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July '05
The issue of employment status is rapidly becoming a minefield for recruitment agencies and their clients. Failure to keep up to speed with the constantly changing legal position can prove very costly.
In Cable & Wireless v Muscat, for example, the Employment Appeal Tribunal held that an agency worker was an employee of the end user, despite the contract between the agency and worker stating otherwise. There are further recent relevant cases that affect the position between an end user, agency and its worker.
These may pave the way for agency workers to claim full entitlement to employee rights and compensation – including unfair dismissal. The decision raises some fundamental issues such as, are agency workers entitled to employment rights? How will end users of agency workers respond? How can recruiters protect existing business?
Central to the concept of agency work is the client’s need for flexibility, in particular the ability to hire and fire at a reduced notice and the risk of claims for unfair dismissal. Traditionally by using agency workers, end users have been able to achieve that flexibility. Furthermore, the Law Courts have supported the concept in case after case where an agency has supplied a worker to the client to work under the client’s direction and control.
The two features that have historically enabled the Courts and Tribunals to determine that neither the agency nor a client is the employer of an agency worker are that the client does not pay the worker, and the agency does not control the worker. This is in respect of those cases where the contract is a contract for services, and that the written contractual terms have been properly formulated and exclude an employment relationship. There has always been a risk that there may be employment if the contractual terms are badly drafted.
The view now taken by the Court of Appeal, and followed by both Employment Tribunals and Employment Appeal Tribunals, appears to be that, despite the written contractual terms, there may still be a direct implied (i.e. not written) contract between the agency worker and the end user client. This can be evidenced by the actual working circumstances under which the worker provides his or her services to the end user.
This clearly exposes both end users and their agencies to risk of claims being made by disgruntled agency workers. The Courts also take the view now that even if a claim is made against an end user, the agency should also be included. Historically if a claim has been made against one, the other has not been made a party.
So does this trend attack the entire concept of agency work? Some end users may think so, with consequences for those agencies that supply them. So what should agencies do to shore up this absolutely key service?
As things currently stand it has been left to the Courts effectively to determine policy in relation to the status of agency workers. This means that agencies and end users will have to fund the arguments in Court, at a not insignificant cost in terms of legal fees and management time. There are few cases where a costs award can ever be achieved against an agency worker who brings what appears to be a spurious claim. If the end users and agencies consistently lose, one of the major advantages to doing business in the UK, the ability to use a flexible workforce, will have been lost. This fundamental outcome raises concern that the government remains silent on the issue
Until the government does decide to stop the haemorrhage of time and money by legislating on the position, agencies and end users should work together to identify the issues and deal with them in advance. This must mean that both agency and end user recognise that an agency worker cannot be treated in the same way as a regular employee. In turn the arrangements between agency and end user and agency and worker should reflect this.
Of course agencies that take a considered approach in handling their agency workers, particularly upon termination, are likely to be rewarded by far fewer claims and greater end user confidence.
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