Employment Lawyers: Court of Appeal Rules on the Employment Status of Agency Workers

Under the Employment Rights Act 1996, protection against unfair dismissal is only afforded to employees. For this reason, the exact employment status of an agency worker is often at issue in the courts.

The Court of Appeal has handed down its judgment in James v Greenwich Council, which dealt with the employment status of a worker involved in a triangular agency relationship. A number of similar cases had been put on hold pending this decision and it was hoped that it would give guidance on what many see as conflicting authorities on this issue. However, the Court of Appeal saw no conflict in the earlier decisions and upheld the ruling of the Employment Appeal Tribunal (EAT) that the agency worker in this case was not the employee of the end user.

Ms James worked full time for Greenwich Council until 1997, providing support work in the Council’s Asylum Seeker’s Team. She stopped working for a while, but then started working for the Council again through an employment agency.

In 2003, she switched to an agency which paid a better hourly rate. There was no contract directly between Ms James and the Council. However, she had signed a ‘Temporary Worker Agreement’, which set out the terms of her agreement with the agency. This provided, amongst other things, that she contracted with the agency in the capacity of a self-employed worker in relation to each assignment and that the terms constituted a contract of services and would not give rise to a contract of employment either between the agency and the temporary worker or between the worker and the client. A second agreement, made between the agency and the Council, provided that the worker would be under the supervision, direction and control of the Council but that the agency assumed responsibility for the worker’s remuneration and for the deduction and payment of PAYE and NICs.

Ms James was off sick in August and most of September 2004 and was replaced by another agency worker in her absence. When she returned to work, she was told she was no longer required.

Ms James claimed that she had been unfairly dismissed, arguing that she had an implied contract of employment, given that she had worked for the Council for a number of years and had been treated in the same way as a permanent employee.

The Employment Tribunal (ET) found that there was no contractual obligation between the Council and Ms James and that there was no implied contract of employment. She could not therefore claim unfair dismissal. The EAT upheld the ET’s decision on the ground that Ms James’s appeal raised no question of law. She did not have an implied contract with the Council as no mutuality of obligation existed. In reaching its conclusion, the EAT observed that the mere passage of time was not sufficient to establish any mutual undertaking of legal obligations between the worker and end user. The Court of Appeal agreed and dismissed Ms James’s appeal. A contract of employment between an end user and an agency worker should only be implied where this is necessary to give business reality to the relationship between the parties. This was not necessary in this case as the work done could be explained by the existing contracts.

The Court went on to say that the courts and tribunals are ‘builders of the law’, not ‘architects of economic and social policy’ and must ‘operate within the legal architecture created by others’. Unless Parliament decides to change the current law, Tribunals must continue to apply the principles of the law of contract to the wide spectrum of factual situations that arise.

Pinder Reaux & Associates