Businesses with concerns about inadvertently finding themselves the employer of people they thought were agency workers may be comforted by the recent Court of Appeal case of Alstom Transport v Tilson. This decision shows that the Courts are not willing to award employment status to agency workers or contractors by implying an employment relationship between them and the end user unless there is a necessity to do so.

Mr Tilson’s services to Alstom were provided under a complex agency agreement (involving four parties and three intervening contracts). Mr Tilson wanted to bring a claim for unfair dismissal, but in order to do so he needed to show that an employment contract should be implied directly between him and the end user, Alstom.

Mr Tilson was fully integrated into Alstom’s business during his period of service. He had a line manager to whom he was responsible and he worked Monday to Friday each week. He had to clear holidays in advance and was not at liberty to choose not to turn up to work, or to field a substitute. Therefore the relationship displayed many of the traditional characteristics of employment and it was conceded by Alstom that if a contract were to be implied between it and Mr Tilson, it would be one of employment. The question was when a direct contract would be implied.

The Court of Appeal refused to find that there was a direct contractual relationship between Mr Tilson and Alstom, and held that:

  • a worker can be fully integrated into an organisation, and still be an agency worker rather than an employee. Just because someone “looks”, acts and is treated like an employee, that does not necessarily mean that he is an employee. A contract of employment should only be inferred when it is necessary to do so in order to give business reality to the transaction and to create enforceable obligations between parties. A key indicator of whether implying a contract is “necessary” is whether the parties would act or have acted any differently without one. If they would or might have acted in the same way in the absence of a contract, then the employment contract would not be “necessary” and so none would be implied.  
  • it is not legitimate for a Tribunal to imply a contract simply because it objects to the practice of end users entering into agency arrangements to avoid incurring the obligations they owe to employees, or to workers seeking the tax advantages which may come with self-employment. Whatever their or the Government’s views, “it is not against public policy for a worker to provide services to an employer without being in a direct contractual relationship with [it]”, said the Court.

When these factors were considered cumulatively, the Court of Appeal found that there was no legitimate basis to imply a direct contract. It concluded robustly that “it is impermissible for a Tribunal to conclude that because a worker does the kind of work that an employee typically does, or even of a kind that other employees engaged by the same employer actually do, that worker must be an employee”.

The case appears to add considerable muscle to end users’ denials of employment relationships between them and agency or self-employed staff. Even leaving aside the Court’s references to Mr Tilson having (in effect) made this particular bed by an earlier rejection of an offer of employment in the same role by Alstom, the test of legal necessity is a high one and much comfort can be taken by its reiteration at this senior level in the court hierarchy.