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April '05
Following the case of Dacas –v- Brook Street Bureau last year the Employment Appeal Tribunal (EAT) has upheld a decision of an Employment Tribunal that an agency worker, operating through a personal services company, is the employee of the end user company.
Although subject to a right to appeal, in the case of Cable and Wireless –v- Muscat it has been found that express terms in a contract between the agency and the worker cannot affect the existence of an implied employment relationship between the worker and the end user company. This is because the terms between an agency worker and an end user company are not set out in the agency and worker contract, but are instead implied from the circumstances and actions of the worker and the end user company towards each other. The EAT has also held that the fact that the worker operated through a personal service company makes no difference, and it has ruled that it considers it must follow the precedent set in the Dacas case.
In the case of Dacas, Brook Street was held not to be the employer. However, the Court of Appeal gave a very strong indication that the end user in that case, Wandsworth Council, may have been an employer of the agency worker, Mrs. Dacas, under an implied contract of employment. This was despite the fact that the contract between Brook Street and Mrs. Dacas was a contract for services and that an Employment Tribunal had already held that there was no express contract of employment between Mrs. Dacas and Wandsworth Council. The Dacas case therefore set an unhealthy precedent so far as companies using agency workers and recruiters are concerned for the likelihood that agency workers may actually be employees of the end user companies depending on the circumstances of the engagement.
However, this is not necessarily the end of the story. Although the usual rule is that a ruling in a higher court must be followed by lower courts, there are arguments that were run by Cable and Wireless that the ruling in Dacas concerning employment status as regards the end user company should not be followed. This is because the Court of Appeal in Dacas had not had various other relevant precedents drawn to its attention before issuing its judgment. In legal terms this would have meant that the decision in Dacas was per incuriam and need not be followed by lower courts.
Also two Judges in the Court of Appeal had argued that almost certainly Wandsworth was the employer of Mrs. Dacas, but the third Judge, Mr. Justice Munro, argued that there was no employment because there was no mutuality of obligation between Wandsworth and Mrs Dacas, and Mrs Dacas was not paid by Wandsworth. Cable and Wireless has been granted leave to appeal to challenge on the per incuriam point and to put forward arguments about creation of contracts and other points alluded to by Mr Justice Munro. However it is not yet known whether an appeal will be pursued.
There is one other point. In the Cable and Wireless case all parties agreed in their contracts that there would be no employment relationship. However, the agency concerned, Abraxas, is obliged in its contract to indemnify Cable and Wireless against obligations arising in the event that a worker is found to be an employee of the end user company. Since the workers claim is for compensation upon termination of employment and there has been a finding of employment, Abraxas can probably expect a claim by Cable and Wireless.
Once again the position in relation to employment status of agency workers is in question, and, as we have recommended at the time that the Dacas decision was announced, it is essential that companies using agency workers have regard to the actual circumstances of an engagement and set up the correct contractual terms. The decision in Cable and Wireless indicates that protection against employment claims is not afforded by the simple device of engaging contractors operating through a limited company. It is also crucial that companies properly assess the risk of employment rights arising from the outset and consider possible changes in the effect of the law over the longer term.
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