Who “employs” the agency worker?

Over the past three years we have reported on a series of decisions where the courts have grappled with the question of ‘who employs the agency worker?’. Are they employees of the agency or the end user, or neither?

In 2004, the landmark Court of Appeal decision in Dacas v Brook Street Bureau, explored the concept of an implied contract of employment existing between an agency worker and an end user. In 2005 and 2006, decisions in Cable and Wireless plc v Muscat swung the pendulum further in favour of finding an implied contract of employment with the end user when an individual had worked under the day-to-day control of the same end user for a significant period of time. However, the beginning of this year brought us James v Greenwich Council and Cairns v Visteon UK Limited, swinging the pendulum back slightly away from the end user.

We now have a further two cases swinging the pendulum further away from the likelihood of an implied contract of employment being found between the agency worker and end user. In Heatherwood and Wexham Park Hospitals NHS Trust v Kulubowila and other, the EAT held that for a contract to be implied it must be reasonably necessary to do so to give business reality to a situation. It must be fatal to the implication of a contract if the parties would have acted as they did in the absence of an implied contract. In this case, the affairs of the parties were consistent with the express arrangements (the contract of services between Mr Kulubowila and the agency and the contract between the agency and the NHS trust for the supply of Mr Kulubowila's services). If the relationship is consistent with the agency arrangement, then an implied contract should not be found.

We now also have, Astbury v Gist Ltd, in which the EAT considered whether an employment agency acted as agent for the end user entering into a contract of service between the worker and end user. The EAT held that as the contractual documentation expressly precluded the agency from being able to act as the end user’s agent for such purpose, the employment agency could not be seen as agent for the end user to establish an employment relationship between agency worker and end user.

As acknowledged by the EAT, the possibility raised in Dacas of an implied contract with the end user “caused something of a stir in the world of employment”. While the possibility of an implied contract of employment still looms, the recent run of cases illustrate that to establish an implied contract, the agency worker must overcome a higher hurdle than initially appeared following Dacas and Muscat.