment between Mr. Larrington and Mr. Dul (the Tribunal's findings do not identify the circumstances in which Mr. Dul entered into the MAA) it is equally clear to us that the MAA itself is not a contract of employment between Mr. Larrington and Mr. Dul. 51. Mr McGrath, speaking on behalf of the College, identified two types of trainees. There were those who were employed by a particular employer who then released them to attend the college, and there were those who attended the college and who were placed by the college with different employers. However, the employer did not pay the trainee: the funds for paying him came from the LSC through the college. We think it somewhat curious, if this is a contract of employment or apprenticeship between the employer and the modern apprentice, that payment to the employee would appear to be made in this way.
67. We were further struck by Mr. McGrath's statement on behalf of the College that were potential employers to be found liable to reimburse modern apprentices for the notional loss of income for the remaining period of the apprenticeship, and were they to be liable for damages for breach of contract, this would have a serious effect on the take up rates for the scheme.
68. In all the circumstances, we take the view that the Tribunal has not addressed the key issues in the case, and that, accordingly, the grounds of appeal set out at paragraph 20 of this judgment are made out. The Tribunal's decision cannot stand and must be set aside.
69. The question which remains is what follows from our conclusion. Mr Sheldon, whose analysis of the Modern Apprenticeship scheme we found compelling, did not and could not address us on the facts of this particular case. He accepted, however, that Mr. Dul's status in employment law was a matter of mixed fact and law, and although we see considerable difficulties in Mr. Dul's way in bringing himself within ERA 1996 section 230, or the Tribunal having jurisdiction under 3(2)(a) of the Employment Tribunals Act 1996, we take the view that it would be wrong for this Tribunal, on the limited facts known to us, to seek to substitute its own view of Mr. Dul's status for that of the Tribunal.
70. It follows that the proper course is to remit the matter to the Tribunal to reconsider Mr Dul's application in the light of the material we have identified. In addition, it may well be that there are more facts which the parties will wish to place before the Tribunal, on which findings affecting Mr. Dul's status will need to be made. Evidence as to the circumstances in which Mr Dul came to enter into the MAA: evidence as to whether or not there was a separate contract of employment between Mr. Dul and Mr. Larrington; and details of the particular Modern Apprentice scheme are likely to be most material.
71. Since the Tribunal has already made a number of findings of fact, we think it would be wrong to remit this matter to a different Tribunal, and we propose accordingly to remit it to the same Tribunal for further consideration.
72. It will, of course, be for the Tribunal to make its own findings of fact and reach its own conclusions. We have considered whether it would be appropriate for the EAT to attempt to give guidance to the Tribunal in it further deliberations. It is, however, reasonably clear that the Tribunal will need to identify Mr. Dul's status by reference to the facts it finds. The options are reasonably clear, and identified in the material we have set out. It would, of course, be open to the EAT to identify solutions which would follow from specific findings of fact, but we have come to the conclusion that such an approach would not be helpful. We have attempted to identify the relevant material which we hope will be of assistance to the Tribunal in its task.

Conclusion

73. Whilst we sympathise with the Tribunal, which was not given the benefit of the arguments available to us, we are in no doubt at all that its decision cannot stand and must be set aside. The matter will, accordingly, be remitted to the same Tribunal for the status of the applicant to be further considered.
74. In these circumstances, since we are setting aside the award, we do not propose to say anything more about it save that in our judgment the Appellant had a strong point when he criticises the Tribunal for refusing to reduce the claimant's damages in line with the 50% finding of liability. We can see no good reason for not doing so. No doubt if, as a result of its reconsideration, the Tribunal reaches the conclusion that the Appellant has any liability to Mr Dul, it will reconsider this point as well.