Selected cases reported on disputed employment status.
Log in to view more
Log in to view more of this content. If you don't have a web account why not register to gain access to more of the CIPD's resources. Please note that some of our resources are for members only.
Here we list a selection of key cases on the rights of agency workers, providing a summary of the decision and implications for employers.
London Underground Ltd v Amissah | CA | 19 February 2019
 EWCA Civ 125
Issue: Employer’s liability under the Agency Workers Regulations 2010 where the agency is at fault?
London Underground engaged staff through an agency (Trainpeople) which later went into liquidation. The agency staff were paid less than comparable underground staff. London Underground paid the agency to rectify the underpayments, but the agency dishonestly didn’t pass that money on to the agency staff. The workers claimed against London Underground for breaches of the Agency Workers Regulations 2010. Liability was initially equally apportioned between the agency and London Underground at 50% each, but the ‘just and equitable’ test was used to reassess the amount of compensation so that London Underground would not have to ‘pay twice’.
The Court of Appeal held London Underground could be ordered to pay compensation. London Underground had chosen to deal with this particular agency and so it had to pay for the agency’s dishonesty. Otherwise the workers would lose out because the agency had taken the money that was intended for them. The actual assessment of compensation was remitted back to the tribunal. A Respondent might be ordered to pay less compensation but that would be exceptional, and usually only where the worker was at fault.
Implications for employers
Under the Agency Workers Regulations 2010 agency workers have a right to the same conditions, including pay, as if they were directly employed. Both the employer and the agency may be liable for any breach of that right and there are provisions for apportionment. An employment tribunal will reduce this compensation for a breach of the regulations by either the employer or an agency if it is just and equitable to do so. However, this reduction will only happen in exceptional cases.
To help avoid liability under the regulations, employers should always provide agencies with relevant information about the terms and conditions of comparable workers. Employers will liable to the extent that they are responsible for any breaches. Therefore, employers should provide copies of standard terms and conditions of employment, pay scales and annual leave entitlements of comparable workers on an ongoing basis.
Some protections for agency workers apply from the start of the agency worker's engagement, other rights arise after a 12-week period.
Employers should remember that the different agency rights have different rules about sharing liability:
- Day 1 rights for agency workers include the right to be informed about job vacancies during their engagement to give the same opportunity as comparable permanent workers in finding permanent employment. There is also the right to access all collective facilities and amenities in the same way as people carrying out broadly similar work for the same employer at the same location. Employers are solely responsible for any breach of these rights and therefore have full liability.
- After 12 weeks of engagement, agency workers have other rights including the right to the same basic pay, working and employment conditions as those directly engaged by the employer. Liability for breach of these rights is apportioned between the employer and the agency to the extent that either is at fault. However, the agency will have a defence if it acted on the employer’s information concerning pay or conditions of comparable employees, even if that information was not correct.
- If employers or agencies structure engagements to prevent agency workers acquiring 12 weeks' service the employer and the agency can be liable for such breaches, depending who is responsible for the structuring of the engagement.
Employers are not liable under the regulations if the worker is genuinely self-employed and not working under the employer's supervision and direction.
Coles v Ministry of Defence | Employment Appeal Tribunal | 31 Jul 2015
Issue: Internal vacancies
An agency worker at the Ministry of Defence (MOD) was given notice that his assignment would end. This was due to a substantial restructure, with hundreds of permanent employees at risk of re-deployment. The agency worker was informed of a subsequent vacancy, but was not encouraged to apply for his old role. It was clear that the at risk permanent employees would only be considered for vacancies. The agency worker claimed breach of the equal treatment provisions of the Agency Workers Regulations 2010 and the Temporary Agency Worker Directive, alleging that the MOD was giving preference to those in the redeployment pool over him and failing to consider him for interview.
The Employment Appeal Tribunal decided in favour of the MOD. The right to equal treatment for agency workers covered basic working conditions such as working hours and pay, but did not extend to the right to be equally considered for alternative roles. Employers are entitled to give priority to their permanent employees. The employer was therefore not discriminatory by giving preference to its at risk permanent employees over temporary staff.
The MOD had complied with its legal obligations by informing agency workers of the vacancy. The agency worker could apply for the role if he wished, but the virtual certainty of his application being rejected was irrelevant.
Implications for employers
- Agency workers have a right to be equally informed of vacant positions (under the Agency Worker Regulations 2010).
