There has been much uncertainty surrounding the employment status of agency workers in recent years. However, two recent EAT decisions should reassure end-users that they are still worth taking on in appropriate circumstances.

James v Greenwich Council and Cairns v Visteon UK Ltd both concerned the familiar triangular relationship between a worker, an agency and an end-user. Ms James was supplied by an agency to work for Greenwich. She had no express contract with the Council direct but had entered a “Temporary Worker Agreement” with the agency, which made it clear that she was not its employee. When the agency terminated

Ms James’ services she claimed unfair dismissal against the Council, contending that in light of Dacas v Brook Street Bureau in 2004 the Tribunal should imply a contract of employment between her and the Council. It concluded otherwise and its decision has now been upheld by the EAT.

The EAT made it clear that Dacas did not say that a Tribunal had to imply a contract of employment between a worker and an end-user: it merely had to address its mind to the possibility of there being such a contract.

It also pointed out that in order for there to be any chance of such a contract between a worker and an enduser in the first place there still had to be both mutuality of obligation between the parties and a suitable degree of control exerted over the worker. Whilst Greenwich potentially exerted sufficient control over Ms James for this purpose, the EAT took the view that there was no mutuality of obligation between the parties. On the facts she was not obliged to work for the Council and it was not obliged to accept her services. It noted that when Ms James was ill the agency simply supplied the Council with an alternative worker. Furthermore, Ms James had accepted that she was willing to (and could be required to) work for other clients of the agency and so had effectively conceded in evidence that the agency relationship was not a sham. The EAT also said that Ms James’ 5 year spell with the Council did not of itself mean the Tribunal had to imply a contract of employment. In this respect it disagreed with comments made in Dacas to the effect that once arrangements of this sort had been in place for a year or more there would be an inference that an implied contract of service did exist.

The EAT in James then gave some guidance on the factors Tribunals should consider when deciding whether or not to imply a contract between an agency worker and an end-user. It said that as a general rule a Tribunal should not imply a contract unless the arrangements between the worker, agency and end-user were a sham, ie did not reflect the actual working relationship between the parties. It gave the example of Cable & Wireless v Muscat in 2006 (where Mr Muscat was initially employed by the end-user but subsequently became a contractor and provided his services via an agency in order to reduce headcount numbers) and said that a Tribunal was most able to infer a contract of employment in cases such as this where the agency relationship was effectively superimposed on a previous employment relationship (or, in shorthand, where the agency worker is effectively doing an employee’s job).

This is good news for both end-users and agencies. It means that provided they set up arrangements which accurately reflect the real relationship between the parties – as is likely to be the case where there is no pre-existing contract between the worker and the end-user – then a Tribunal should not (certainly not automatically) imply a contract between the worker and the end-user, even if he has been working for the end-user for more than a year.

To minimise the risk of a claim end-users should still ensure that any documentation and procedures for managing and administering agency-supplied workers point as far as possible away from the traditional employment relationship. As in James, agencies should normally deal with the payment and administration of sickness and holiday pay as well as disciplinary and grievance matters. After all, Tribunals will continue to focus on what actually happens on a day-to-day basis advisable to restrict the use of agency workers to short periods of time or specific projects where possible, or at least for the agency to exercise periodically the rights it ought to have in the agreement to send the worker to some other client and some other worker to the client.

On the face of it, agencies which supply workers to end-users are unaffected by this decision. In reality, however, end-users frequently seek to protect themselves against the risk of claims by agency workers by including indemnities in the agreement with the supplying agencies – this decision should at least give agencies some comfort that those indemnities might not be called upon after all. It might also strengthen their negotiating position in any such discussions.

The second case, Cairns, deals with a slightly different point but it should also provide some comfort to endusers. Ms Cairns worked for Visteon from 1998 until 2005. From 2001 she provided her services via an agency, MSX, which employed her. When her employment was terminated she brought a claim of unfair dismissal, initially against MSX. She subsequently withdrew this claim and added Visteon as respondent instead, apparently because it was that company’s decision to dispense with her services, which led to her dismissal by MSX.

As in James, Ms Cairns argued that the Tribunal should imply a contract of employment between her and Visteon, thus giving it jurisdiction to hear her unfair dismissal claim. Her arguments were unsuccessful. While the EAT refused to rule out entirely the possibility of there being parallel contracts of employment between a worker and both the agency and the end-user at the same time for the same work it said that the concept was “problematic” – which is perhaps putting it mildly. It said that it was simply not necessary to imply a contract of employment between Ms Cairns and Visteon. Not only did she already have one with MSX but there was no suggestion that the triangular relationship between the parties was a sham. Unlike Ms Dacas, who had no clear employer for unfair dismissal purposes, Ms Cairns could bring (and indeed had initially done so) such a claim against MSX: the fact her claim might not be successful was an altogether different matter.

The sting in the tail of Cairns is the more-or-less open admission by the EAT that a worker needs someone to sue when the wheels come off, and that a contract of employment with someone is likely to be implied if necessary to procure a suitable respondent. That leaves the ball between the agency and the end-user, both consequently doing their best to place control issues (discipline, holidays, expenses, sick pay etc.) in the other’s hands. The end-user will almost inevitably “control” the worker’s daily tasks, but it should keep as far as it can from the nitty-gritty of the rest of the worker’s contractual arrangements. In James the EAT also acknowledged that some agency workers remain vulnerable and need protection but it made it clear at the same time that this was a job for the legislators and not the Courts. Such calls are likely to fall on deaf ears since only last year the Government said that it had no plans during this Parliament to extend employment rights to workers or agency workers as this could “damage labour market flexibility and result in a reduction of overall employment”, not to mention scupper its chances of re-election.

Hammonds acted for Visteon in its successful defence of Ms Cairns’ claim. If you would like to know more about this decision or its implications for your business please contact one of the following or your normal contact in the Human Capital (Employment) team.