Employment Law Cases

Liability without a contractual relationship

A tribunal had incorrectly struck out an employee’s claims for detriments for blowing the whistle under the Employment Rights Act and discrimination/detriments claims under the Equality Act. An organisation, other than the employee’s employer, could potentially be liable under specific sections even without a direct contractual relationship with the employee.

Background

W worked for Highways England (HE) as an architect. A year after she started work, HE brought in KPMG to provide management consultancy services and W was part of the team working with KPMG. She became very unhappy in her dealings and interactions with certain of KPMG’s staff. She believed that because she is a woman, and because she had made certain public interest disclosures and complained about discrimination, she was demoted and ultimately forced out of her job. She brought various tribunal claims against HE and KMPG.

This appeal concerns only W’s case against KPMG and whether they should be allowed to proceed. Those were complaints of being subjected to detriments on the ground of having made protected disclosures (ERA, s. 47B), direct sex discrimination (Equality Act, s. 13) and victimisation (Equality Act, s. 26). KPMG resisted all three claims on the basis that it had never been W’s employer.

W accepted that she had no express contract with KPMG but argued that she had an implied contract either of employment or as a worker. In relation to her whistleblowing claim she submitted that, in any event, KPMG was her employer under the extended definitions of ‘worker’ and ‘employer’ in ERA, s. 43K. Alternatively, she argued that, in its dealings with her, KPMG and /or KPMG’s employees acted as agents of HE such that KPMG was liable. Finally, she argued that KPMG had instructed, caused, induced or aided HE to commit basic contraventions against her contrary to the Equality Act.

A preliminary tribunal hearing held that W had failed to establish the existence of any implied contract between her and KPMG and struck out all her complaints against them. She appealed.

EAT decision

The appeal was partially successful.

The tribunal was correct to conclude that W had failed to establish any implied contract between her and KPMG. The test for implying a contract is whether or not it is necessary.

The tribunal’s conclusion was straightforward and legally correct:

W had a contract of employment with HE from whom she received her wages.
Separately, HE had a consultancy contract with KPMG.
W’s interactions with KPMG were explicable by reference to those two contracts.
It was not, therefore, necessary to imply a third contract between W and KPMG.

However, as to whether KMPG could be liable to W under the extended definition of ‘employer’ for the purposes of a whistleblowing claim, the EAT did not agree with the tribunal. The tribunal had held that because there was no implied contract of any kind between W and KPMG, the extended definition of ‘employer’ in s. 43K could not apply to KPMG. Not so said the EAT. The extended definitions of ‘worker’ and ‘employer’ are capable of applying even where there is no contract of any kind between the worker and the person who substantially determines the terms on which the worker is or was engaged.

Similarly, because the tribunal had ruled out an implied contract did not mean that W’s argument that KMPG was liable on an agency basis could not be made out. The issue of whether or not individual KPMG employees acted as agents of HE in relation to particular acts or omissions of alleged discrimination, victimisation or protected disclosure detriment involves a different and wider factual matrix than the implied contract issue.

W’s argument, under s. 112 of the Equality Act (aiding contraventions), that KPMG had ‘knowingly helped’ HE to commit a basic contravention against her was also not dependant on the issue of the implied contract.

All of these issues were fact sensitive and could not properly be determined in the context of an application for strike-out.

Comment

This decision is a useful reminder to those who offer third-party consultancy services that there is a possibility that they might find themselves liable in claims of discrimination or whistleblowing detriment to someone else’s employee.