- It is normally not discriminatory for an employer to offer a job currently occupied by a temporary agency worker to its permanent employees.
- The right to be informed of vacancies does not give agency workers a right to compete with employees for permanent posts.
- Agency workers do have a right to equal treatment in relation to working time and pay.
Smith v Carillion (JM Ltd) | Court of Appeal | 18 Mar 2015
 EWCA Civ 209
Issue: Agency workers and employee status
The claimant was engaged to do construction work for Carillion Ltd (the end-users) through an employment agency. He alleged that he was blacklisted and received detrimental treatment from Carillion. He claimed detrimental treatment on grounds of trade union activities and activities as a health and safety representative under section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 and under section 44 of the Employment Rights Act 1996.
To pursue his claims the claimant had to establish that he was an employee. He said that an employment relationship should be implied because he was:
- interviewed before his appointment
- engaged on long-term assignments
- fully integrated into the managerial structure
- subject to a significant degree of control, and
- his ‘dismissal’ was decided by Carillion.
The Court of Appeal and Employment Appeal Tribunal agreed with the employment tribunal that no contract should be implied at all. There was no evidence that the contract between the agency and the end user was a ‘sham’, and an employment contract could be implied only if it was necessary (in accordance with the principle in James v London Borough of Greenwich (2008)).
Whether a contract should be inferred with an end-user depended on the test of ‘necessity’. An employment contract will not be inferred if the relationship between the parties can be explained without implying such a contract. The Court of Appeal held that it was not necessary to imply a contract between an agency worker and the end-user. Therefore the claimant could not bring his claims as he was not an employee or worker of the respondents.
In the Court of Appeal it was also argued that that blacklisting is a breach of Articles 8 (Right to respect for private and family life) and 11 (Right to freedom of assembly and association) of the ECHR. This Human Rights Act 1998 appeal was also dismissed, primarily because the acts complained of occurred before the Act came into force. The CA therefore refused to agree a ‘declaration of incompatibility’.
(The UK government intervened and admitted that the blacklisting of trade unionists is a breach of Articles 8 and 11 of the ECHR, but despite this admission argued that the Court should not issue a ‘declaration of incompatibility’)
Implications for employers
- In October 2014 the Government announced a broader review of worker status and it remains to be seen if this employment status review will extend the scope of protection.
- In the meantime this case is one of the most recent which reviews the principles concerning the employment status of workers which has been the subject of a series of decisions over the years. The question of the employment status is particularly complex when individuals are engaged through an agency to work for an end-user client.
- The worker often wants to establish employment rights and alleges that an implied employment contract has arisen between them and the end user.
- The leading case of James v London Borough of Greenwich emphasised that an employment contract between an agency worker and the end user will only be implied if it is necessary.
- For example, necessity may arise if there is no express contract between the agency and the end user or if there is evidence of a sham, such as using a purported agency, client relationship to avoid tax liabilities.
- Where there is a contract which adequately describes the true relationship between the parties, then that contractual position will not lightly be cast aside.
- Staff on long-term agency arrangements who seek to establish employment status with the end user will not succeed if the written agreement between the parties adequately explains the relationship.
- Employers should keep contractual relationships with agency workers and self-employed contractors under review.
- Employers should ensure that any contracts used reflect their intentions in respect of employment status and are clearly expressed to limit the likelihood of an employee relationship arising.
Moran v Ideal Cleaning Services Ltd | Employment Appeal Tribunal | 3 Dec 2013
Issue: The meaning of ‘temporary’
A cleaning company employed a number of cleaners who it then placed with a client on a long-standing arrangement. One of the employees had worked for the same client company for 25 years. Following the Agency Workers Regulations 2010, the cleaners employed by the agency working for the client claimed entitlement to equal treatment with the permanent workers of that client company.
It was held by both a employment tribunal and the Employment Appeal Tribunal (EAT) that the employees fell outside the Regulations. They were not qualifying agency workers because the Regulations and the Agency Workers’ Directive, which triggered them, apply only to workers who work temporarily for the end-user. In this case the agency workers were not temporary. It was not the length of the assignment which meant that that they did not qualify, but the fact that the employees cleaned for the client on an indefinite basis.
Implications for employers
- The Regulations provide workers who have worked for a 12-week qualifying period with the ability to claim equal treatment with permanent staff.
- This important decision (unless appealed) potentially reduces the impact of the Regulations in the UK.
