Even where the parties intend to create a triangular relationship between a “worker”, a “recruitment agency” and an “end user”, a Tribunal may still ignore the documentation and imply a contract of employment between the worker and the end user.

In National Grid Electricity Transmission plc v Wood the Employment Tribunal decided that an agency worker was in fact an employee of the end user because the triangular contract arrangement between the worker, two recruitment agencies and the end user, was a ‘sham’.

The end user appealed to the EAT, arguing that an arrangement can only be a ‘sham’ where the parties intended that the documentation should not create the legal rights and obligations that they gave the appearance of creating. In this case, all parties intended that the triangular relationship should arise. It is an established principle in law that there is nothing unlawful or wrongful in what the parties to such an arrangement seek to achieve for their own mutual advantage.

The EAT agreed, but said that even though that may have been what the parties intended at the outset, on the facts of the case it was now necessary to imply a contract between the agency worker and the end user. It was significant that the worker had been interviewed with two other candidates for the post. The end user had not merely vetted him but had selected him over the other candidates as being suitable for the post. More significantly, as the assignment progressed, he had negotiated directly with the end user for a longer notice period than that provided for by the agency, and with regard to pay and holiday arrangements.

Points to note:

  • Where the documentation is found to be a ‘sham’, the Tribunal is likely to decide that a contract of employment must be implied which will make the agency worker the employee of either the end user or, in some cases, the agency. End users in particular should take advice to ensure that the wording of their contractual arrangements reflects their intentions as to the status of individual workers.
  • A Tribunal will not simply focus on the wording of an agency worker’s contract in order to decide his or her status. It will also have regard to how the work is actually carried out. As in the National Grid case, even if the agency documentation expressed the intentions of the parties at the outset, the Tribunal may find it necessary to imply a contract of employment if circumstances later change. End users should consider carefully the extent to which they wish to become involved in issues such as pay and holiday arrangements as the assignment progresses.
  • A contract of employment between end user and worker will only be implied i.e. imposed by the Tribunal, if it considers it necessary to do so to give business reality to what is actually happening. We shall be happy to advise on appropriate documentation where agency workers are being used.