UK: The Status Of Agency Workers - Still A Muddle?

Last Updated: 22 March 2007
Article by James Libson and Joanna Blackburn

Two recent cases have dealt with the status of agency workers and whether a contract of employment can be implied between the agency worker and the end user (the client). In both cases, James v London Borough of Greenwich and Craigie v London Borough of Haringey, the Employment Appeal Tribunal (EAT) held that a contract should not be implied.

In the James case, the EAT helpfully concluded the case by setting out guidance for the future assistance of tribunals asked to imply a contract between a worker and an end-user:

  1. Tribunals must first consider whether the implication of a contract between the agency worker and end-user is necessary
  2. In considering whether a contract should be implied, the issue is whether the way in which the contract is performed is consistent with the agency arrangements or whether it is only consistent with an implied employment contract between the worker and end-user
  3. In a genuine tripartite agency relationship, the end-user is not paying directly for work done by the worker, but for the services supplied by the agency (which includes not only wages but also other elements such as expenses and profit). The end-user will often not know how much the worker is being paid
  4. Can the agency send a substitute for the worker? A key consideration is whether the end user can insist on the particular worker being provided by the agency. If it cannot, this is indicative of a genuine agency arrangement
  5. The mere passage of time will not, by itself, justify the implication of a contract. The comments made in another well-known agency case (Dacas v Brook Street Bureau) that there should be an inexorable inference of a contract of employment once arrangements have been in place for one year or more, were rejected
  6. Where agency arrangements are superimposed on already existing contractual relationships between agency worker and end-user, it is more likely that a contract will be implied (or rather that the original contract will be found to have survived).

The somewhat more cautious approach to whether an employment contract should be implied than has previously been the case is helpful for companies who use agency workers. However, in both the James and the Craigie case the EAT expressed a view that legislation is urgently needed in this area. Until such time, there will continue to be uncertainty for all the parties involved in agency arrangements.

New Legislation for April

We are approaching the month of April when we normally expect to see some new employment legislation. This year is no exception and the following are some of the main changes to the law that will come into force:

  • The Information and Consultation of Employees Regulations 2004 (which enables employees to request that their employer put in place information and consultation agreements governing how they will consult their work force about economic and employment related matters) will be extended to cover employers with 100 or more employees
  • The same will apply to the requirement for employers to undertake consultation before making changes to occupational and personal pension schemes
  • The right for parents of young or disabled children to request flexible working will be extended to include employees who are carers of adults. It will apply to those who are carers of (i) a spouse or partner; (ii) a near relative (which include parents, parents-in-law, adult children, siblings (including those who are in-laws), uncles, aunts, grandparents or step-relatives) or (iii) someone who lives at the same address as the employee
  • New rates of statutory benefits will also apply from April 2007. The standard rate of maternity, paternity and adoption pay will rise from £108.85 to £112.75 per week and the standard rate of statutory sick pay will rise from £70.05 to £72.25 per week.

April will also see the closing date for the consultation on increasing the annual leave entitlement. If the proposals are implemented, the minimum statutory holiday for someone working a standard five day week will be increased from 20 days (which can include bank and public holidays) to 28 days per annum (ditto). The increase will be phased-in in two stages with an extra four days entitlement from 1 October 2007 and the second increase of four days from 1 October 2008.

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

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