Agency workers – where are we now?

You won’t find a definition of an agency worker or temp in the statutes. Recent employment laws give rights to ‘workers’ (as distinct from ’employees’), but agency workers are excluded from the right to claim unfair dismissal compensation, unless they are an employee of either the agency or the client business. Neither can agency workers claim equality of treatment with their permanent counterparts within a client business.

If temps did enjoy such protection, the cost of taking them on would rise and the incentive for doing so would fall. That said, the quest for agency worker rights is well under way. In April 2004, the introduction of the revamped Conduct of Employment Agencies and Employment Businesses Regulations 2003 ensured minimum standards for relationships between agencies, client businesses and workers.

Similarly, the campaign for freestanding individual rights for agency workers has begun in Europe, with the proposed Temporary Agency Workers Directive on working conditions for temps. Last July, the government announced it would stop its long-standing opposition to the Directive, although there are other member states which may continue to oppose it.

That leaves the question of unfair dismissal and other employment rights. Is it fair that an agency worker can be discharged at the drop of a hat? The courts do not altogether think so.

The Court of Appeal decision last year in Dacas v Brook Street Bureau establishes a high watermark. The ruse adopted by the court in that case is cunningly simple: if you need to be an employee in law to claim unfair dismissal, it is possible to give agency workers this protection by finding that a implied contract of employment exists between the agency worker and the client business or the agency.

Making the case
Mrs Dacas worked for Wandsworth Borough Council for a number of years as a cleaner. Brook Street Bureau supplied her services to the council under a temporary worker agreement which said that Dacas was an employee of neither Brook Street nor any of its clients. The council exercised control over Dacas’ activities. Brook Street set her rate of pay and paid her out of payments made to it by the council. Brook Street accounted for PAYE, income tax and National Insurance and dealt with sick pay and holidays.

After two incidents, Dacas was discharged and Brook Street told her that it would no longer find work for her. Dacas claimed unfair dismissal compensation on the basis that she was an employee either of Wandsworth Borough Council or of Brook Street. The Employment Appeals Tribunal found that Dacas was an employee of the agency, but the Court of Appeal found that she was an employee of the council.

So what does an agency worker or temp need to show to make a case for employment rights? The House of Lords in Carmichael v National Power in 2000 said that the ‘irreducible minimum’ of a contract of employment is that there is mutuality of obligation between the worker and the end user – there is an obligation to provide work and an obligation on the part of the worker to perform it. In Dacas, the Court of Appeal said that an employee cannot qualify as an employee unless there is a contract which provides for mutuality of obligation coupled with the presence of control.

In Dacas, the court concluded that Wandsworth Borough Council exercised the relevant degree of control over Dacas and that mutuality of obligation existed between them. The fact that she had a contract with the agency did not prevent an implied contract existing between her and the council and tribunals must now consider whether an implied contract exists in similar cases.

Courts and tribunals have not been idle since this decision. In Bridges & Others v Industrial Rubber plc, the EAT demonstrated that Dacas would be strictly applied. The case concerned home workers who were paid according to the amount of work they completed. They received holiday pay, sick pay and maternity pay. Although work was graded as to its urgency, they could work whenever they liked. Their contracts said that the company was under no obligation to provide work and the home workers were under no obligation to accept it. The EAT had no trouble concluding that they were not employees.

Implied contracts
Similarly, the Court of Appeal in Bunce v Skyblue found that Mr Bunce was not an employee of the agency, Skyblue. Bunce worked as a welder and the majority of his recent assignments had been for Carrillion Rail. Skyblue terminated his contract after Carrillion Rail complained about his performance. The agreement between Bunce and Skyblue provided that there was no obligation on him to accept work or for Skyblue to provide it.

Bunce’s ingenious argument that there was a separate implied contract each time an assignment was offered to him, and that mutuality of obligation existed in each of these implied contracts, failed. He also failed to convince the court that his services were under the control of Skyblue because Skyblue delegated control to Carrillion Rail.

Others have been more successful. In Astbury v Gist Limited, Mr Astbury had a temporary worker agreement with Pertemps, which supplied his services. Astbury claimed he was an employee of Gist, which had made an unlawful deduction from his wages. The tribunal found that there was insufficient mutuality of obligation for him to be Gist’s employee, but suggested that it might have formed a different view if it had been considering an unfair dismissal claim.

The EAT remitted the case to a fresh tribunal. The EAT’s judgment makes the point that a worker cannot be an employee in law for the purposes of one claim (unfair dismissal) but not another (unlawful deduction of wages); it recommends that tribunals use discretion to join all three parties to a hearing where a triangular relationship is at issue (in this case Pertemps had not been represented before the tribunal); leave to appeal to the Court of Appeal was denied.

In Muscat v Cable & Wireless plc, Mr Muscat was initially an employee of Cable & Wireless but at Cable & Wireless’s request, his services were later supplied via an agency which contracted with Muscat’s service company. Subsequently, Cable & Wireless terminated the contract with the agency. Muscat successfully claimed unfair dismissal compensation against Cable & Wireless, who appealed, asserting bravely that Dacas had been wrongly decided. The EAT, which found in favour of Muscat, said that the tribunal had been correct to follow Dacas and the fact that Muscat had been engaged via a service company did not prevent an implied contract of employment between him and Cable & Wireless. The EAT did, however, grant leave to Cable & Wireless to appeal to the Court of Appeal.

Bushaway v Royal National Lifeboat Institution shows the EAT’s willingness to look behind the contract to discern the intended bargain. The existence of an entire agreements clause in the contract between Mrs Bushaway and her agency, Robert Half Group, did not prevent the EAT allowing the possibility of a separate implied contract of employment between Bushaway and the RNLI.

While providing rights for agency workers and temps is a job for Parliament, such workers can make a credible case for employed status where the tests of mutuality of obligation and control are sufficiently made out. Written contracts between the parties will be relevant but not necessarily conclusive.

Sen Lavin is a partner in the employment group at City law firm Macfarlanes

Recent cases

  • Carmichael v National Power plc [2000] I.R.L.R. 43
  • Dacas v Brook Street Bureau (UK) Limited [2004] I.R.L.R. 358
  • Astbury v Gist Limited [2005] All E.R. (D) 165 (Apr)
  • Muscat v Cable & Wireless plc [2005] All E.R. (D) 412 (Feb)
  • Bushaway v Royal National Lifeboat Institution [2005] All E.R. (D) 307 (Apr)
  • Bridges & Others v Industrial Rubber plc [2004] All E.R. (D) 261 (Nov)
  • Bunce v Postworth Limited (trading as Skyblue) [2005] E.W.C.A. Civ 490

The Temporary Workers Directive

If adopted, the proposed Temporary Workers Directive will:

  • become law in the UK within two years of adoption
  • require equal treatment for temps to comparable employees in the user business where the assignment lasts more than six weeks
  • entitle temps to be advised of perm-anent vacancies in the user business
  • outlaw fees charged by agencies for finding permanent jobs for temps
  • give temps greater access to training and the ‘social services’ of the user business
  • require temps to be included in the information and consultation structures of the workplace
  • impose effective sanctions for non-compliance with its terms

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