A
recent decision by the EAT could have huge implications for employment agencies
and their clients. In future employers may have to think very carefully about
their operating practices when taking on agency staff. Failure to do so, warns
Anthea Lawrence, could result in costly court actions
In
many industries, agency workers are viewed as a useful resource. Clients can
use them as and when required, depending on their current business needs,
without having to take on employment liabilities. In some sectors, such as
banking, agency workers are particularly prevalent and contracts for the
provision of agency workers can be worth substantial sums.
Despite
opposition from the recruitment industry, the Government is introducing a new
more rigid system of controls, with the Conduct of Employment Agencies and
Employment Businesses Regulations, which are expected to come into force by the
summer of 2001.
Already
reeling from this news, employers and the recruitment agency market (which is
estimated to be worth £20bn), could face further problems as a result of the
recent decision of the EAT in the case of Motorola v (1) Davidson and (2)
Melville Craig Group, 2001, IRLR 4. Â
The
fear for many agencies will be that this case casts a shadow over the attractiveness
of using agency workers, because, if a court or tribunal follows the case, a
client using agency staff could be held to be the employer rather than the
agency. For both agencies and their clients, this may begin a worrying trend in
the courts that could undermine the value of using agency staff.
Facts
of the case
In
November 1996 Davidson responded to an advertisement for a job as an analyst to
repair mobile phones with Motorola. The recruitment process was carried out by
Melville Craig Group, which had an operating agreement with Motorola for the
supply of temporary workers. Davidson was subsequently taken on and assigned to
work at Motorola’s site. Under the terms of his contract with Melville, he was
bound to comply with all reasonable instructions and requests made by Motorola.
Davidson
worked at Motorola’s plant until December 1998, when he was suspended by a
Motorola regional manager, who later decided to terminate his assignment with
the company. Davidson brought a claim against both Motorola and Melville for
unfair dismissal. Motorola asserted that Davidson was an employee of Melville
and that he had never had a contract of service with Motorola. The employment
tribunal disagreed and found that Motorola was the employer. Motorola appealed
against this decision to the EAT.
The
EAT’s analysis
The
EAT dismissed the appeal. Its analysis was based upon the issue of
"control" which, perhaps importantly, was the sole issue to be raised
by Motorola in its appeal. The EAT found that, although there was no legal
contract between Davidson and Motorola, day-to-day control rested with Motorola.
The
EAT referred to the well known words of Mackenna J in Ready Mixed Concrete
(South East) v Minister of Pensions, 1968, ALL ER 433, who considered that
"control includes the power of deciding the thing to be done, the way in
which it shall be done, the means to be employed in doing it, the time when,
and the place where it shall be done. All these elements of control must be
considered in deciding whether the right exists in a sufficient degree to make
one party the master and the other his servant."
Elements
of control
Melville
chose individuals such as Davidson to work for Motorola under specifications
agreed with Motorola.
At
Motorola’s site, Davidson was subject to the same controls as if he was an
ordinary full-time employee. Like any other Motorola employee, Davidson
completed an induction course, worked at the Motorola site, took instructions
from its employees, used its tools, arranged absences from work with Motorola,
had to be available for overtime if Motorola required it, obeyed Motorola
factory rules and wore its uniform.
Motorola
called Davidson to a disciplinary hearing and decided to suspend him. And the
real decision to terminate was taken by Motorola, when the company advised
Melville that it no longer wanted Davidson after the disciplinary hearing.
The
EAT considered that, although Davidson was in a position to choose for any
reason not to work for Motorola without this being on his part a breach of contract
with the company, this freedom was "more theoretical than real".
The
EAT’s view was that, according to the conditions on the back of Melville’s time
sheets, which were provided to Davidson, if Motorola had wanted him to attend
work at any time when he did not wish to do so, it was likely that he would
have been contractually obliged to Melville to perform that assignment at
Motorola.
The
EAT said that it should not ignore the existence of the practical degree of
control, simply because a direct legal right did not rest in Motorola under a
contract it had made with Davidson. Davidson was bound to comply with all
reasonable instructions and requests made by Motorola.
In
addition, it was a term of the operating agreement between Melville and
Motorola that, if Motorola found a worker supplied by Melville to be
unacceptable, Motorola would inform Melville, and it was then Melville’s
responsibility to ensure that the worker did not return. The obligation owed by
Melville to Motorola might amount to a sufficient right of control in that it
is established in law (in appropriate cases) that, if A procures B to do an
act, the act should be regarded as done by A. The fact that Melville had the
power to assign Davidson to work elsewhere did not disprove Motorola’s control
of him.
Is
the importance overstated?
Motorola
did have a great deal of control over Davidson, so the EAT may have decided the
case differently if it had been based on weaker facts. It is worth noting that
the EAT was only asked to consider whether Motorola exercised a sufficient
degree of control to enable a court to regard it as the employee.
The
EAT was not asked to consider whether other elements of the employment
relationship were present. These were:
–
Had Davidson agreed that in return for a wage he would perform some service for
Motorola?
–
Were other terms of the employment contract consistent with it being a contract
of service? If the provisions of the contract had been inconsistent with it
being a contract of service, it would have been some other kind of contract and
he would not be an employee.
It
may be that the EAT would have made a different finding if it had been asked to
consider each of these elements.
Increased
risks
Although
it could be argued that this case did have remarkably strong facts, it still
highlights the risk that agencies and their clients may be found to be the
employer of an agency worker if they exercise sufficient control. The factors
that may increase this risk include, where:
–
Agency workers are engaged for long periods of time on an assignment or
assignments with one client
–
The agency conducts a recruitment campaign specifically to meet the needs of
the client
–
The agency takes no part in the arrangements once the contract is in position
–
The client carries out a disciplinary process and dismisses agency staff
–
Workers are subject to day-to-day control by the client
–
Workers become involved in other day-to-day activities of the client (under the
control of client employees) beyond their assignments. This may include
participation in regular team meetings
–
Clients pay performance-related or other bonuses to agency staff.
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With
the increasing focus both at political and judicial levels on the rights of
temporary workers, agencies and their clients may wish to review their
procedures and give careful thought to further measures that will clarify the
non-employment status of their workers.      Â
Anthea
Lawrence is a solicitor with KLegal
