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What is an employee, and how does this affect the concept of discrimination?

Updated: Feb 16

Can an employer be held liable for discrimination if the complainant is not actually an employee of theirs? This article takes a look at a case that answered this question.

What constitutes ‘employment’ for the purposes of bringing a case for discrimination? This is a question which the case of Halawi v WDFG t/a World Duty Free UKEAT/0166/13 went some way towards answering and provided a useful insight into the relevant tests and how they are likely to be applied in certain circumstances.

The Facts

Halawi was a beauty consultant selling cosmetics at Heathrow Airport. Her employment situation with World Duty Free (WDF) was convoluted and so it is worth examining each part of it.

WDF operates retail outlets at airports. Within these, it offers space to companies for the exclusive storage of their products. Those spaces are normally staffed by uniformed specialist staff on behalf of each company. In this instance, the company was Shiseido, a Japanese cosmetics company.

In 2000 Shiseido entered an agreement with Caroline South Associates (CSA), who agreed to provide management services, including the staffing of Shiseido’s outlet spaces. In 2001, Halawi began working as a uniformed beauty consultant selling Shiseido products in the outlet at Terminal 3, Heathrow Airport.

To begin with, Halawi worked through an agency but in 2002, she established a limited company, Nohad Ltd, which invoiced CSA for her time and services at an hourly rate set by CSA. In turn, CSA invoiced Shiseido. CSA performed the function of an agent supplying workers to Shiseido to work in their retail space.

There was no contract between WDF or CSA and Halawi. There was no requirement for her to work personally. She received no pay if she did not work and did not get holiday pay or sick pay. Neither WDF nor CSA was under an obligation to offer her work and she was entitled to refuse such an offer if it was made.

Because the retail unit where she worked was beyond the security gates – “airside” – to work there she needed two authorisations: one from WDF and a BAA airside pass which WDF sponsored. WDF’s control over her ability to work was total since if it chose to remove her authorisation, she could no longer carry out her job.

Halawi claimed that in June 2011, her airside pass was withdrawn because of rumours that she was ‘anti-Islam’ after she said that she defended a fellow Christian employee who was mocked by Muslim workers for wearing a cross. She alleged that she had been the victim of ‘unsubstantiated complaints’ by Muslim workers. WDF denied this claim.

With the withdrawal of her airside pass, Halawi was no longer able to work at WDF’s outlet and was effectively dismissed.

She then brought claims for unfair dismissal and discrimination against both WDF and CSA in the Employment Tribunal, claiming that the withdrawal was discriminatory on the grounds of race and/or religion.

The Employment Tribunal

In order for her claim to have a chance of success, Halawi needed to show that she was an employee and therefore covered by Section 83(2) of the Equality Act 2010. She supplied the Tribunal with witness statements that she claimed demonstrated that WDF had considerable control over the manner in which she carried out her duties. Examples in her evidence included the fact that she had to obtain permission to take holidays and that WDF could dismiss her by removing her airside pass. She also said that the products available in the unit where she worked were considered WDF stock, which meant that they profited from her services.

The Employment Tribunal found that the only documentation recording the relationship between Halawi and WDF was a handbook of ‘business-partner guidelines’.

Within the handbook was a paragraph showing the difference between employees and business partners; citing this, the Employment Tribunal held that Halawi could not have been unaware of the difference.

She was also not entitled to holiday pay or sick pay and was not required to work personally at her job, but could get another person to substitute for her. She had used that power on more than one occasion.

WDF’s role was to give Halawi authorisation to work at the store; they did not employ her. CSA had a relationship with Nohad Ltd. but no separate relationship with Halawi. CSA was not obliged to offer work and Halawi was not obliged to accept it.

The Tribunal found that Halawi did not have a contract personally to do work and was therefore not an “employee” as far as Section 83(2) of the Equality Act 2010 was concerned.

Halawi appealed the decision of the Employment Tribunal and her case was heard in October 2013.

The Employment Appeal Tribunal

Halawi’s main ground of appeal was that the EAT should look more broadly at whether she was in an “employment relationship” with either WDF or CSA, rather than focussing on the concept of ‘personal service’. She said that her “subordinate” position to WDF and CSA, with its accompanying elements of economic dependency and value should be considered instead.

The EAT rejected her arguments, seeing no reason to ignore the requirement in the Equality Act for a “contract” or “personal service”.

The Employment Appeal Tribunal also found that on the material facts of the case, Halawi was not in a “subordinate” position. She was under no obligation to personally do work for either WDF or CSA and she was not significantly under their control.

It was found that Halawi did not have a contract personally to do work within the meaning of section 83(2) of the Act. There was, the EAT said, no employment relationship as there was no control, no subordination or economic dependency. The issue of substitution was again raised.

The EAT was left with an “uneasy feeling that…the arrangements…were such that the Claimant could have been the victim of discrimination and yet have no right to complain to a Tribunal”.

Halawi appealed the decision again and the case was heard at the Court of Appeal in June 2014.

The Court of Appeal

Using the argument that had been brought up at the EAT but with a different emphasis, Halawi argued that only a relationship of subordination or economic dependency was required in order for a person to be considered an employee under EU law. Personal service was not required.

The Court of Appeal did not agree. They said that any interpretation of section 83(2) of the Equality Act must be compatible with EU law and so the existence of the relationship of employment does not depend on the existence of a formal contract of employment that would be recognised by UK law, but whether it met the criteria laid down by EU law, including in this case:

  • a requirement that the employee should agree personally to perform services, and

  • a requirement that the employee should be subordinate to the employer, that is, generally be bound to act on the employer’s instructions and integrated into the organisation.

In this case, the Employment Tribunal found that these two criteria were not satisfied and in the opinion of the Court of Appeal, had taken all the relevant factors into account in concluding that Halawi was not an employee of WDF.

The Court of Appeal considered:

  • the lack of integration of Halawi into WDF’s business,

  • the lack of control over Halawi’s work,

  • the lack of documentation to evidence an employment relationship,

  • the lack of a relationship of subordination and a real power of substitution,

and reached the decision to dismiss the appeal. The Court declined the request to refer the case to the European Court of Justice for a preliminary ruling.

The Implications for Employers

Businesses who have complex working arrangements in place with those who do work for them will find the outcome of the case a satisfactory one. If the appeals had succeeded, the scope of discrimination protection could have been extended to those without any contract with the end user.

The case also serves to remind employers that the employment status of those working for them should be clarified. A good place to start is to ask two key questions:

  1. Is there a contract between the employer and the individual; and if so,

  2. Does the contract place the individual under an obligation to do the work personally (i.e. without the right of substitution).

If both those questions can be answered in the affirmative, the employer should consider the individual to be in employment and therefore the employee would benefit from employment rights. This would enable them to bring a claim against the employer should an act of discrimination occur.

This case never really considered if the Claimant should be considered a worker. A worker is entitled to certain rights and would be able to make a claim for discrimination. We will deal with the subject of workers and their rights next month.

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