- It now appears that workers who are placed with the end-user on an indefinite rather than temporary basis are not in fact covered by the Regulations.
- In the UK agency workers are often placed for indefinite periods with specific clients. If these arrangements are open-ended they may fall outside the Regulations as they are not temporary.
- The EAT said that temporary contracts do not have to be short to be covered by the Regulations, but they should not be open-ended.
- The workers engaged in this case were however on very long-term placements and it is not known whether the Regulations would be dis-applied for shorter length placements, even though the EAT said that the duration was not the crucial factor.
- Employers engaging agency workers and agencies will be pleased with this decision as, if they place workers on an indefinite, open ended basis, then they do not have to provide parity of terms with permanent staff and are less likely to face challenges over agency worker pay and conditions.
- However if an agency worker is placed as cover, perhaps until some specific project is completed or until a fixed period expires (for example until another employee returns from maternity leave or a sabbatical), the arrangement would not be open-ended and the Regulations would still apply.
- Employers using agency staff must consider their arrangements with the agency. If there is a genuine paper-trail which proves the placement is indefinite the employer will be less vulnerable to claims under the Regulations.
- This case remains the best guidance on the Regulations unless it is appealed. Amending legislation is unlikely.
- However, further cases in the European Court of Justice (ECJ) are likely, as the wording of the Directive could easily be interpreted to mean that UK agency workers on open-ended assignments are protected by the Regulations contrary to the decision of the EAT in this case.
- It is perfectly possible that another case reaching the the ECJ on open-ended agency working could find that the agency workers do have rights under the Directive after all.
- It is logical that if agency workers on open-ended assignments were intended to be excluded from the Directive and the UK Regulations, then this would have been expressly stated.
- As this case was extreme on the facts, future cases may be decided differently, so employers and agencies should probably be cautious until other cases emerge.
- Some employers will be prepared to risk relying on this case and decide only to equalise terms for agency workers on ‘closed ended’ placements. Other employers will be less confident that the Regulations really are to be interpreted as restricted.
- Employers should also consider carefully worded indemnities from the agencies supplying them with staff if these are available.
Bray v Monarch Personnel Refuelling UK Ltd | Employment Appeal Tribunal | 28 Sep 2012
(unreported, ET/1801581/2012 28 September 2012, ET)
Issue: Agency workers employed on zero hours contracts
This case concerned a group of tank drivers employed by an employment agency on a zero-hours contract which supplied them as agency workers to drive BP’s tankers. The drivers had worked continuously for BP on a series of regular assignments.
The employer paid BP drivers £1 an hour more than other drivers, although drivers recruited directly by BP were represented by an active union and were paid more than the agency workers.
The situation fallls within what is known as the Swedish derogation (an exception contained within regulation 10 of the Agency Workers Regulations). This means that agency workers do not have to be paid the same as comparable employees of the hirer provided that:
- they are employed directly by the agency;
- they use contracts that include an obligation to pay agency workers when they are not working on assignments for at least four weeks.
BP instructed the employer to employ drivers under Regulation 10, the Swedish derogation. As a result, after a meeting, the agency drivers were issued with new contracts of employment. A dispute arose about the various conditions that are needed for the Swedish Derogation to be effective. Had the agency workers agreed to a new contract, incorporating the Swedish Derogation, and waived their right to equal pay with the permanent drivers? Regulation 10(1)(a) says the contract of employment must be entered into before the beginning of the first assignment under that contract. The ET held that the agency workers had been given the new contract ahead of starting their first assignment and that an assignment meant the particular assignments the agency received from BP, not the entire period during which the agency workers had been hired out to BP.
Implications for employers
- Under the Agency Workers Regulations 2010 (AWR), agency workers are entitled to the same basic employment and working conditions as if recruited directly as permanent staff, following completion of a 12-week qualifying period.
- The Swedish derogation contained in Regulation 10 is an exemption which denies agency workers the right to equal treatment in relation to pay and holiday pay.
- However, the derogation gives agency workers a minimum payment when they are out of work between assignments and there is no suitable alternative work to do.
- The derogation applies to pay and holiday pay only and does not stop agency workers from being entitled to other provisions under the AWR, such as equal treatment over rest breaks, job vacancies and length of working time.
- An agency worker can be transferred from a 'standard' agency contract to a 'Swedish derogation' contract, even if the agency worker will be working in the same way for the same client of the agency.
