M & P Steelcraft Ltd v Ellis: UKEAT/536/07

EAT: Elias J (President), Mrs J Matthias and Mr H Singh: 21 February 2008

Under a tripartite agreement between the claimant, the Prison Service and the appellant company, the claimant, a serving prisoner, was given a job placement with the company pursuant to a resettlement scheme designed to facilitate the rehabilitation of prisoners. A “memorandum of understanding” regulating the scheme imposed obligations on the company to pay the claimant, to monitor his progress, to notify the Prison Service if he breached the terms of his day release and to permit the Prison Service to visit the company unannounced to monitor the claimant’s compliance with the scheme. The Prison Service undertook to risk assess the claimant and to inform the company if the scheme was suspended or withdrawn, while the claimant undertook to comply with the terms of the scheme and all reasonable requirements of the company. The memorandum contained an exclusion clause which provided that no contract of service or for services was created and that no legally enforceable rights arose. Following his release from prison, six months later, the claimant worked for the company for seven months under a contract of employment until he was dismissed. On his complaint of unfair dismissal an employment judge, considering a preliminary issue of jurisdiction, decided that there was a contract of employment between the claimant and the company during his job placement under the resettlement scheme; that he accordingly had the requisite qualifying period of one year’s continuous employment for the purposes of section 108 of the Employment Rights Act 1996; and that the employment tribunal had jurisdiction to hear the claim.

The company and the Prison Service appealed, the claimant contending that, in any event, no effect could be given to the exclusion clause in the memorandum as it contravened section 203 of the 1996 Act, being an attempt to contract out of the claimant's statutory rights.

The Employment Appeal Tribunal held:
On the facts, no agreement, separate and distinct from the tripartite agreement identified by the memorandum, arose between the claimant and the company, and, as a pure matter of construction, the exclusion clause effectively established that there was no intention to create legal relations. On the assumption that the claimant would otherwise have been able to take advantage of statutory rights, the clause would have had the effect of infringing section 203 of the Employment Rights Act 1996, as its only purpose was to seek to alter the legal consequences of conduct pursuant to the relationship. But the purpose of the tripartite agreement, seen in the context of the resettlement scheme, was to assist the rehabilitation of the claimant, the provision of service to the company being essentially secondary, and the tribunal judge had erred in extrapolating from it a bilateral contract of employment. Accordingly, the claimant was not an employee while he was in prison and acquired no rights under the 1996 Act on which section 203 would bite and effect could be given to the exclusion clause in the memorandum.

The appeal was allowed.

Appearances: Nicholas Price (Royal Bank of Scotland Mentor Services, Glasgow) for the company; Matthew Purchase (Treasury Solicitor) for the Prison Service; Sean Jones and Rachel Kamm (Farnfield & Nicholls, Gillingham) for the claimant.