The employment status of agency workers has been the cause of many problems over the years. In the absence of legislation to clarify the position, Employment Tribunals (ETs) have to attempt to determine the exact nature of triangular agency relationships on a case-by-case basis.
In previous cases, end user employers have sometimes been judged to have an implied contract of employment with staff supplied by an employment agency but there has been uncertainty as to the circumstances in which the ET should make such a ruling. In each case, ETs have to examine the business reality of the arrangements between the agency, the worker and the end user.
A recent case (James v Greenwich Council) in the Employment Appeal Tribunal (EAT) has provided guidance on this issue which will give some relief to those who regularly employ agency workers.
Ms James worked full time for Greenwich Council until 1997, providing support work in the Council's Asylum Seeker's Team. She stopped working for a while, but then started working for the Council again - this time through an employment agency.
In 2003, she switched to an agency which paid a better hourly rate. There was no contract directly between Ms James and the Council. However, she had signed a 'Temporary Worker Agreement', which set out the terms of her agreement with the agency. This provided, amongst other things, that she contracted with the agency in the capacity of a self-employed worker in relation to each assignment and that the terms constituted a contract of services and would not give rise to a contract of employment either between the agency and the temporary worker or between the worker and the client. A second agreement, made between the agency and the Council, provided that the worker would be under the supervision, direction and control of the Council but that the agency assumed responsibility for the worker's remuneration and for the deduction and payment of PAYE and NICs.
Ms James was off sick in August and most of September 2004 and was replaced by another agency worker in her absence. When she returned to work, she was told she was no longer required.
Ms James claimed that she had been unfairly dismissed, arguing that she had an implied contract of employment, given that she had worked for the Council for a number of years and had been treated in the same way as a permanent employee.
The ET found that there was no contractual obligation between the Council and Ms James and that there was no implied contract of employment. She could not therefore claim unfair dismissal.
Ms James appealed to the EAT, which upheld the ET's decision that she did not have an implied contract with the Council as no mutuality of obligation existed. In reaching its conclusion, the EAT went on to make observations (paragraphs 53 to 61 of the judgment) as to how these types of relationships should be viewed. In particular, the mere passage of time does not of itself justify that an implied contract can exist. There are many reasons why a worker might wish to work in the same environment regularly or why an end user might prefer a worker with previous experience of the systems in operation. In the absence of any contradictory evidence, 'effluxion of time does not of itself establish any mutual undertaking of legal obligations between the worker and end user.'
Furthermore, in a triangular relationship where the end user is paying for the services supplied by the agency, the key feature is not just the fact that the end user is not paying the wages, but that it cannot insist on the agency providing a particular worker.
The EAT concluded that a careful analysis of the problems regarding the employment status of agency workers, with the introduction of legislative protection where necessary, is urgently required.
Contact Dean Parnell on 0121 698 2200 or email d.parnell@sydneymitchell.co.uk if you would like assistance in reviewing your temporary or permanent staff agreements.
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