The use of agency workers has a number of advantages for businesses, including flexibility in filling temporary roles and a reduction in the basic administration associated with those staff, such as recruitment and payroll. Taking on staff via an agency also has the added benefit that the workers will not normally be employees, meaning that they do not qualify for the right to claim unfair dismissal or other key statutory employment rights.
In order to ensure that an employment relationship does not arise, wording is usually included in the relevant contractual documentation to make it clear that the agency worker is self-employed. However, despite such express wording, the Court of Appeal ruled in 2004 that a contract of employment can, in appropriate circumstances, be implied between an agency worker and the ‘end-user’ business they are working for. The Court also went further and stated that an employment relationship can be inferred over time, once the agency arrangements have been in place for a year or more. This decision raised doubts regarding the employment status of agency workers and gave rise to serious concerns amongst businesses that agency staff could potentially have employment rights.
The Employment Appeal Tribunal (EAT) has recently looked again at the law surrounding agency workers and concluded in four separate judgments that the agency workers concerned were not employees of the end user. This conclusion was reached even though in one case, the agency worker had been working for the end-user for five years. These judgments curtail the tendency to imply an employment relationship in agency situations and also give the following helpful guidance:
- An employment relationship will not arise unless the way in which the contract is performed is inconsistent with an agency relationship. This may be the case where there was a pre-existing contract between the worker and the end-user before the agency arrangements were put in place;
- A key feature with agency workers is not just the fact that the end-user is not paying the wages, but that it also cannot insist on the agency providing a particular worker to carry out the work. Provided the arrangement is genuine and the actual relationship between the parties is consistent with this, no employment relationship will be implied;
- The mere fact that an agency worker has worked for a particular client for a considerable period of time does not justify the implication of a contract between the worker and end-user.
Read the other articles in this newsletter:
Entitlement to benefits during maternity leave
Handling of grievance must be within range of reasonable responses
New duty on public authorities to promote gender equality
Q and A - May 2007