- Employers can continue to enter into new terms with agency workers already on assignments with the same hirer, as long as the new terms are entered into before the start of the next assignment.
- The interpretation of assignment is very important in understanding the Swedish derogation. If assignment meant the entire period in which an agency worker is hired out to any hirer, it would be possible to enter into a Swedish derogation contract only at the start of the relationship with a new client of the agency.
- It is possible for agencies to create with an existing hirer a new contract falling within the Swedish derogation if new terms are entered into before the start of the first assignment under the new terms.
- Where a contract is already in place with an agency it will not be necessary to create an entirely new contract in order to put the Swedish derogation in place; existing contracts can be varied to include these terms.
- The decision is only an Employment Tribunal decision and may be subject to appeal.
Unison v London Borough of Barnet and another | Employment Tribunal | 4 Feb 2013
Issue: Agency workers and TUPE
This case involved a redundancy exercise across Barnet Council and the TUPE transfer of more than 100 employees from the Council to two new employers. One transfer was of housing staff and the other was of parking staff. This redundancy exercise also resulted in 16 redundancies.
During the formal consultations the union UNISON asked for agency worker information which the union subsequently claimed was insufficient, especially regarding agency workers, and prevented effective consultation. The Council had given information about the total number of agency staff, but had not given an adequate set of information about where those agency workers were working within the organisation. Nor did they give sufficient information about the type of work that was being carried out. UNISON claimed against the Council for failure to provide information regarding agency workers.
UNISON won and the employment tribunal found that the Council breached its consultation obligations under both collective redundancy legislation and the TUPE regulations. The tribunal said that the information was insufficient and this breach was especially serious in relation to the redundancy exercise. The employers might have been able to reduce the number of agency staff and that might have helped them save jobs and reduce the number of redundancies. The tribunal therefore made a protective award for 60 days’ pay for each of the 16 redundant employees.
In relation to the TUPE consultation the breach was less serious, but the duty should still be complied with. The non-compliance was more than a technical failure and the tribunal awarded compensation of 40 days’ pay for employees affected by the first transfer and 50 days’ pay for those affected by the second transfer.
Implications for employers
- Employers must remember agency workers when collective consultation takes place, as failure to provide agency workers information will not be regarded as a mere technical breach and can result in a protective award.
- Under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers must inform and consult employees about collective redundancy dismissals.
- Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), both transferor and transferee employers must inform and consult trade union or employee representatives in relation to their own employees who might be affected by a TUPE transfer, or related measures.
- Employers must comply with the Agency Workers Regulations 2010, which oblige employers to provide information on agency workers during TUPE and collective redundancy consultation, including the number of agency workers, the areas of the business where agency workers are used and the type of work being carried out.
- This case shows how much information must be given in relation to agency staff. In this context, an adequate set of information includes where the agency workers work within a complicated structure in the organisation and the type of work that was being carried out by them.
- Employers must keep adequate records tracking agency staff, including what work is being carried out. This information should be disclosed during TUPE or collective redundancy consultation processes.
Tilson v Alstom Transport | CA | 27 November 2010
Tilson v Alstom Transport | CA | 27 November 2010
 EWCA Civ 1308
Issue: Employment status of an agency worker.
A technical engineer was employed through an agency to work for Alstom, a train company and was promoted to be a manager. He worked under a complex agency arrangement. The engineer provided his services to a contractor Silversun Solutions Limited which was really a payment mechanism, he had a verbal agreement under which he agreed to pay Silversun a 3% service charge, this company then contracted with a human resources agency to provide services which in turn, contracted with Alstom, the end client.
A clause in the contract between the payment company and the agency stated that:
"Neither the Company nor the client shall be entitled to or seek to exercise any supervision, direction or control over the Contractor or the operatives in the manner or performance of the Project."
Although this clause specified that the end-user (that is, Alstom) would not exercise control over the way in which he carried out his duties, in fact the company did have high control. For example, he had to notify his line manager before taking holiday.
There was also very extensive integration of the engineer into Alstom's business which was not disputed (for example, he was a manager who was authorised to hire and fire employees). The engineer’s relationship with Alstom was summarily terminated and he alleged that this constituted an unfair dismissal which required him to prove that he was an employee of Alstom. By the time the case reached the Court of Appeal, the key issues was whether it was necessary to imply a contract to give business reality to the relationship.The fact that the contractual documents were alleged to be an inaccurate reflection of the working practices also formed part of the picture and was a powerful factor pointing in favour of implying a contract.
