Agency workers not employees of end user

The Court of Appeal has held in the case of James v London Borough of Greenwich that an agency worker was not employed by the end user client to whom she was supplied, and that a contract of employment should only be implied between the agency worker and the end user where it is necessary to do so to reflect the business reality of the relationship. The Court confirmed that the mere passage of time will not be sufficient to imply such a contract.

Background

Ms James' worked as an agency worker for the Council for around five years. Part way through that period she had switched agencies to obtain a better hourly rate of pay. Mrs James had signed a temporary worker agreement with the agency, which in turn had a contract with the Council to provide temporary workers. When she returned from a period of sickness absence the Council told Ms James that they no longer required her services as the agency had sent a replacement. Ms James brought a claim for unfair dismissal which the Council contested on the grounds that she was not an employee of the Council.

The employment tribunal held that there was no implied contract of employment between the Council and Ms James and therefore she could not bring a claim for unfair dismissal. This decision was upheld by the EAT. Ms James appealed to the Court of Appeal.

The Court dismissed the appeal and held that the employment tribunal had correctly applied the test of necessity in assessing whether a contract of employment should be implied.

Impact on employers

Despite a number of conflicting judgements in this area, the Court has said that the law is clear and that it is up to employment tribunals to decide as a matter of fact whether or not a contract of employment needs to be implied between the worker and the end user. Provided the tribunal has followed the correct approach in considering this question, there will rarely be scope for appeal.

This decision will be welcomed by businesses that use agency workers as it confirms that in typical tripartite arrangements between agency workers, end users and agencies, it is unlikely that the workers will be deemed to be employees of the end users. It will however remain important to ensure that agency workers are not treated like employees of the end-user. For example, the end-user should not provide them with sick pay or holiday pay and should not deal with performance or discipline issues directly with the worker.

It will still be necessary to consider the arrangements in each case carefully and to ensure that the contracts are clear, in writing and reflect the understanding of the parties. End-users are advised to make it a requirement of their contract with the agency that the agency will have written contracts with the workers and will make the form of the contract available to the end-user to check that it does reflect its understanding of the relationship. If negotiable, the end-user should also take the precaution of seeking indemnities from the agency to cover employment claims.