Landmark Court of Appeal Status Ruling

Those hirers using agency workers / contractors / interims will know that 2 years ago the Court of Appeal (in Dacas -v- Brook Street Bureau) stated that an agency worker could be the employee of the end user to which he/she is supplied. This despite the worker being signed on a contract for services and the written contracts stating that employment was excluded. But questions were left open as to whether the ruling was correct and/or effective. Those questions have now been answered.

In its judgment handed down today in the case of Cable and Wireless v Muscat, the Court of Appeal has robustly supported the statements and guidance made in Dacas in 2004, finding that Mr Muscat was an employee of Cable and Wireless under an implied unwritten employment contract. Mr Muscat was a £65,000 p.a. executive operating through a limited company and supplied by the agency Abraxas to Cable and Wireless, the contract he was hired on being a contract for services.

Lawspeed has long warned about the dangers posed by the Dacas decision. This raised the prospect of increased employment claims by agency workers. Dacas had already been supported and followed by decisions in the Employment Appeal Tribunal last year. The unambiguous and powerful judgment today makes the position very clear and surely will have considerable ramifications for hirers using both direct staff engaged on contracts for services and agency workers, since most will not wish to be put in the same position as Cable and Wireless.

Some hirers may now question the entire concept of agency supply, which has historically protected them against employment claims. The UK economy has thrived on a flexible workforce. As with Dacas, this decision attacks the very principles that allow for this flexibility, central to which is the ability to hire and fire at will. However most also will not wish to lose the benefits that come from using agency workers – the flexibility, the sourcing skills, and the payroll function. It follows that to reduce risk of a claim both agencies and hirers alike should work together to ensure that agency workers are not treated as employees. Similarly hirers should review their hiring arrangements for direct worker to achieve a good long term result.

There are further ramifications, for example in relation to tax. Since Cable and Wireless is held to be the employer for the duration of Mr Muscat’s engagement, it should have accounted for PAYE and national insurance payments, including the employer’s national insurance. Will the Revenue seek this now?

As things stand unless government legislates to change the position, every hirer must take heed and suitable steps to protect against claims being made.

So what can be done? There are potentially some contractual solutions, but it is the reality of the working relationship that will be the guiding factor. If a worker is treated as an employee it can be expected that he/she will want the benefits. This is likely to crystallise at the end of the relationship. So every aspect of the relationship should be reviewed to avoid not only the rights accruing, but the perception that an employment relationship exist.

For more information for hirers and agencies call Lawspeed on 01273 236236.

Cable & Wireless v Muscat Court of Appeal
Employment status – where are we now?