Is there a contract of employment between an agency worker and a client?

This question was revisited by the Court of Appeal in Smith v Carillion. This issue arises when a worker is supplied by an employment business and brings a claim that he or she is an employee of the client.

The Appellant in Smith worked in the construction industry for over 20 years. He was supplied to work for Carillion (client) by Chanton (employment business) and had found it difficult to obtain employment since 2001.  Mr. Smith discovered in 2009 that he had been added to a “blacklist” because he reported safety concerns at the workplace, as part of his trade union activities. He brought legal proceedings against Carillion for victimisation and discrimination resulting from the blacklisting and sought to establish an employment relation between him and the client.    

The Court of Appeal followed established legal principles from the 2008 case of James v Greenwich and confirmed that the agency worker has to show that it is necessary for the Court to imply a contract of employment between him and the client, to give effect to the business reality between the parties.

For example, a contract between the worker and the client is likely to be implied if the employment business is used as a sham to disguise the true nature of the dealings between the parties, or when the relationship between the worker and the client has changed over time and becomes consistent with one of employment.

On the other hand, it has to be noted that the duration of the relationship between the worker and the client is not by itself enough to imply an employment contract.  Additionally, such a contract is not likely be implied merely because the Court disapproves the employer’s purpose of engaging a worker through an agency, even if that purpose is to avoid legal obligations associated with employment.

The Court held that Mr Smith was not an employee of the client, despite the fact that, amongst other things, he was interviewed by the client and fully integrated into the client’s site management team. However, these factors were not enough to trigger the necessity to imply an employment contract. 

It is important to remember that by having a contract in place with the worker, an agency will mitigate against these type of claims against both itself and a hirer.

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