The issue of agency staff often arises on an outsourcing. In
particular, what will happen to staff who have been assigned to the
service. Will these staff transfer to the service provider? How
should the risk of any claims from such staff be allocated? and in
practice, what should happen?
Can agency staff be regarded as employees of the
client/existing service provider?
Subject to caveats generally no. The first caveat is that agency
staff have a direct contract with the agency rather than the
client/existing service provider. The second is that they are not
found in reality to be employees of the end user. The practical
risk of this has been reduced, following the indication of the
Court of Appeal, in James v LB Greenwich, that a contract between
an end user and an agency worker should only be implied when
necessary and where the relationship is only consistent with an
As a result of not being employees of the client/existing
service provider, agency staff would not transfer under TUPE from
the client/existing service provider to the new service
Could there be a separate transfer from the agency to the new
Unless the agency is providing very specialist staff in relation
to a discrete part of the service, so that it is possible to argue
that the agency itself has been providing part of the service, the
answer should be no.
What will happen to agency staff?
either the new service provider will continue to use the
agency, agency staff will continue to be provided through the
agency and there will be no transfer;
or, the client or existing service provider will serve notice
to the agency, and the new service provider will make its own
arrangements in relation to any additional staff required. As
explained above, there should be no transfer.
How to allocate the risk of claims from agency staff
The incoming service provider will want certainty regarding the
staff it inherits under TUPE. Ideally, this being through an agreed
list of "Transferring Employees" backed up by a
"wrong pocket" indemnity (see Indemnity Spotlight below),
which would include the risk of claims from agency staff.
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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