The key issue then was whether a contract should be implied and whether the contractual documentation was a genuine reflection of the relationship between the parties.
The Court of Appeal held that there was no proper basis that a court or tribunal could find that there was a direct contractual relationship. Despite the elements of ‘integration’ and ‘control,’ the engineer was not an employee of Alstom. Relying on James v Greenwich Borough Council the Court said that a contract should only be implied when it was necessary. Just because some clauses in the contract between the payment company and the agency seemed to be a sham that did not mean the entire contract was invalid. The parties would have acted in exactly the same way if there had not been a contract and that “was fatal to the implication of a contract”.
Implications for employers
Following the case of James v Greenwich Borough Council it is very difficult for agency workers to be able to successfully argue that they are employed by the end-user. There is no need to invent an implied contract when there is a perfectly adequate contract between agency and contractor which covers everything. This does not mean a contract can never be implied; but whether a contract should be implied involves an objective analysis of all the relevant circumstances.
Generally, the label that individuals put on their employment relationship is not determinative. The courts look at the paperwork and how the relationships work overall in practice to enable an evaluation of employee status to be made.
However, in this case the worker had expressly turned down a contract of employment. Employees cannot expect to have their cake and eat it by taking the tax advantages of self-employment when it suits them but then claiming employee status when they wish to make a claim. Employers should also note that:
- The mere fact that there is a significant degree of integration into the organisation is not inconsistent with the existence of an agency relationship in which there is no contract between worker and end user.
- Where the parties were unable to reach an agreement on the contractual terms this is an extremely powerful factor militating against the implication of contract.
Muschett v HM Prison Service | Court of Appeal | 2 Feb 2010
 IRLR 451
Issue: duty of personal service
The claimant was an agency worker who was assigned to work in a prison laundry on a temporary agency basis. After a few months the assignment was terminated by the prison. The claimant brought unfair dismissal, sex, race and religious discrimination claims against the prison and the agency. The employment tribunal dismissed the claims, finding that the claimant had no direct contract with the prison, was paid by the agency and that all parties could terminate the assignment at any time without notice. There was a contract for services between the claimant and the agency. The claimant was not an employee of the prison as there was no mutuality of obligation between them and therefore no contract of employment and no unfair dismissal claim. He was also not an employee of the agency, so a discrimination claim as a ‘contract worker’ would fail. The employment tribunal went on to find that the claimant was not protected by section 7 of the Race Relations Act 1976, as this requires an agency worker to have a contract with the end-user (the prison) to provide services to them personally.
The Court of Appeal, in upholding the Employment Appeal Tribunal’s decision, agreed that the claimant would not succeed against the prison or the agency. The claimant was also not in employment for the purposes of discrimination law. The only way that an agency worker could be protected from discrimination from an end-user was to show that it was ‘necessary’ for the Court to imply a contract for services with that end user. Where, as in this case, the contract between the claimant and the agency was clear, the courts are unlikely to do so.
Implications for employers
- It has been an established for some time that when considering the triangular relationships between agency, worker and end-user, the tribunals and courts will rarely imply an employment contract between the worker and end-user (see James v Greenwich Borough Council).
- Some agency workers will be able to bring discrimination claims on the basis of their legal relationship with the employment agency.
- Employers must keep an eye on the use of all agency workers if they wish to avoid those workers enjoying the benefits of employee status.
- Employers who use agency workers should always address workers status in a clear contract with the agency and ensure that effective contracts are in place between the agency and the worker.
- Employers are less likely to find themselves the employers of all of their agency workers as the recent decisions show a reluctance to imply a contract between an agency worker and an end-user unless it is necessary to do so.
- A contract of employment will still be implied against employers if it is necessary to do so and the arrangements under which the employee is working are only explicable by there being such a contract.
- A contract of employment will not always arise with agency workers, but the risks ought to be assessed and managed.
- A tribunal will assess the whole of the evidence including any contractual documents between the worker and the agency, between the agency and the end user and the conduct of the parties to determine if the relationship has become an employment one.
- All organisations using agency workers on a long term basis are at risk of acquiring responsibilities towards them as with other employees.
- An employer will only be vulnerable to a finding that there is a contract of employment if other essential ingredients for a contract of employment are present between the worker and the end user, including the obligation to personally provide work and the obligation to perform it (mutual obligation).
