Agency Workers and Employment Status - EAT decides some agency workers have employment rights

In a significant decision, the London Employment Appeal Tribunal (EAT) has ruled that a group of Polish workers, provided with work by a UK employment agency, are employees of the agency and, as a result, entitled to all of the employment rights available to employees. The case was brought by the T&G section of Unite, the trade union formed on 1 May 2007 by the merger of the Transport and General Workers' Union and Amicus, which was representing a number of Polish nationals who lost their jobs and their living accommodation in 2005 after joining the trade union.

In his decision in the case Consistent Group Ltd v Mrs. K. Kalwak and others and Welsh Country Foods Ltd on 18 May 2007, Mr. Justice Elias, President of the EAT, upheld the decision of an employment tribunal, that the agency had entered into contracts of employment with the workers. His decision is highly critical of the agency's treatment of the workers, agreeing with the employment tribunal that the terms of their contracts were a "sham".

The workers are Polish nationals, most of whom speak little English. The agency, Consistent, supplies staff to work in hotels and food processing factories. They were offered work while still in Poland and came to England in May 2005 and lived in a hostel provided by the agency. The client to which they were supplied was Welsh Country Foods. The agency deducted money from their earnings for accommodation and cleaning charges amounting to some �56.40 per week. The workers claimed that they were discouraged from joining the union and were subsequently dismissed.

The contract under which they worked is described as a "self-employed sub-contractor's contract for services". Among the terms on the contract were:

a requirement for the subcontractor to provide services on an ad hoc casual basis as required by the agency, but without any obligation on the agency to provide work or the subcontractor to accept the work

a statement that the subcontractor is not an employee of Consistent and is not entitled to any fringe benefits such as sick pay, holiday pay or pension rights

a requirement to perform the services personally but, if unable to do, by another suitably skilled person

permission for a worker to work elsewhere if that work does not conflict with the subcontractor's ability to provide services to the agency or a client of the agency.

The chairman of the original employment tribunal had compared these contract terms with the actual practice of the agency and described them as a "sham". To quote the tribunal:

"There were parts of the written contract that indeed set out the actual terms under which the claimants worker � those, for instance, as to wages or, indeed, the obligation to work. But I noted the frequency with which the first respondents in the documents sought to emphasize the absence of rights � holiday pay, fringe benefits, the right to complain of unfair dismissal. These were their real concern. They in practice retained a firm measure of effective control over the claimants' working lives. They told them when and where they had to work, they might deny them days off, they provided them with transport and accommodation (taken away, as it proved, without notice). They ensured further economy in the claimants' employment by charging them for domestic services that were not provided. Here were seekers after work who could not adequately speak English, newly arrived here, for whom any purported freedom to work or not work, to work for more than one employer, were unreal. They were discouraged from union membership. The first respondents wanted to constrain them so as to retain them as compliant people through whom they could meet the demands of their clients. But they did not want people with expensive and troublesome rights. The provisions as to the right not to accept work or to work for other employers were a sham inserted into the documents to give the appearance of relieving the first respondents from the burdens of being employers, not seriously to reflect the actual relationship between the parties. The respondents, in effect, wanted employees, but did not want to pay the necessary price."

The President of the EAT decided that the tribunal had been entitled, on the evidence, to take this view, stating:

"If the reality of the situation is that no-one seriously expects that a worker will seek to provide a substitute, or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship. But if these clauses genuinely reflect what might realistically be expected to occur, the fact that the rights conferred have not in fact been exercised will not render the right meaningless.

Applying this principle here, in my judgment the Tribunal was entitled to say that that this was a situation where there was no realistic possibility that these claimants, as heavily dependent as they were on the economic power of the agency, would be free to accept work as and when offered, nor to work for someone else whilst the contract they had signed remained in place. They had come from Poland expecting to work for the agency, their continued accommodation depended on doing such work, and there was no realistic chance of their working elsewhere, at least whilst the agency needed their services. On these matters the formal document bore no relationship to reality. Tribunals should take a sensible and robust view of these matters in order to prevent form undermining substance, and this is precisely what this Chairman did."

The issue of control was critical in both the tribunal's and the EAT's decision that the workers were, in fact, employees of the agency. Established case law requires two key factors to be present in the working relationship for a contract of employment to exist, namely "control" and "mutuality of obligation". When similar cases have been considered, the decision has almost always been that agency workers are neither

employees of the agency, because the agency does not control the way in which the work is performed for the client, nor

employees of the client, because the client's obligation is to pay the agency for the work performed, not the worker.

The EAT President took the view that the fact that it is the client and not the agency that exercises control over the actual operation of the work does not, as a matter of law, prevent a contract of employment arising between the agency and the employee, although it would be an exceptional case where such a finding can properly be made. In many cases, the agency simply places staff registered on their books with clients and has relatively limited contact with them. In this case, however, not only were the claimants effectively obliged personally to do the work offered, but they were recruited in Poland, transport and accommodation was provided in circumstances where they were not in reality in a position to refuse them, and there were severe practical and legal limits placed on their working elsewhere whilst the contract with the agency was maintained.

The decision must not be taken to indicate a change in the established status of agency workers. The EAT President stated:

"This is an exceptional case where the nature of the relationship justified a finding that there was a contract of employment between the agency and the workers."

However, the decision could impact on the employment of thousands of workers from EU member states who are engaged by agencies to work in the UK under similar circumstances.

...UK Payroll News - Latest

Sources:
Consistent Group Ltd v Mrs. K. Kalwak and others and Welsh Country Foods Ltd

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