Hospital Medical Group Ltd v Westwood [2012] EWCA Civ 1005 CA
employment status | workers | self-employed contractors
The Court of Appeal has held that a self-employed GP who provided hair restoration services for a private clinic was a "worker" for the purposes of the Employment Rights Act 1996.
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Implications for employers
- In this case, the Court of Appeal rejected an argument that any individual who is in business on his or her own account cannot be a “worker” under the ERA when providing services under a contract to another party.
- Employers should consider whether or not any self-employed independent contractors that they use are workers under the ERA.
- Although workers receive fewer employment rights than employees, they are still entitled to paid annual leave and protected against unlawful deductions from wages.
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Hospital Medical Group Ltd has clinics throughout Europe, some of which have facilities for cosmetic surgery procedures. The company engages surgeons and doctors who have their own practices or business to provide services for it. Dr Westwood is a GP who, in 2005, agreed to provide services to the company. These services consisted of carrying out hair restoration surgery on the company’s behalf at its premises.
Dr Westwood provided his services to the company until it terminated the agreement in August 2010. From November 2007, the arrangement had been governed by an agreement expressed as a contract for services, which stated that Dr Westwood was a self-employed contractor. He was entitled to reject any assignments given to him by the company, although he later gave evidence that he thought the company would “not be very happy” if he refused to carry out procedures that had been booked for patients. Dr Westwood was paid a percentage of the rate that each customer or client paid to the company. Throughout the period in which Dr Westwood provided services to the company, he continued to work as a GP and also advised on transgender issues at a separate medical organisation.
After the company terminated its agreement with Dr Westwood, he brought a number of tribunal claims, including for unlawful deductions from wages and accrued holiday pay. The employment tribunal held that Dr Westwood was not an employee (because there was no mutuality of obligation), and considered whether or not he was a worker. The relevant law is s.230(3)(b) of the Employment Rights Act 1996 (ERA), which defines a “worker” as an individual who, under a contract:
"...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."
Individuals who meet this definition are known as “limb (b)” workers.
The tribunal found that Mr Westwood was “clearly in business on his own account”, and was engaged personally by the company to carry out the hair restoration work himself. The tribunal held that the company was not Mr Westwood’s client or customer in respect of his services, and Mr Westwood was a “limb (b)” worker. The Employment Appeal Tribunal (EAT) considered the tribunal decision to be “plainly and unarguably right”, and the company took the case to the Court of Appeal.
The Court of Appeal noted that permission to appeal had not been granted because the company had a real prospect of success, but to give the Court an opportunity to consider the law regarding “limb (b)” workers and, potentially, give guidance as to a “more uniform approach” to the way the statutory provision is interpreted and applied.
The company argued that, because Dr Westwood was engaged in business on his own account, and he had dealt with the company in the course of that business, the company was his client or customer under s.230(3)(b) of the ERA, and he was not a “limb (b)” worker.
The Court noted that it was not bound by any previous case law on this issue, although it was “content to adopt” the formulation given by Aikens LJ in Autoclenz Ltd v Belcher and others [2010] IRLR 70 CA, which separated s.230(3)(b) of the ERA into three elements.
The Court disagreed with Dr Westwood’s argument that he had had one business under which he carried out three activities: his work as a GP; his transgender work; and his work for the company. The Court found that they were three distinct businesses or outlets for his professional skills, and they were “quite unrelated to each other”.
The Court considered two leading EAT decisions on “limb (b)” workers, Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 EAT and James v Redcats (Brands) Ltd [2007] IRLR 296 EAT, observing that “the striking thing about the judgments...is that neither propounds a test of universal application”, and stating that both were “wise to eschew a more prescriptive approach”. The Court said that there is no “single key with which to unlock the words of the statute in every case”, but agreed that the “integration” test proposed in Cotswold “will often be appropriate”.
The “integration” test considers whether:
- the purported worker actively markets his or her services as an independent person to the world in general (in which case he or she would have clients or customers, and is not likely to be a “limb (b)” worker);
- or is recruited by the other party to work for it as an integral part of its operations.
The Court held that the EAT had correctly used the “integration” test in coming to the correct decision that Dr Westwood was a “limb (b)” worker. Under the contract, Dr Westwood agreed to provide his services as a hair restoration surgeon “exclusively” to the company, which recruited him to provide work as an integral part of its operations.
The Court rejected Dr Westwood’s arguments, stating that, if Parliament had intended to provide for an excluded category defined as those in business on their own account, it would have said so, rather than providing a “more nuanced” exception. Further, it was counterintuitive to see the company as Dr Westwood’s customer or client. The company was not “just another purchaser” of his various medical skills. Although he was not working for the company under a contract of employment, he was “clearly an integral part of its undertaking” when providing hair restoration services, even though he was in business on his own account.
Additional resources
- Get more information on employment status in the XpertHR FAQs section, which answers the following questions:
Case transcript of Hospital Medical Group Ltd v Westwood (on the BAILII website)
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