James v London Borough of Greenwich | CA | 5 February 2008
EWCA Civ 35
Issue: Employment status in a tripartite relationship between an agency worker, the agency and the end user.
A council worker had for a long period worked initially on a full-time basis with the council then later started to work with the council through a couple of agencies. According to the terms of the agreement with the current agency she was a self-employed worker under a “contract of services”. The contract stated there was not a contract of employment between her and the agency or between her and any ultimate client. She was not entitled to holiday or sick pay from the Council, and was not subject to their disciplinary or grievance procedure.
Following sickness absence when she returned to work she found that another agency worker was covering the same shift and she had no work. She brought an unfair dismissal claim against the Council and her former agency based on her raising health and safety issues. , although she did not allege that she was employed by the latter. James relied on her length of service and the fact that she was treated the same as the other Council employees and was therefore an employee. A key issue was whether there was mutuality of obligation (i.e. an obligation on the authority to provide work and an obligation to accept that work) and whether a contract could be implied.
The Court of Appeal held that the Tribunal was entitled to find that James was not an employee of the council. There was no express or implied contractual relationship between the parties. The only express contractual relationship was with the agency itself. The facts suggested that this contract was genuine.
Implications for employers
The issue of a tripartite relationship between an agency worker, the agency and the client has generated much case law. Agency workers can be employees, workers or self-employed.
How the relationship works in practice determines the actual employment status. It is possible for a contract to exist between agency workers and end user such as the council in this case. This case gives greater clarity suggesting that key issue is whether it is necessary to imply an employment contract between the end user and the worker.
In this case, it was not necessary because an effective contract already existed between James and the agency.
Employers and agencies should have clear contracts in place which address the employment status of agency workers. In cases where the position is in doubt the following points may be relevant:
- Implying a contract with the end user will only happen if needed to make sense of the situation.
- In many cases agency workers will not be employees of the end user because there is no express contractual relationship and it is not necessary to imply one.
- Implying a contract requires a consideration of all the evidence relating to the nature of the relationship between the parties, and not merely the documents.
- The legal status of agency workers means very few will have unfair dismissal rights.
A deliberate use of ‘false’ substitution clauses, or clauses denying any obligation to accept or to provide work where such terms do not reflect the real relationship may be a sham arrangement. In such cases there may still be employment status.
- A tribunal will assess the whole of the evidence including any contractual documents between the worker and the agency, between the agency and the end user and the actual conduct of the parties to determine if the relationship has become an employment one.
- All organisations using agency workers on a long-term basis are at risk of acquiring responsibilities towards them as with other employees.
- An employer will only be vulnerable to a finding that there is a contract of employment if other essential ingredients for a contract of employment are present between the worker and the end user; the key factors include the obligation to personally provide work and the obligation to perform it (mutual obligation).
Even if an agency worker is not an employee but is self-employed they could still have some protections under 'The Conduct of Employment Agencies and Employment Businesses Regulations 2003'. For example, the right to be paid even if the agency has not been paid by the hiring organisation.
Craigie v London Borough of Haringey | EAT | 12 January 2007
Issue: Employment status of an agency worker
An Estates Services Officer for Haringey council was engaged via an arrangement with an agency. He was not obliged to accept any assignment form the agency, but if he did not, the agency contract would terminate. His contract with the agency explicitly stated that he was not an employee, he would be paid an hourly rate, he was entitled to four weeks’ holiday; could join the agency pension scheme, and that he would not be paid when he was not working. He worked for the council for over a year, and there was a high degree of control over his working arrangements.
He applied for a permanent job with the council in June 2005 and was given a provisional offer which was withdrawn as a result of references when attention was drawn to his sickness record. The council told the agency that it no longer required his services, and the agency terminated his appointment. He claimed unfair dismissal and breach of contract against the council. The key issues were whether he had an implied contract with the council and if there was the necessary mutuality of obligation required.
The EAT held that the worker should lose his claim. The contract between the individual and the agency, and between the agency and the council, managed the relationship effectively and was consistent with the services supplied. It was not necessary to imply a contract of employment to give business efficiency to the arrangements.
Although the council did exercise a high degree of control that simply reflected the reality of his job. There was no need to infer a contract of employment. The fact that the council worker could choose not to attend work on a particular day helped to defeat the argument there was mutuality of obligation between him and the council. The court commented that legislation was needed to address the status of agency workers.
