The agency arrangement makes the most sense to the outsider when the nature of the work is such that the identity of the worker is irrelevant, in that the work is unskilled, and there is a high rotation of staff. The agency worker is provided for a short period of time and does not develop a particular relationship with the client company. However, in modern times agency arrangements have sometimes been used in relation to skilled workers who have been provided to clients for long periods of time. In these cases the formal relationship remains as the tri-partite one with no direct relationship between the client and the worker. However, the arrangement becomes long term and the worker is in practice indistinguishable from a permanent employee. In these cases the worker may come to view the client as his ‘employer’ and aspects of the employment relationship may be present, such as the client exercising control over the worker. Yet, the worker in these circumstances will still, according to the strict agency relationship, have only limited rights and will not be able to claim inter alia unfair dismissal if he is summarily dismissed from his post. It is also for the reason that he does not satisfy the definition of employee set out in section 230(1) of the Employment Rights Act 1996: “employee means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment” This appears somewhat unjust where the worker has been engaged for a period of years with one firm and has come to rely on that work and think of himself as an employee.
In light of this seeming unfairness, the courts have sometimes been asked to consider whether there has developed some form of employment relationship either between the worker and the agency or the worker and the client which would endow the worker with full employment rights. For example, the question may be asked whether a temporary arrangement can ‘morph’ into an employment arrangement with associated rights for the worker.
In McMeechan v Secretary of State an employment agency owed wages to the claimant and became insolvent. An employee in these circumstances would be entitled to claim unpaid wages from the Secretary of State. The Court of Appeal held that there was no general rule that agency workers could never be treated as employees and each case would turn on its individual facts.
In Montgomery v Johnson Underwood Ltd the Court of Appeal was asked to consider whether an agency worker could be an employee of the agency. It was held that even though the worker worked for one client for two years, she had been subject to little or no control, supervision or direction by the agency. In most agency circumstances the control, supervision and direction will be provided by the client rather than by the agency, and indeed it is usual for no such control to be provided by the agency. Thus, it would seem that, at least in most cases, any claim of employment will need to be made against the client.
However, as there is no direct contract between the client and the worker, finding a contract of employment to exist is very difficult. For example, in Hewlett Packard Ltd v O’Murphy the worker had set up a service company which then contracted with an employment agency that in turn provided his services to the respondent company. The arrangement lasted several years and the worker was under the respondent client’s control. However, the legal position was that there was no contractual nexus and the worker could therefore not be the employee of the client.
Perhaps in order to remedy the perceived injustices resulting from a lack of full legislative protection for agency workers, the courts then went into a period of deciding cases more in favour of the worker. In Franks v Reuters Ltd the EAT originally found that an agency worker who had been supplied to the respondent client organisation for five years could not claim for unfair dismissal or redundancy pay on the basis that there was no employment relationship between the client and the worker. It was found that there was a lack of mutuality of obligations both on the part of the agency and the worker, and the client and the worker. However, on appeal to the Court of Appeal it was held that the EAT should not have ruled out the existence of an employment relationship between the worker and the client. The Court of Appeal stated that the complexity of working relationships requires employment tribunals to consider all the circumstances before determining status. In particular, the Court of Appeal noted the possibility of finding an implied contract being formed between the worker and the client by virtue of their dealings over the lengthy period. The court went so far to say that: “dealings between parties over a period of years, as distinct from the weeks or months typical of temporary or casual work, are capable of generating an implied contractual relationship.”
Similarly, in Dacas v Brook Street Bureau (UK) Ltd the Court of Appeal was again asked to consider whether an employment relationship could be formed between an agency worker and the client organisation. In this case the worker was supplied by the agency to be a Council care worker and she worked in that role for the one client for a period of four years. Upon dismissal the tribunal rejected the worker’s claim on the basis that she was employed by neither the agency nor the end user client. Unfortunately, the client appealed only against the decision that she was not employed by the agency. However, the Court of Appeal still went on to consider whether the claimant could have brought a successful claim against the Council client. The majority of the Court of Appeal (2:1) took the view that tribunals should consider the possibility of an implied contract of employment between the worker and the client. Guidance was provided to tribunals as to when a contract of employment should be implied between the worker and the end-user. This guidance was that where the tri-partite arrangement is genuine, such as where there was no pre-existing relationship between the worker and the end user it will be rare to find an implied contract. The passage of time alone does not justify the implication of a contract of employment and something more is necessary. Additionally, whether an implied contract exists is a question of fact for the tribunal.
