News

The Court of Appeal has decided that an agency worker was not employed by the end user company.

This is an important and much anticipated judgment. It approves EAT guidance as to when an agency worker will be deemed to be an employee of the end user.

However, the Court declined to make any hard and fast rules about agency workers' employment status. It instead made clear that this is for Parliament to do.

(Decision by Court of Appeal in James v London Borough of Greenwich [2008])

Implications and Action

Good news for employers that use agency workers.

The decision should make it easier for employers to retain and rely on agency workers without facing the threat of claims based on employment rights. (However, the Court did make clear that each case will still need to be judged on its own circumstances.)

We recommend that employers:

  • review existing arrangements with agencies and agency workers;
  • check agreements to be entered into with new agencies (and agencies with their workers, if feasible);
  • ensure that such agreements reflect the reality of the arrangements.

We have yet to see whether Parliament will change the law in respect of the rights and employment status of agency workers. There is no current government proposal to give agency workers employment rights, other than a private member's bill (expecting its second reading on 22 February).

However, there are ongoing discussions at EU level in relation to a draft EC Directive which could, in future, give employment rights to agency workers. We'll keep you posted!

Details

In 2001, Ms James (the Claimant) started to work for London Borough of Greenwich (the Respondent) through an employment agency (the Agency). She signed a "Temporary Worker Agreement" with the Agency which stated that the terms constituted a contract of service between the Agency and the Claimant and that no contract of employment existed between them or between the Claimant and the Respondent. The Agency had a separate agreement with the Respondent for the "Supply of Temporaries to Carry Out Assignments".

During August and September 2004 the Claimant was absent from work due to sickness. When she returned to work she discovered that the Agency had provided the Respondent with another agency worker to cover the same shifts. The Claimant met with the Respondent to discuss the situation, but did not then undertake any further work for the Respondent. In November 2004 the Claimant presented a complaint against the Respondent for unfair dismissal.

The employment tribunal held that there was no implied contract of employment between the Claimant and Respondent because there was no mutuality of obligation between them. On appeal, the EAT upheld the decision and refused to imply a contract of employment.

The EAT provided guidance, including:

  • if the way in which the contract is performed is consistent with the agency arrangements, and the arrangements are genuine, it will rarely be necessary to imply a contract of employment;
  • in a genuine agency relationship the end-user cannot insist on the agency providing a particular worker;
  • the mere passage of time will be very unlikely to justify the implication of a contract of employment. Something more will be required to establish that an agency arrangement no longer exists;
  • a tribunal is more likely to imply a contract of employment where agency arrangements have been super-imposed on an existing contractual relationship between the employer and agency worker. It may then be appropriate to conclude that the agency arrangements are a sham.

The Court of Appeal dismissed the Claimant's appeal and expressly approved the guidance given by the EAT.