EAT gives advice on implying an employment contract with an agency client
The London Employment Appeal Tribunal (EAT), in a decision given on 18 December 2006 in the case James v Greenwich Council, has provided, for the first time, guidance to help employment tribunals approach the question of implying a contract of service, or employment contract, between an agency worker and the agency client.
It is not necessary to say too much about the case in question. Ms. James was an employee of Greenwich Council up to 1997. After a break in the employment, she started working for the Council again in 2001, but this time supplied by an employment agency. In 2003, she moved to another agency which continued to supply her to the Council, but now for a higher hourly wage. In August and September 2004, she was sick and, during her absence, the agency supplied a replacement. When she went back to work, she was told that she was no longer required by the Council.
She claimed before an Employment Tribunal that, having worked for the Council for more than a year and effectively being in the same position as other full-time employees of the Council, a contract of employment could be implied by custom and practice. The Tribunal disagreed, stating that, because there was no obligation on the Council to provide Ms. James with work, there was no "irreducible minimum" of mutual obligation necessary to create a contract of service. In the absence of mutual obligation, the first of the two requirements to indicate a contract of service, the fact that she worked under the Council's control, the second requirement, was irrelevant. Both mutuality of obligation and control had to be present for a contract of service to exist. In addition, the agency supplied another worker during her sickness absence, she was not paid by the Council, she did not receive holiday and, when sick, she was not required to notify the Council. She had chosen to be supplied by an agency in order to receive a higher hourly rate of pay than the Council's own full-time employees.
After reviewing the increasing body of case law that covers the triangular relationship between an employment agency, the agency worker and the agency's client, in particular the decision of the Court of Appeal in Dacas v Brook Street Bureau (UK) Ltd, the EAT ruled that the Tribunal was entitled to find that there was no basis for implying a contract of service between Ms. James and Greenwich Council in this case.
One of the key points made by the Court of Appeal in Dacas v Brook Street Bureau (UK) Ltd, was that the express contracts between the parties may not tell the full story and that an Employment Tribunal should consider whether the totality of the arrangements between the three parties could lead to the "necessary inference" of a contract of service. However, as the Court of Appeal decision did not give any guidance to Tribunals on how they should approach the question of implying a contract between an agency worker and the agency's client, the EAT made the following observations to assist Tribunals in this task.
- The issue is whether the way in which the contract is in fact performed is consistent with the agency arrangements or whether it is only consistent with an implied contract between the worker and the client and would be inconsistent with there being no such contract.
- Provided that the express contracts between the parties both explain and are consistent with the nature of the relationship, no further implied contract is necessary.
- If a contract between the worker and the client is to be inferred, there must be, subsequent to the relationship commencing, some words or conduct which entitle the Tribunal to conclude that the agency arrangements no longer dictate or adequately reflect how the work is actually being performed, and that the reality of the relationship is only consistent with the existence of an implied contract. It will be necessary to show that the worker is no longer working to the agency arrangements but that mutual obligations now bind the worker and the client which are incompatible with those arrangements.
- Contrary to the comment made by one of the judges in Dacas, that "once arrangements like these had been in place for a year or more, I would have thought that the same inexorable inference (that there was a contract of employment) would have arisen", the mere passage of time typically does not justify any such implication to be made as a matter of necessity. It will frequently be convenient for the agency to supply the same worker and the client may prefer someone who already has the necessary experience. The mere fact that the arrangements carry on for a long time may be wholly explicable by considerations of convenience for all parties; it is not necessary to imply a contract to explain the fact that the relationship has continued perhaps for a very extensive period of time. This is so even where the arrangement was initially expected to be temporary but has in fact continued longer than expected.
The EAT made one final important point. One of the judges in the Dacas case commented that "the conclusion that Mrs Dacas was employed by nobody is simply not credible. There has to be something wrong with it." The EAT's view is that many agency workers are highly vulnerable from the abuse of economic power by agency clients. The problem cannot be resolved simply by tinkering with the common law. While recognising that the triangular arrangement has some benefits for all of the parties, the EAT stated, in a message to our lawmakers, that "a careful analysis of both the problems and the solutions, with legislative protection where necessary, is urgently required".
Further information:
Ms. M. James v Greenwich Council
Ends
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