Neither Franks nor Dacas were actual authorities for finding that agency workers were in fact employees of the end user as Franks was remitted and Dacas was obiter because of the nature of the appeal. However, in Cable & Wireless plc v Muscat the court took the final step and found an implied contract of employment to exist. In this case the worker had worked for a company and then had been asked to leave employment and be re-engaged through an agency. It was found that after two years of working under this arrangement the worker had morphed into an employee of the end user company and could claim under associated rights.
However, the implied contract approach adopted by the courts has come under some fairly heavy criticism. The concept of an implied contract is that a contract may be implied as existing between two parties where it is necessary to do so to explain the relationship. However, in the case of employment agency arrangements, it probably cannot be said to be strictly legally necessary to imply a contract of employment as other contracts exist to explain the relationship that is the contract between the agency and the worker and the contract between the agency and the client. Thus, Reynold has suggested that the decision in Muscat was wrong and that: “in any case where an agency worker is introduced to the end user pursuant to contractual arrangements which purport to govern exhaustively the parties’ respective rights and obligations, there is simply no scope for ‘deducing’ a contract of employment between worker and end user by way of necessary inference.”
More recent cases have demonstrated a more cautious approach by the courts with a move away from the implied contract approach. In James v Greenwich Borough Council the claimant, Ms James, had a temporary worker agreement with an employment agency which found her work as a housing support worker with the local council. Ms James worked in the role for the Council for more than three years. In this time she switched agencies in order to achieve a greater rate of pay but still continued in the same work with the council. The standard relationship existed in that Ms James’s contract was with the agency and stated that she was a self-employed worker and the agency had another agreement with the Council to provide a worker. After falling ill Ms James took time off work and when she attempted to return was told that she had been replaced by another agency worker and she then claimed unfair dismissal. The EAT found that no employment relationship existed between Ms James and the Council. This was upheld by the Court of Appeal, which held that the issue in the typical tri-partite situation such as the one in issue, where there are two express contracts neither of which are contracts of employment, the question for consideration is whether it is in fact necessary to imply a third contract of employment.
Similarly, in Muschett v HM Prison Service the Court of Appeal emphasised that in tri-partite arrangements a contract of employment could only ever be implied as between the worker and the end-user where it was necessary to do so to reflect the business reality of the situation and that this would only be the case where the standard agency relationship could no longer be said to adequately reflect the relationship between the parties and how the work was being performed.
Thus, the approach of the courts now appears to be much more in line with the traditional understanding of the implied contract and is likely to result in a more restrictive interpretation of when an employment relationship will exist between the worker and the end-user. This means that the rights afforded to employees are much less likely to be extended to agency workers, as agency workers are less likely to be held to be employees themselves.
Therefore it can be noted that the agency worker falls into certain category of atypical workers. In contrast to a typical workers, the atypical workers are not on the basis of a permanent contract and do not have a single identifiable employer. Atypical workers have various shapes and sizes. The following examples present the nature of atypical workers: casual workers (like Carmichael), agency workers (like Montgomery), fixed-term workers, part-time workers and home workers. There is no recognised mutuality of control and obligation in the above examples. Certain classes of atypical workers received some protection under legislation. Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, Equality Act 2010, Fixed Term “Employees (Prevention of Less Favourable Treatment) Regulations 2002 illustrate that workforce which tends to be more flexible these days can be given some protection from government.
However, in terms of the rights afforded to temporary agency workers, circumstances were about to change its course. The Temporary Agency Workers Directive came into force in October 2011 in the form of the Agency Workers Regulations 2010. The right to equal treatment and opportunities under the Regulations is subject to a qualifying period of 12 weeks and will not apply where the worker is in fact employed by the employment agency and continues to be paid between assignments at a rate of at least 50% of the pay received in the previous month. The equal treatment includes: conditions as to the duration of working time, overtime, breaks, rest periods, night work, holidays, pay, and maternity issues.
