Employment Update: Agency workers

08 May 2007

In a triangular end-user/agency/worker relationship, it is not ‘incredible’ that the worker may not be an employee of either the end-user or the agency. There will be no contract of employment between the worker and the end-user unless there is a necessary implication of one.

Two recent cases confirm that agency workers need not be the employee of either the employment agency or the end-user. They will normally not be treated as employees at all and thus not have the statutory rights of employees – in particular the right not to be unfairly dismissed.

In Heatherwood & Wrexham Park Hospitals v Kulubowlia and others a worker was told that he would only get employment as a medical equipment maintenance engineer with the local NHS Trust if he applied through an agency. Accordingly he signed a contract with an employment agency that was headed Terms of Engagement of Temporary Workers. He accepted that this contract did not make him an employee of the employment agency. The agency placed him with the NHS Trust. He worked there for over two years. At one point he applied to the Trust for a permanent post but was unsuccessful. Then the Trust ran short of funds and terminated its arrangement with the employment agency.

He claimed unfair dismissal against the Trust and the Employment Tribunal decided that he should be treated as an employee of the Trust and so his claim should be allowed to proceed.

The Trust appealed to the EAT which has now allowed its appeal.

In the EAT’s view, it is not enough for the Tribunal to say that, because the Claimant ‘looked like an employee of the Trust, acted like an employee and was treated like an employee’, the business reality was that he was an employee and a contract of employment must therefore be implied. The circumstances were at least as consistent with there being no contract between the Claimant and the Trust, given that he had an express contract with the employment agency and had in fact applied for a permanent post with the Trust and been rejected.

In another recent case (Astbury v Gist) the Claimant, having originally entered into a temporary worker agreement with an employment agency under a ‘temporary worker agreement’, later entered into a ‘fixed-term agreement’ with the agency which was a contract of employment. When the end-user of his services asked for him to be removed from site, he wanted to claim unfair dismissal against the end-user but the Tribunal, and the EAT, considered that all the documentation showed him to be an employee of the agency. Indeed the temporary worker agreement had expressly stated that the agency had not been authorised to enter into an employment contract on the end-user’s behalf.

Points to note

  • In addition to his unfair dismissal claim, the Claimant in Heatherwood also brought a race discrimination claim against the Trust arising out of its failure to appoint him to a permanent post. As the EAT noted, contract workers may bring discrimination claims even though they are prevented from bring unfair dismissal claims because they are not employees.

  • The EAT in Heatherwood was asked to consider the case of Muscat v Cable & Wireless where an implied contract of employment was found to exist between a contract workers and an end-user. The EAT considered that the distinguishing feature of that case was that the Claimant had begun as an employee of the end-user and the Court decided that the arrangement then made for contracting out his services did not alter this continuing state of affairs. End-users should appreciate that the Tribunals are more likely to consider that agency workers must be employees if they have been employees in the past.