There has been much uncertainty surrounding the employment status of agency workers in recent years. Their status is important as it affects their statutory rights; for example, only employees have the right to bring a claim for unfair dismissal. The Court of Appeal's decision in James v London Borough of Greenwich should reassure end-users that agency workers are still worth taking on in certain circumstances.

The Court has held that when deciding the employment status of an agency worker, an Employment Tribunal should do so (1) by only implying a contract of employment between the agency worker and the end-user of his or her services where it is necessary to do so and (2), in very extreme circumstances, by exposing sham arrangements between the parties. The Court also made it clear that it is not for the courts or tribunals to extend employment protection rights to agency workers and that further developments will need to come from Parliament.

Ms James was supplied by an agency to work for Greenwich. She had no express contract with the Council direct but had entered a "Temporary Worker Agreement" with the agency which made it clear that she was not its employee. When the agency terminated Ms James' services she claimed unfair dismissal against the Council, contending that in light of Dacas v Brook Street Bureau in 2004 the Tribunal should imply a contract of employment between her and the Council. It concluded otherwise, as did the Employment Appeal Tribunal.

Ms James appealed to the Court of Appeal, which has now upheld both of the earlier decisions. This is good news for both end-users and agencies. It means that provided they set up arrangements which accurately reflect the real relationship between the parties – as is likely to be the case where there is no pre-existing contract between the worker and the end-user – then a Tribunal should not (certainly not automatically) imply a contract between the worker and the end-user, even if he or she has been working for the end-user for some time.

Further to a Practice Direction issued last November by the President of the Employment Tribunals, a large number of agency worker tribunal cases have been put on hold pending the Court of Appeal's decision. Further guidance now is awaited.

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