The Employment Appeal Tribunal has recently reviewed the legal test that needs to be met when deciding whether a contract of employment exists between agency workers and an employment agency. The employment agency, Unity, had gone into administration and the agency workers asserted that they had been employees of Unity in order to obtain unpaid wages from the Secretary of State. The employment tribunal initially upheld the agency workers' claim, but the EAT has reversed this decision.

The EAT considered the authorities on agency workers and employment status. It concluded that neither of the two necessary requirements for a contract of employment, mutuality and the appropriate degree of control, existed and therefore there was no contract of employment between the agency workers and Unity. Unity was not bound to offer work, but if it did offer work the agency workers were not bound to accept the work nor to complete the work during an assignment (as both the agency workers and Unity could terminate the agreement at any time). Unity did have some control over when the agency workers could take annual leave, but other than that, the end user had control and gave directions.

Although many agency workers will be entitled to improved terms and conditions when the Agency Workers Regulations come into force on 1 October 2011, their position as regards employment status will, if anything, become more precarious. That is because access to facilities at the organisation to which they were supplied has often been used to support an argument that they should be regarded as its employees. Now the end user will be able to point to its legal obligations under the Regulations as the only reason for treating them the same as its permanent employees. The only other possible route to employment status is through employment with the agency itself, and this recent EAT decision illustrates just how difficult that argument is to win.

To read the review by the Employment Appeal Tribunal please click here. To read the Agency Workers Regulations please click here