The Court of Appeal has provided welcome reassurance that agency workers will rarely be able to claim employment rights against an end-user, provided the end user treats them appropriately. However, EU legislative developments mean the rationale for using agency workersmay soon disappear.

Agency workers forman integral part of the workforce of many companies in the retail sector. There has long been concern that, though employed through an agency, some individuals may in fact be employees of the end-user company with employment law rights (eg, to claimunfair dismissal).

The Court of Appeal in James v Greenwich Council has recently confirmed that an employment relationship will only be implied between an agency worker and end-user if it is necessary to explain the work undertaken. If the arrangements in the agency documentation are genuine and implemented accurately, then it will be a rare case where it is necessary to imply a contract of employment. The mere fact that the worker has worked for the end user for a long period of time does notmean that a contract of employment should be implied.

Practical tips for employers wishing to avoid agency workers acquiring employment status include: 

  • hire agency workers through a well-regulated employment agency and ensure all the documentation is consistent with the individual being an agency worker. Consider negotiating warranties and/or indemnities about the agency worker’s employment status in the end-user’s agreement with the agency. Only the agency should negotiate terms of engagement with the agency worker: the end-user should not get directly involved 
  • avoid treating the agency worker as an employee (eg do not discipline, train, appraise or grant holiday requests fromhim/her - this should be done by the employment agency; do not provide access to your own employee benefits, such as holiday pay, sick pay, staff discounts, and employee events) 
  • aim to limit the work the agency worker is engaged to cover to particular projects and/or for a fixed period of time, preferably less than one year to avoid the worker obtaining the qualifying period of service necessary to claimordinary unfair dismissal

Meanwhile, both Parliament and the EU have been considering legislative changes to improve rights for agency workers. The Government, the Trades Union Congress and the Confederation of British Industry have recently agreed a proposal giving agency workers rights to the same basic working conditions (excluding pensions) as comparable employees after 12 weeks. This enabled the Government to negotiate an agreement at the European Council that agency workers should be given an EU right to equal treatment, subject to the right of member states to carve out exemptions such as the UK’s proposed 12 week rule. If the agreement is endorsed by the European Parliament, UK legislation could follow in the 2008-09 Parliamentary session

Employers who use agency workers need to keep a close eye on this legislative development, as it is likely to have a significant impact on costs and may affect the business rationale for using agency workers.