The employment status and rights of agency workers

01.01.08

The employment status and rights of agency workers

As we reported in a previous bulletin (Issue 22 - 10 January 2007) the thorny issue of agency workers' employment status has been considered frequently by tribunals in recent years. In James v London Borough of Greenwich the Court of Appeal has confirmed that a contract of employment can only be implied between an agency worker and a client where it is necessary to do so. This comes at a time when the government is coming under increasing pressure to extend the rights of agency workers.


Background

Agency arrangements involve a triangular relationship where an agency enters into a contract with a client and separately enters into a contract with the agency worker who is then supplied to the client. The contractual documentation usually provides that the individual is not an employee of either the agency or the client. As many statutory employment rights are only available to employees, there have been a series of cases in which agency workers have argued that they are employees of either the agency or the client. Some were successful, indicating that it may be possible to imply a contract of employment even where this is inconsistent with the agreed contractual arrangements.

James v London Borough of Greenwich

Ms James worked for the Council as a full-time employee until she left in 1997. After a short break she then started working for the Council again, this time through an employment agency. In 2003 she switched agencies in order to take advantage of a better hourly rate of pay. The contract between Ms James and the agency referred to her being self-employed, while there was no express contract between Ms James and the Council. The Council's disciplinary, grievance, sick pay and holiday arrangements did not apply to her.

The agency supplied an alternative temporary worker to the Council during August and September 2004 when Ms James was ill. When she was fit to return, she was told that she was no longer required. She then issued unfair dismissal proceedings against the Council.

The Court of Appeal decided that Ms James could not raise an unfair dismissal claim against the Council as she was not its employee. In a ruling which has been welcomed by employment agencies, the Court decided that a contract of employment between an agency worker and the client can only be implied where it is necessary to do so (for example, where the agency arrangements are a sham and in fact the parties are in an employment relationship). Here the working relationship was clearly consistent with the contractual agency arrangements and so there was no reason for the court to imply a contract of employment.

The Court of Appeal also emphasised that the fact that an agency worker has worked with a client for a substantial period does not necessarily mean that they are an employee.
This decision makes it more difficult for Britain's 1.4 million agency workers to claim that they are employees of the end user and so entitled to the same employment protection as permanent employees.

Will the government increase the rights of agency workers?

In James the Court of Appeal recognised the ongoing debate about the absence of employment protection for agency workers but commented that any changes to the law would require to come from parliament.

Since 2002 European leaders have been pushing for temporary agency workers to be given the same basic rights as permanent employees. The European Council's most recent draft directive proposed that after 6 weeks' employment, agency workers should have the same rights in relation to pay, hours, breaks and holidays as permanent employees. However, agreement could not be reached when the matter was debated in December 2007, partly due to British opposition. It is believed that this issue will be back on the agenda in Europe in the summer (when France takes over the presidency).

In the meantime, a Private Member's Bill to increase the rights of agency workers and protect them against discrimination will get its second reading in the Commons on 22nd February. So far the government has opposed any plans to increase agency workers' rights. However, recent behind-the-scenes meetings between government aides, agency workers and MPs supporting the Bill suggest that the government is coming under pressure to change its stance.

James v London Borough of Greenwich 2008 EWCA Civ 35