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Who employs the agency worker?

01 April 2008

The question of agency workers and who actually employs them has rumbled on for many years.

The last milestone case on the issue was Brook Street Bureau v Dacas, which we reported in 2004. Now the outcome of James v London Borough of Greenwich has gone further and it is a significant decision for any business that uses agency staff.

The case was brought by Merana James, who worked through an agency for the council from 2001. She switched agencies two years later but remained in the same job. There was no express contract of employment between her and the council – just a written agreement with the agency, headed ‘Temporary worker agreement’. In 2004 she went on sick leave and, on returning, learned that the council no longer required her as the agency had sent a replacement. Arguing that the council in fact employed her, she brought a claim for unfair dismissal. The Tribunal decided there was no employment contract and their decision was upheld by the EAT and the appeal court.

It is common practice for a business to take on workers through the facilities of an agency, often for long periods. The risk is that, when the business ends the arrangement, some workers will try to claim they were employees of the business. Just as it is wrong to consider all agency workers to be outside the protection of the Employment Rights Act 1996 (and therefore unable to claim unfair dismissal), it is not possible for all agency workers to argue successfully that they are employees.

What flowed out of the earlier  Dacas case was that tribunals should consider whether there is an implied contract between the worker and the end user. A series of subsequent cases moved the goalposts a little in how to determine who employs a worker, and indeed whether they are employed at all. Now, at long last, the appeal court has provided a definition of what tests should be applied. In brief, these are:

  • is the way in which the work is undertaken consistent with the agency’s arrangements or does the worker simply attend like any other employee?
  • a tribunal will rarely be entitled to imply a contract between the worker and the end user when in fact the agency arrangements are genuine and represent the working relationship
  • the mere fact that the agency worker has worked for a considerable period does not, by itself, imply a contractual arrangement
  • tribunals should more readily imply an employment contract where the agency arrangements are superimposed on an existing contractual arrangement – in other words where the agency arrangement is a mere sham.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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Matthew Clayton MA LLM (Cantab), CIPP/E
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Mathew Clayton
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