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Employment Law Solicitor
Sarah Cruice 0114 253 6547 | email Sarah View Sarah's profile |
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An agency worker is an individual who enters into a contract with an employment agency, where the agency in turn enters into a contract with the ‘end user’, to who the worker is sent to work for. There is usually no contract between the worker and the end user, and the agency will pay the worker (after deductions for PAYE and national insurance contributions). The end user pays the agency for its services (i.e. the supply of the worker). |
The problem with this type of arrangement is that it is not always clear what the employment status of the agency worker is. There are three types of employment status; employee, worker and self employed, and each type benefits from a different level of employment protection (please see our note on employment status for more information).
The usual starting point is that the agency worker will be a ‘worker’ in law. S/he will therefore be entitled to some employment protection rights, including paid holidays, but not the full employment protection rights enjoyed by ‘employees’.
However, in some circumstances, this position can be challenged. Challenges most often arise in situations where agency workers are terminated (by either the agency or the end user), and the worker wishes to exercise employment rights that are exclusive to employees, e.g. bringing an unfair dismissal claim, or a claim for a redundancy payment. Where such claims are raised in the employment tribunal, the first question for the tribunal will be “was the agency worker an employee of either the agency or the end user?” If yes, the claim can proceed. If no, the upshot is that the worker does not have these statutory rights and his / her claim/s will fail.
Employment rights of agency workers is a tricky subject from a public policy point-of-view. As a result, the legal position is a little ‘grey’, as there is no legislation on point and the courts will not rule that all agency workers have full employment protection rights, nor will they rule that they do not. Essentially, the position is that each case will turn on its own facts, which the tribunal will need to examine in detail on a case-by-case basis before coming to a decision.
Tribunals must consider the following questions:
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Is there an obvious contract of employment between the agency worker and the agency or the agency worker and the end user (i.e. a written contract of employment)?
- If not, is the relationship between the parties a clear commercial agency relationship, or is it necessary for the tribunal to imply a contract of employment either between the agency worker and the agency or the agency worker and the client?
As above, the traditional starting point for agency workers is that they are ‘workers’ rather than ‘employees’.
However, in the 2007 case of Dacas – v – Brook Street Bureau (UK) Ltd, the Court of Appeal raised the possibility that a contract of employment could be implied between an agency worker and an end-user. The Court considered it wrong that the Claimant in that case was nobody’s employee. Unfortunately however, the judgment in that case set no clear precedent, and the issue was left ‘up in the air’.
A later EAT case on this issue (James – v – London Borough of Greenwich, 2008) set out to clarify the position, and stressed that it was not appropriate simply to imply an employment contract in order to ensure the Claimant had full employment rights. The Court emphasised that tribunals must determine that it is necessary to imply a contract before looking at whether one can be implied.
In considering the question of necessity, the Court went on to say that where agency arrangements are genuine and accurately reflect the relationship between the parties, it will be rare that the tribunal will be entitled to look at implying a contract of employment. It is only necessary to look at implying a contract of employment where the agency arrangement does not accurately reflect what is happening between the parties in reality.
The EAT decision in James was appealed to the Court of Appeal. The Court of Appeal dismissed the appeal and approved the EAT’s approach to the question of implied contracts of employment.
In practice, this is likely to mean that where the relationship has always been a tripartite agency relationship, unless something has changed in the way the arrangement works, the tribunal will not need to look at implying a contract, and there will be no employment relationship.
On the other hand, if a contractual relationship exists before an agency relationship is imposed on that relationship, it is very likely that the tribunal would look at implying a contract of employment.
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If the tribunal decides that it is necessary to look at whether a contract should be implied between the worker and agency or the worker and the end-user, it will do so having regard to all of the facts of the case and the usual tests for employment status (please see our note on employment status).
It will be very rare that there will be a contract of employment between the worker and the agency, given that the agency will not ordinarily have day-to-day control over the worker. As such, most claims will ask the tribunals to imply a contract of employment with the end-user.
Since the EAT’s decision in James – v – London Borough of Greenwich, there have been a number of cases on this point.As you might expect, some have gone in favour of the agency worker, but a large number have not. The general feeling is that agency workers will struggle to prove employee status, and many claims will fall at the first hurdle.
If you have any queries about agency workers and employment status, please contact Sarah Cruice on 0114 253 6547 or at sarah.cruice@ironmongercurtis.com.
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