Temporary solutions could cause long-term problems

A Court of Appeal ruling on agency workers has made a clear signal to
employers to avoid using temporary staff on anything but the most short-term

The Court of Appeal (CA) has issued its judgment in Dacas v Brook Street
Bureau (UK) Ltd & another [2004] EWCA Civ 217, which has important
implications for UK recruitment agencies, organisations that use agency staff
and workers on long-term assignments.

Mrs Dacas had an agreement with Brook Street which stated its provisions
would not give rise to a contract of employment between Brook Street, and the
temporary worker, or the temp and the client, which in this case was Wandsworth

Dacas was assigned to a mental health hostel run by the council, where she
worked for six years until it was alleged that she had been rude to a visitor,
and the council’s management asked that she be withdrawn from the contract. In
her complaint to the employment tribunal, Dacas claimed unfair dismissal
against both the council and Brook Street.

The employment tribunal held that she wasn’t an employee of the council as
no contract existed between the two parties, nor was she an employee of Brook
Street because, although a contract existed, it lacked day-to-day control over
her activities.

The Employment Appeal Tribunal upheld an appeal against the decision, on the
grounds that paying wages and having the right to terminate was sufficient
‘control’ to say that Brook Street was her employer.

In a ruling, which the CA made plain was intended to set a point of
reference for future cases concerning the status of agency workers, the CA
overturned the EAT decision, finding that Brook Street was under no obligation
to provide the applicant with work and she was under no obligation to accept
work offered by it. Nor did the agency exercise any relevant day-to-day control
over the tasks she carried out.

In looking at the facts, the CA felt that that Dacas could rightly be
regarded as an employee of the council because of the degree of control it
exercised and mutuality of obligation to provide and carry out work existed,
but as the decision rejecting the claim by Dacas against the council had not
been appealed, it must stand.

However, in dealing with future cases of this kind – ie, a triangular
arrangement between an individual, an employment agency and an end-user –
tribunals should not determine the status of the applicant without considering
the possibility that an implied contract of employment had come into being
between the worker and the ‘end-user’. The judge went as far as saying that one
year’s employment (enough time to accrue unfair dismissal rights) was
sufficient to mean an implied contract of employment had arisen.

Taking the guidance from this and other relevant cases into account, there
are four essential requirements for a contract of employment to exist:

– A contractual relationship of some kind between the parties

– Mutuality of obligation – the employer is obliged to provide work and the
employee is obliged to accept it

– A high degree of control must be exercised by the employer – the power to
decide what tasks are to be carried out, together with how, where and when

– An obligation on the worker to provide their services personally – there
can be no substitution.

Further, when assessing employment status, where a working relationship has
lasted for a long period of time, this will invariably mean that an implied
contract of service will have arisen.

Many businesses use temporary agency workers as a means to avoid the risks
and obligations of an employment relationship. However, this case demonstrates
that the reason for using agency workers will have to be carefully
reconsidered, particularly where assignments of a year or longer are being
contemplated. It is vital for user-organisations to ensure that the contractual
documentation covering any assignment makes the employment status of the
‘worker’ absolutely clear as far as both the agency and the end-user are
concerned. If appropriate, end-users may also need to consider seeking
indemnities from the agency companies they use.

By Makbool Javaid, Partner, DLA

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