Agency Workers - Are you the Employer?

Many employers contract with agencies to provide temporary workers. While employers may pay a premium for these workers, one of the major benefits is seen to be flexibility, in particular the employer’s ability to bring the contract to an end when circumstances change.

This flexibility has traditionally been based upon the assumption that temporary agency workers are not employees and, therefore, not entitled to statutory employment protection, notably protection against unfair dismissal.

The Court of Appeal challenged this assumption in 2004, advising Employment Tribunals to consider whether an implied contract of employment between the agency worker and the end-user client had arisen by conduct, irrespective of what was agreed between the parties and was contained in written contracts.

Two important 2006 cases have developed this theme further.

In the first, the Court of Appeal upheld an Employment Tribunal’s decision that a telecoms specialist was employed by Cable & Wireless. He provided his services through an agreement between his Company, E-NUFF Limited, and an employment agency.

By contrast the Employment Appeal Tribunal held, in the more recent case, that an agency worker who worked for five years for the London Borough of Greenwich was not an employee, and that no implied contract of employment had arisen between her and the Council.

What appears to have been material to these recent decisions are factors such as:

• If the end-user client cannot insist on the agency supplying a particular worker, and the agency is entitled to provide a substitute, for instance in case of illness, it is not appropriate to imply a contract of employment.

• Where agency arrangements are genuine – as is likely to be the case where there was, prior to the agency arrangement, no pre-existing contract between the temporary worker and the end-user client– it will be rare for an Employment Tribunal to imply a contract of employment.

• The passage of time does not in itself justify implication of a contract.

While the Greenwich Council judgment will bring some relief to employers, it appears that the debate is far from over. There is a policy imperative, expressed by Lord Justice Sedley in the 2004 case. He commented that “the conclusion that Mrs Dacas was employed by nobody is simply not credible”.
This issue has not been resolved by more recent decisions. Employers who make use of temporary agency workers should, therefore, continue to be aware that a long-standing arrangement may give rise to an implied contract of employment between the agency worker and the employer.