Employment status – where are we now? October '05

The issue of the employment status of an agency worker has been one on which there has been a flurry of judicial activity over the past two years. The recent trend in court decisions has been to find that there has been an implied contract of employment between the agency worker and the end user client.  Whilst this may at first, appear to be more of a concern for the end users than recruiters, the knock on effect on the recruitment industry may not be insignificant as end user’s turn to their supplying agencies to cover the costs involved.

After 4 years of working as a cleaner through Brook Street for Wandsworth Borough Council Mrs Dacas’ assignment was abruptly ended due to a dispute between her and the council. Even though her written contract was with Brook Street, the Court reached the conclusion that an end user could be the employer of an agency worker, due to an implied contract of employment between the agency worker and the end user.

An unwritten agreement between the worker and the end user, the terms of which can be assumed from the arrangements and the manner in which the end user and the worker treat each other. If the manner is the same as an employer would treat an employee the Courts consider that the treatment is evidence that the parties intended there to be employment. A contract is therefore implied directly between the worker and the end user, with the payment arrangements continuing via the agency in the normal way.

“Employment” is defined in the Employment Rights Act 1996 as including employment under an express or an implied contract.

This case challenged the decision in DACAS and argued that it should not be followed. However the EAT rejected this argument. The employment tribunal held that they must look at all the circumstances of an employment relationship and not just the contractual documentation between the agency and the worker (contract 1) and the agency and the end user (contract 2), even if those documents expressly state that the parties have agreed that there is no employment relationship. Such documents cannot affect a contract between the worker and the end user (contract 3).

Importantly the EAT has also held that the fact that the worker operated through a personal service company makes no difference.

The decision in Cable & Wireless v Muscat is subject to an appeal to the Court of Appeal, currently due to be heard late November 2005. It is only one possible outcome that the Court of Appeal reverses its guidance in the Dacas case, which it would need to do to find in favour of Cable and Wireless. Another possibility is that the Court will adhere to its Dacas decision and issue a judgment that sets a further precedent which may be damaging to the recruitment industry and advantageous to agency workers.

The EAT upheld the decision of the Employment Tribunal that Ms Bushaway was the employee of RNLI, the end-user client, from the beginning of her temporary placement. 

The agency introduced Mrs Bushaway to work direct but on a temp basis, with the possibility that the placement may lead to a permanent post with the end user client. 6 months after starting the assignment Mrs. Bushaway successfully applied and was appointed to a permanent position, when she became employed. Some 7 months later Mrs Bushaway later resigned and claimed unfair dismissal against the end user client, since she needed to show that she had been employed for at least 12 months she claimed that she was employed by RNLI during her temp period.

The focus was therefore on whether she had been employed during the temp period. The EAT held that it must look behind the contractual documentation at all the circumstances of the relationship to determine whether it is one of employment or not. In doing so it found that Mrs. Bushaway had been employed for the entire period.

This case clearly causes concern wherever there is a temp to perm situation.

The claim had been brought against the end user client and not the agency. Astbury was supplied by Pertemps. The EAT decided that the ET, in finding that the end user was not the employer, because amongst other things Pertemps provided an on site supervisor, it had failed to consider whether there was an implied contract of employment. Pertemps had not been joined into the proceedings, which was criticised. The case was remitted back to the ET to consider that issue and guidance was given that all parties should be joined in wherever there is an agency case. The upshot of this finding, being that where a claim is brought against only an end user or an agency, the other party is likely to be joined as a party to the proceedings and therefore will incur the additional time and costs involved in defending such a claim.

Overall the courts are looking to the reality of the relationship between the agency worker and the agency and end user client, as opposed to what is stated in the contractual documentation. It is therefore essential that recruiters take a proactive approach, work together with end use client’s and reduce as much as possible the risk of an employment status claim arising.

Lawspeed can help in this area. Crucial to success is the taking or preventative measures both so that the evidence shows that no employment was intended and so that a worker does not believe he or she was employed. This dual approach, legal and psychological, is key to reducing the risk of claims.

Lawspeed has a range of available measures dependant on the circumstances, from simple advice through to a fully managed service. For more information call Lawspeed on 01273 236236.

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