UK: Employment Status and Agency Workers

Last Updated: 2 September 2005

Employment By The End User?

In Cable and Wireless v Muscat (2005) the Employment Appeal Tribunal looked at whether an agency worker, provided via an agency, could be an employee of the end user.

Mr Muscat was employed as a telecommunications expert for Exodus Internet Limited. In 2001 he became a "designated contractor" and set up a company E-Nuff Communications Limited, at Exodus’ expense, which then supplied his services. Mr Muscat was responsible for his own income tax and NICs. In April 2002, Exodus’ business was taken over by Cable and Wireless plc ("C&W"). C&W required that Mr Muscat’s services be provided via an employment business, Abraxas plc. E-Nuff Communications entered into a contract with Abraxas plc under which it agreed to provide Mr Muscat’s services to C&W. The agreement expressly stated that Mr Muscat was not an "employee" of C&W. Mr Muscat worked under the direction of C&W’s managers and was labelled as an employee within C&W’s structure. C&W supplied Mr Muscat’s mobile phone and laptop and he arranged his holiday to suit C&W. His only contact with Abraxas was in relation to the payment of invoices. In December 2002, C&W stopped using Mr Muscat’s services and he brought a claim for unfair dismissal.

At first instance, the Tribunal found that Mr Muscat was an employee of Exodus Internet Limited and that his employment transferred under TUPE to C&W. The next issue was whether he had remained an employee of C&W after becoming an agency worker. The Tribunal looked at the Court of Appeal’s decision in Dacas and felt bound to follow it. It did not think there were significant differences between the cases and, therefore, held that there was an implied contract of employment between Mr Muscat and C&W. C&W appealed.

The EAT agreed with the Tribunal that the facts of this case could not be distinguished from those in Dacas. Effectively, C&W exercised control over Mr Muscat’s work and activities. The EAT stated that the implication of the contract of employment in these circumstances was "necessary". The Tribunal was right to follow Dacas and had reached the correct decision.

This case is currently on appeal to the Court of Appeal.

Employment By The Agency?

In a subsequent case, Bunce v Postworth (2005), the issue of the employment status of agency workers reached the Court of Appeal.

Mr Bunce was a welder who entered into an agreement with an employment agency, Postworth Limited, trading as Sky Blue. In the following 12 months he carried out welding work for a number of rail companies but mostly for Carillion Rail. The Employment Tribunal concluded that Mr Bunce was not an employee of Postworth and he was not an employee of Carillion. Interestingly, the Tribunal also said that he was not self-employed. This decision was appealed against Postworth only.

The EAT and subsequently the Court of Appeal both upheld the decision of the Employment Tribunal. It had been argued on behalf of Mr Bunce that the Claimant had an "umbrella" agreement with Postworth covering the relationship generally, under which there were separate contracts for each specific assignment, and that each such contract was a contract of service. Whilst recognising that this situation may be possible in some circumstances, on the facts of this case the Court of Appeal held that there was not a second contract every time Mr Bunce went on a specific assignment; the master agreement was very detailed and there was little room for individual contracts for each assignment.

Even if there was a contract between Mr Bunce and Postworth for each assignment, such a contract lacked the necessary degree of control by Postworth to make it a contract of service. The Court of Appeal recognised the importance of control as a feature of contracts of service and, in particular, control over what the worker does and how he does it. In this case, when Mr Bunce was working on a particular assignment, it was the client who had power to direct and control what he did rather than Postworth itself. On this basis, it would have been interesting to see the Court’s approach had Mr Bunce appealed the decision of the Employment Tribunal in respect of Carillion, the end user in this case.

Practical Considerations

The Court of Appeal’s decision in Dacas on the employment status of agency workers has given employers cause for concern, particularly when an agency worker has worked for the end user for a number of years.

The cases since Dacas seem to suggest that the key to determining whether an agency worker has an implied contract of employment with the end user is control. Control is an important factor in determining the status of a worker, particularly in the sense of the end user giving direction to the worker as to how the work should be carried out. Issues such as who deals with disciplinaries and grievances are less important. The risk remains that where an agency worker has over 12 months continuous employment and the end user controls how he carries out his work, there will be a contract of employment implied between the agency worker and the end user.

We will have to wait until Muscat reaches the Court of Appeal for further guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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