Company named in employment contract was not the true employer

In Dynasystems for Trade and General Consulting Ltd and others v Moseley, the Employment Appeal Tribunal upheld an employment tribunal’s decision that an employment contract that identified a Jordanian company as the individual’s employer was in fact between the individual and an associated UK company. 

Background

Mr Moseley had a written contract of employment with Dynasystems for Trade and General Consulting, a Jordanian company with a registered office in Jordan but no actual functioning office or place of business.  On the same day that he entered into the contract, a UK company within the group issued a letter to support a passport application which stated Mr Moseley was its employee.  Throughout his employment it was the Jordanian company which paid him but Mr Moseley worked in the UK under the management of a director of the UK company and he did no work for Jordanian company. 

He was later dismissed and brought claims for unfair dismissal and wrongful dismissal against the Jordanian and UK companies and the tribunal had to decide which was the true employer.  

Decision

The employment tribunal concluded that it was never the intention of the parties that the individual would work for the Jordanian company.  It therefore held that it was appropriate to find that the UK company was the individual’s employer, despite the provisions of his employment contract. The companies appealed on four grounds, all of which the EAT dismissed:

1. The tribunal should not have implied an employment contract between Mr Moseley and the UK company.  The EAT held that the question in this case was not whether to imply a further contract of employment, but who was the employer in an existing contract. 
2. The tribunal should not have considered events that took place after the contract had been entered into in order to determine the intention of the parties at the time they entered into that contract. The EAT disagreed, concluding that a seamless stream of events that showed that at no point did the parties intend for Mr Moseley to work for the Jordanian company was good evidence as to what was initially agreed. 
3. The tribunal’s decision was perverse given there was a written contract in place with the Jordanian company and no such contract with the UK company. The EAT found that as the evidence was either neutral or pointed towards the UK company as the employer, it was not unreasonable to come to the conclusion that it was the employer. 
4. The tribunal had misconstrued a clause in the employment contract that said Mr Moseley may be required “by an officer of the Company” to work for other group companies.  The tribunal interpreted this to mean that instructions for Mr Moseley to work for the UK company must come from the Jordanian company.  The EAT held the instructions had actually always come from the UK company.

Comment

In practice it is not uncommon for group companies to employ an individual and require them to work for other companies within the group and this case is a reminder that tribunals are willing to look beyond contractual documentation in the right circumstances. 

It is therefore important that employers ensure that the contractual position reflects the reality of an arrangement so that there is clarity on the position of the employee.  Additionally, any arrangement in which an individual is employed by one company but carries out work for another should be clearly documented, for example by way of a secondment agreement, to reduce the risk of uncertainty in the event of a dispute.

This case also serves as a reminder to those conducting due diligence in the context of an M&A transaction or an outsourcing arrangement of the importance of identifying the true employer and the employees who are in scope.