Thus, agency workers are finally entitled to a greater range of rights than they have previously been, and therefore have the benefit of additional protection against exploitation through agency arrangements. However, they are still not entitled to rights of unfair dismissal and redundancy pay. This to some extent reflects the difficult balance which must be achieved between the needs of business in terms of flexibility, and the desirability of protection for workers. However, some are critical of the new Regulations on the basis that it will be costly to businesses in an economically difficult time.
In conclusion, the rights of agency workers have traditionally been much less protective than the rights afforded to employees, and this has left agency workers vulnerable and subject to potential abuse. As legislative provisions have not afforded adequate protection to agency workers, the courts have taken it upon themselves to attempt to use legal principles to turn agency workers into employees in order to give them access to greater rights. However, the courts have now realised that the legal principles relied upon cannot give rise to an employment relationship in the standard circumstances of the agency agreement. However, developments at an EU level now mean that agency workers are benefiting from equal treatment as compared to employees, although they will not benefit from full employment rights such as those to claims for unfair dismissal and redundancy pay. Consequently the new Regulation on temporary agency workers did not solve the problems that judges where dealing with before. For the reason that there are no special provisions in legislation that would define temporary agency workers, the question in terms of rights such a worker would fall into normal principles. That means it would be the case of recognising the technical employee and whether the qualifying period of 12 weeks was satisfied.
Bibliography
Websites:
Articles:
Leighton P., Wynn P., “Classifying employment relationships - more sliding doors or a better regulatory framework?”, ILJ 2011, 40(1), 5-44
Leighton P., Wynn P., “Temporary agency working: Is the law on the turn?” Comp Law 2008, 29(1), 7-15
McKay S., “Hard Work, Hidden Lives: the full report of the TUC Commission on vulnerable employment”, ILJ 2008 , 37 (3), 296, 297
Fletcher, C., “Mind the gap – new rights for agency workers” (2008) ELN November 2008
Reynold F., “The status of agency workers: A question of legal principle” ILJ 2006, 35(3)
O’Neill N., “’Temp’ to ‘Employee’” (2008) 32 CSR 1 1
Tew P., “Equal treatment of agency workers” (2011) 34 CSR 21, 168
Fletcher C., “Mind the gap – new rights for agency workers” (2008) ELN November 2008, 35
Pullan L., “Looking ahead” (2011) Pay & Benefits, January 2011, 20
Books:
Blanpain R., “European labour law”, (Kluwer Law International: Amsterdam, 2010)
Smith I., Thomas G., “Smith & Wood’s Employment Law”, (Oxford University Press: New York, 2008)
Phillips G., Scott K., “Employment Law”, (College of Law Publishing: London, 2011)
Davies A, “ Perspectives on Labour Law”, (Cambridge university Press: Cambridge, 2004)
Leighton P., Wynn P., “Classifying employment relationships - more sliding doors or a better regulatory framework?”, ILJ 2011, 40(1), 5-44
“The employment relationship”, International Labour Conference, 95th Session, 2006, Report V (1), p 11,13
- accessed on 6.03.2012
Leighton P., Wynn P., “Temporary agency working: Is the law on the turn?” Comp Law 2008, 29(1), 7-15
Blanpain R., “European labour law”, (Kluwer Law International: Amsterdam, 2010), page 31
McKay S., “Hard Work, Hidden Lives: the full report of the TUC Commission on vulnerable employment”, ILJ 2008 , 37 (3), 296, 297
Smith I., Thomas G., “Smith & Wood’s Employment Law”, (Oxford University Press: New York, 2008), p 75
Phillips G., Scott K., “Employment Law”, (College of Law Publishing: London, 2011), p 12
Reynold F., “The status of agency workers: A question of legal principle” ILJ 2006, 35(3), p 320, 323
O’Neill N., “’Temp’ to ‘Employee’” (2008) 32 CSR 1 1
Davies A, “ Perspectives on Labour Law”, (Cambridge university Press: Cambridge, 2004)
Tew P., “Equal treatment of agency workers” (2011) 34 CSR 21, 168
Fletcher C., “Mind the gap – new rights for agency workers” (2008) ELN November 2008, 35
Pullan L., “Looking ahead” (2011) Pay & Benefits, January 2011, 20