Businesses that use the services of agency staff can breathe more easily, following two recent decisions in the Employment Appeal Tribunal.

For a number of years, there has been some confusion as to whether agency workers should be regarded as employees of the employment agency, the end-user of their services (ie the client of the agency) or self-employed. This is an important issue as an individual can only bring a claim of unfair dismissal against his/her former employer.

Until 2001, it had been commonly thought that agency staff would either be employees of the agency concerned or self-employed. However, since then, various decisions in the Court of Appeal and Employment Appeal Tribunal have made it clear that, in certain circumstances, an implied contract of employment could exist between an agency worker and the end-user of his/her services.

Consequently, wherever an agency worker was under the effective control of the end-user for a sustained period of time, there was a good chance that the agency worker would be found to be an employee of the end-user. This meant that an agency worker who had been placed at the same establishment for a year or more could bring a claim of unfair dismissal against the end-user of his/her services.

As a result, many businesses that use agency staff have been left in a state of uncertainty: might they be liable for the unfair dismissal of an agency worker whose placement had come to an end?

Happily for employers, two recent Employment Appeal Tribunal (“EAT”) decisions have helped to clear up the confusion, whilst offering some reassurance to businesses that take on agency staff.

In Cairns -v- Visteon Limited, the EAT agreed with an Employment Tribunal’s finding that there was no need to imply a contract of employment between the agency worker and the end-user where the worker had already entered into a contract of employment with the agency. This was because, in such circumstances, the worker already had an employer (the agency), against whom he/she could bring a claim of unfair dismissal.

In James -v- Greenwich Council, the EAT held that the Ms James (an agency worker) was not an employee of the end-user as the minimum requirements for there to be a contract of employment between the parties were not met. Significant, in the EAT’s view, was the fact that when Ms James was ill, the agency sent a replacement – the Council did not insist on Ms James providing the services in person.

More importantly, the EAT in James offered guidance on when a contract of employment should be implied by Tribunals. In essence, the EAT said that Tribunals should look at the actual working relationship between the agency, worker and end-user. Where the working relationship is consistent with a genuine agency arrangement (using a third party agency business), then an Employment Tribunal would rarely be justified in finding that there was an implied contract of employment between the worker and the end-user.

The fact that an agency worker has been working for the end-user for a long time does not make it necessary to imply a contract of employment between the agency worker and the end-user. However, where an existing employee is encouraged by his employer to provide his services through an agency instead, then it would be open to a Tribunal to find that the worker remained an employee of the ‘end-user’ notwithstanding the purported agency arrangement.

So, the good news for businesses that use agency staff is that, so long as their arrangements with employment agencies are genuine and not simply an attempt to avoid workers’ employment rights, agency staff are unlikely to succeed in any unfair dismissal claims against them.

However, this may not be the last word on the matter. Therefore, to be on the safe side, users of agency staff should:

  • seek confirmation from the agency that it has entered into contracts of employment with the workers it supplies;
  • if possible, make it clear that the agency does not have to provide a particular worker and that, if the worker assigned to them is unable to attend for any reason, the agency should send a replacement; and
  • avoid “cunning plans” whereby existing employees are encouraged to provide their services through an agency instead. 

In taking these steps, businesses should be able to continue to enjoy the flexibility that engaging agency staff can provide, whilst minimising the risk of liability for unfair dismissal when their placements come to an end.