Agency worker agreements must be clear

The status of agency workers has been unclear since 2004 when the Court of Appeal ruled that that temporary agency workers who are placed with the same end user for many years, would be able to imply a contract of employment with the end user (i.e. the client of the agency). The judgment in this case, Dacas v Brook Street Bureaux (UK) Limited, has had huge implications for businesses using agency workers. However, within the last 6 months, there has at last been some good news for businesses.

Following Dacas, there has been a period of confusion as to whether agency workers should be regarded as employees of the employment agency, the end user of their services or be self-employed.  Clarity over a worker’s status is extremely important as the agency worker can only bring a claim for unfair dismissal against his or her former employer.  As a result of Dacas, wherever an agency worker was under the effective control of the end user for a substantial period of time, there was a good chance that the agency worker would be found to be an employee of the end user since there would be an implied contract of employment. This meant that an agency worker, who had been placed at the same establishment for a year or more, could bring a claim of unfair dismissal against the end user of his or her services. 

Two recent cases have attempted to resolve the uncertainty in this area of law: James v Greenwich Council, and Heatherwood & Wrexham Park Hospitals NHS Trust v Mr Kulubowila & others.

In James, Ms James claimed that she was an employee of Greenwich Council. The Tribunal disagreed stating that there was none of the mutual obligation necessary to create a contract of employment. In the absence of mutuality of obligation (which is the first of the two essential indicators of a contract of employment), the fact that she had worked under the Council’s control (“the second indicator”) was irrelevant.    Other important factors were that the agency had supplied another worker during Ms James’ sickness absence, she was not paid by the Council whilst off sick, she did not receive any holiday and, when sick, she was not required to notify the Council.  The Employment Appeal Tribunal (EAT) agreed that there was no basis for implying a contract of service between Ms James and Greenwich Council.  The fact that the agency worker had been working for the end user for a long time did not necessarily mean that a contract of employment should be implied between the agency worker and the end user. 

The EAT had finally recognised that it is often convenient for an agency to supply the same worker, and the client may prefer someone who already has the experience, which may lead to the agency worker working for the end user for a significant period of time.

Another case in March this year supports the James judgment.  In Heatherwood & Wrexham Park Hospitals NHS Trust v Mr Kulubowila & others, the Employment Appeal Tribunal found that Mr Kulubowila was not an employee of the hospital although he had been working there for more than two years.

An engineer who wanted to work at the Hospital, Mr Kulubowila was advised by a friend that the best way to get started was to join a recruitment agency which had a long term contract to supply the hospital with engineers on a temporary basis. Mr Kulubowila followed this advice and was duly assigned to the hospital in October 2003. All went well until early 2006 when the Hospital stopped paying the agency for Mr Kulubowila’s services. As a result of the failure to pay, the agency withdrew Mr Kulubowila’s services and cancelled their contract with him.

The Employment Tribunal applied the Dacas case test and found that Mr Kulubowila was an employee of the Hospital (the end user). However, when this was appealed, the EAT stated that just because the employee looked and acted like an employee didn’t necessary mean that he was an employee. The EAT found that the standard tests of mutuality of obligation and control were more important.  Furthermore, the contractual agreement between the parties was just as important particularly when none of the parties appeared to have acted outside the terms of that agreement.

In this case, Mr Kulubowila had a contract for services (as opposed to an employment contract) with his agency and that the terms of his engagement with the Hospital had not supported any type of contractual relationship between the hospital and Mr Kulubowila. Furthermore, Mr Kulubowila had been denied access to important employee rights such as the Hospital’s pension scheme.

For businesses, there are some measures to help avoid any agency worker confusion:

* Ensure there is a clear understanding of the worker’s position at the outset;
* Ensure that the agency has a clear express contract with the worker and that their day-to-day activities do not deviate from that express contract;
* Do not act in any way that would, over a period of time, change the relationship and so give rise to the creation of an implied contract of employment;
* Make it clear to the agency that it does not have to provide a particular worker, and if that worker assigned to them is unable to attend for any reason, the agency should send a replacement;
* Finally, do not pay sick or holiday pay, to the agency worker.

Katie Wood is an employment law solicitor with Burnetts Solicitors in Carlisle, Cumbria. For further information on agency workers or other employment law issues, contact Katie on 01228 552222 or visit Burnetts' employment law department.