In Smith v Carillion (JM) Ltd , the Court of Appeal has confirmed that a contract cannot be implied between an agency worker and the end-user of his services unless it is necessary to do so. In addition, the Court has made clear that it is not against public policy for an end-user to obtain services through the utilisation of agency staff even if the purpose, or alleged purpose, of doing so is to avoid legal obligations which would otherwise arise if the agency worker were directly employed by the end-user.

Background

David Smith provided services through an employment agency to John Mowlem & Company plc (now part of the Carillion group) in 1997-1998 and 2000. Separate contracts were in place between Mr Smith and the agency and between Mowlem and the agency, but there was no express contract between Mr Smith and Mowlem. Mr Smith was an active trade union member, holding a number of offices including shop steward and safety representative. 

From 2001, he was unable to obtain construction work generally. He subsequently discovered that he had been included in the Consulting Association’s database of problematic workers – a blacklisting practice which was exposed in 2009 and outlawed from March 2010. 

In the absence of sufficient evidence to the contrary, it was conceded that at least some of the information about Mr Smith in the database was supplied by Mowlem between 1997 and 1999. Mr Smith claimed that by providing the information Mowlem had subjected him to detrimental treatment by virtue of his trade union and health and safety activities. 

At the time of the alleged treatment, the relevant statutory protection against such detrimental treatment (in the Trade Union and Labour Relations (Consolidation) Act 1992 and Employment Rights Act 1996) only applied to employees. It was subsequently amended in part to cover all workers. 

Mr Smith sought to establish that, as regards legal relationship with Mowlem as end-user, he was a worker, which would require a contract for performing work or service personally to be implied between him and Mowlem. As a second element of his appeal, he argued that the statutory protection against detrimental treatment would then need to be re-interpreted so it applied to workers (rather than just employees) at the time of his apparent mis-treatment. He claimed that, unless this happened, his human rights enshrined by the Human Rights Act 1998 would be contravened.

Decision

The Court re-stated the principle (as set out in the earlier case of James v Greenwich London Borough Council) that a contract can be implied only if it is necessary to do so. This is a high burden that has to be met by the party claiming the existence of the implied contract. 

There were various potential indicators that Mr Smith had employment or worker status – he was personally interviewed for one of the projects, was fully integrated into the Mowlem management team and “to all outward appearances” seemed to be a Mowlem employee, and the engagement in 2000 was originally intended to be long-term. However, upholding conclusions previously made by the employment tribunal and EAT, the Court decided that none of these factors were necessarily inconsistent with a genuine agency arrangement and neither separately nor cumulatively required a contract to be implied. On that basis, the necessity test was not satisfied and a contract, whether in respect of employee or worker status, could not be implied. 

The Court also suggested that Mr Smith’s human rights argument was bound to fail. The principal issue here was a lack of persuasive evidence that any of the alleged detrimental treatment took place after the Human Rights Act came into force – as a consequence, the protection provided by the Act could not apply.

Comment

This case forcefully emphasises that the modern workplace may lawfully utilise a variety of contractual arrangements and methods for the supply and delivery of services, and that the supply of personnel via an employment agency is a common and readily explicable example. 

The Court of Appeal considers that it is not the function of the Courts to intervene and to imply a contract of employment “merely because [they] disapprove of the employer’s objective”; an example being where a given structure has been used with the objective of precluding certain employment rights which would have applied had there been a direct employment relationship. 

It remains to be seen whether any of the major political parties will seek to review the potential utilisation of agency personnel after the 2015 General Election whether through Manifesto commitments or otherwise. 

The circumstances of Mr Smith’s case were challenging because of the timing of the acts in question: they pre-dated the Human Rights Act. Therefore, the decision should not be read as a wider limitation on the obligation to construe UK legislation in a manner consistent with, for example, Articles 8 and 11 of the European Convention on Human Rights protecting private life and freedom of association. 

If anything, we should expect greater focus in the immediate aftermath of the Election, from trade unions and claimants alike, on such European rights and the Charter of Fundamental Rights of the EU in order to frame and enhance UK statutory employment rights.