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Agency workers: relief for employers or calm before the storm?

11 February 2008

The Court of Appeal has rejected an agency workers claim that she was an employee of the end user. Her complaint of unfair dismissal therefore failed.

Agency worker relationships

Agency workers register with an employment agency to provide their services to end users. There is no direct contractual relationship between workers and the end user, so you might think there is no possibility of agency workers being regarded as employed by the end user.

However, the Court of Appeal decided in Dacas v Brook Street Bureau (UK) Ltd [2004] ICR 1437 that it was possible for a contract of employment to be implied where the worker has worked for one end user continuously over a long period. The decision resulted in a stream of tribunal cases brought by agency workers.

Conflicting authorities since then have resulted in uncertainty for employers and agencies. The position has to some extent been clarified by the Court of Appeal, in the case of James v London Borough of Greenwich [2007] ICR 577.

The decision in James

Mrs James had worked for seven years at Greenwich Council. She brought a claim for unfair dismissal when she was told she was no longer required. Mrs James claimed she had an implied contract of employment with the council. Her claim failed in the Employment Appeal Tribunal last year and this week her appeal was rejected by the Court of Appeal.

The Court of Appeal suggested that a tribunal will rarely imply an employment relationship between a worker and an end user where the agency arrangement accurately reflects the nature of the relationship. Where there is no written contract (as was the case between Mrs James and the council) the test is simple - an employment contract will only be implied where it is "necessary" in the circumstances for a tribunal to do so.

The Court of Appeal recognised that "it is not always possible to predict with certainty how this question will be answered by the tribunal". This test presents a significant hurdle for potential claimants. In effect, an agency worker will have to show that the manner in which the agency arrangement was conducted could only have been consistent with their being engaged on a contract of employment. Such a claim would verge on asserting that the entire tripartite relationship was, in fact, a sham.

What can end users do/not do to ensure there is no contract of employment?

Do

  • Maintain a periodical dialogue with the agency about its workers
  • Ensure arrangements for sick pay and holiday pay are made by the agency

Do not

  • Give agency workers an employee handbook unless you clarify that it is given for information only and does not apply to them
  • In documentation, refer to agency workers as employees
  • Apply company sick pay schemes to agency workers
  • Apply company holiday arrangements to agency workers

False hope for employers?

The ruling in James has been welcomed by agencies and employers, who had feared judicial expansion of the rights of Britains 1.4 million agency workers and subsequent undermining of the flexible labour market. Trade unions, however, argue that the current legal position creates a two-tier workforce. The James decision is unlikely to be the end of the matter. The Court of Appeal noted that, whilst courts are "not architects of economic and social policy", there is nothing to prevent Parliament from introducing changes to the law in this area.

The United Kingdom has been under pressure from Europe to introduce laws that would give agency workers the same rights as permanent employees after only six weeks of continuous working for the same end user. Reports suggest that more than 100 Labour MPs have now pledged to back a private members bill introduced by Andrew Miller MP on 6 February. Operating under the title of the Temporary and Agency Workers (Equal Treatment) Bill, this draft legislation is due to be debated on 22 February and could ultimately force ministers to confront the conflicting demands from business and unions.

The decision in James may only provide brief respite for employers.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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