Implications for employers
It is not necessary to imply a contract between an agency worker and an end user if the worker already has a contract with the agency. Contracts of employment between agency workers and end users should only be implied to give effect to “business reality”.
Organisations using agency workers should confirm that contracts with the agency and between the agency and the agency worker do not suggest an employment relationship between the organisation and the worker.
Organisations wishing to distance themselves from the risk of acquiring employees should ensure that the agencies should pay, tax, appraise, discipline and, where possible, exercise day-to-day control over the worker and provide a substitute where the worker is unavailable due to sickness, holidays etc. Organisations wishing to minimise the risk of acquiring employees should also:
- Ensure assignments are of shorter duration.
- Consider seeking warranties and indemnities from the agency in relation to the worker’s employment status if possible.
- Limit the worker’s integration into the business. For example, where possible, exclude the workers from organisation charts, corporate functions, supervisory or management roles, or wearing any uniform.
It is often easier to consider directly employing workers within the organisation, for example under a fixed-term contract.
Cornwall County Council v Prater | CA |24 February 2006
EWCA Civ 102
Issue: Breaks between assignments and employment status
The tutor in this case worked for a County Council's home tutor service, teaching children who were unable to attend school, for example, because of serious illness or injury. There was no contractual obligation on the employer to offer pupils to tutors. Tutors were always entitled to refuse a particular pupil, although over the 10 years or so that this teacher worked she never refused to take on a pupil.
She was paid for work in every month of the year apart from August. The duration of the individual assignments varied from a few months to one lasting for five years. There was no close level of control and no right to substitute another teacher if she was unable to teach.
Crucially, the employer asserted that she was not an employee because she was under no obligation to accept any further engagements and no obligation on the employer to offer her further work, so the essential mutuality of obligation was missing.
The CA said that where an arrangement is one of a series, there is no need to look for additional mutuality of obligation, such as an agreement that further similar work would be offered and or accepted. The lack of mutuality of obligation between the assignments in a succession of contracts did not of itself prevent each assignment from constituting a contract of employment.
Implications for employers
Employers are sometimes uncertain whether a particular individual is an employee, a worker or self -employed. The distinction matters because employees enjoy far more rights than workers. Only employees enjoy the full range of employment protection rights – for example, the right not to be unfairly dismissed and to statutory redundancy pay – but many employee rights depend on being employed for a continuous period of time (for example, two years’ continuous service is needed to qualify for a redundancy payment or unfair dismissal where employment started after 6 April 2012: prior to this the qualifying period was one year’s service).
Deciding on status can be particularly difficult where there is a series of individual contracts with a break in-between. As with many aspects of employment status, the courts have developed tests to try and resolve the issue.
The implications of this case show how the law on continuous service applies:
- Employee status can arise during any week in which there is a contract of employment in existence and all these weeks count toward continuous service.
- It can also arise where there is no minimum period specified, so the hours of work in any week can be quite short.
- Some weeks when there is no work can still count toward continuity of employment provided they amount to a 'temporary cessation of work'.
The use of this ‘temporary cessation’ provision enabled the teacher in this case to establish continuity of service.
Employers who have agreed a succession of short-term assignments may find they have acquired employees with sufficient continuity of service to claim the appropriate employment rights. Temporary gaps in working periods may be disregarded, especially where employers regularly re-employ the same person.
This case also has implications for employers who use zero hours contracts, because those on zero hours may be employees while they are actually working, but the gaps between work may make it unclear whether they have the requisite amount of continuity of employment. If there is no mutuality of obligation (on an employer to provide work, and on the employee to personally do that work) during the gaps, then it may appear there is no continuous service.
However, the gaps may be effectively bridged by the temporary cessation of work provisions enabling the employee to establish sufficient continuity to bring a claim for unfair dismissal, provided the employee is also found to be an employee whilst actually at work.
As well as attempting to establish employee status, zero hours workers may be entitled to rights as workers, such as statutory annual leave and the national minimum wage. Employers must not stop a zero-hours worker from getting work elsewhere. Employers should be aware that the law in this area is subject to change. The government’s Good Work Plan does not limit the use of zero hours contracts but instead will introduce a right for employees to request a fixed working pattern if they have had 26 weeks of working on a non-fixed pattern.
Please note: While every care has been taken in compiling these notes, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.