Agency workers: the Court of Appeal rules

April 10, 2008

Agency workers are considered to "miss out" because many important employment rights, such as protection against unfair dismissal, are only enjoyed by those who can bring themselves within the legal definition of an 'employee'. Much case law has therefore been generated by workers seeking to establish that they too are employees and therefore eligible for the same coveted employment protection rights. As the latest ruling from the Court of Appeal demonstrates, however, agency workers face difficulties in convincing a tribunal that they qualify for the same level of protection as permanent staff.


The relationship with agency workers is usually between the agency and the institution, rather than directly with the agency workers themselves. The absence of a contract is fatal to a claim to employment status; so for many years claims by agency workers that they were employed by the end-user of their labour were generally thought destined to fail. All that changed, however, with the Court of Appeal's decision in the case of Dacas v Brook Street Bureau (UK) Ltd (2003). The Court held that even if there is no express contract between the parties in any particular case, it is necessary to consider whether there might still be an implied contract. Comments made in that case led to speculation that an employment contract may inevitably arise if a worker's engagement were to carry on for more than 12 months.

In 2006 we started to see the first signs of a retreat from Dacas, beginning with Cable & Wireless v Muscat (2006). This was followed by the EAT's decision in James v London Borough of Greenwich (2006), which observed that it will rarely be appropriate to imply a contract between the worker and the end-user where the agency arrangements are genuine, so long as they accurately reflect how the work is actually being performed. As the EAT said, in typical three-party agency arrangements, the question to ask is whether the way in which the contract is, in reality, performed is consistent with those agency arrangements, or whether it is only consistent with there being an implied contract between the worker and end-user. James was followed last year by a raft of EAT cases reinforcing its conclusions.

The Court of Appeal's decision in James

James was appealed and the Court of Appeal handed down its decision recently. The Court of Appeal dismissed Ms James' appeal against the finding that she was not employed by the council.

As is typical in agency relationships, Ms James' work arrangements were set out in two written agreements: one (which described her as a self-employed worker) between herself and an employment agency, the other between the agency and the council. When she claimed that she had been unfairly dismissed by the council, a tribunal held that she had not been an employee and dismissed her claim. Ms James was unable to persuade the tribunal that it should imply the existence of a contract, despite the fact that she had carried out work for the council for several years.

The Court of Appeal refused to overturn the tribunal's decision. In doing so, it endorsed the guidance given by the EAT outlined above.

A note of caution

There are still circumstances in which it might be appropriate to imply an employment relationship. In two cases last year the EAT concluded that the workers were employees of the end-user. In these cases the workers had negotiated changes to their terms of engagement directly with the end-user (rather than the agency that supplied them) and this was a crucial factor.

Other developments

For years the UK has resisted attempts in Europe to introduce a directive that would give agency workers rights to the same terms and conditions as permanent employees in areas such as pay and holidays after just six weeks' service. However, the Government has come under mounting pressure from trade unions and Labour backbenchers as exemplified by UCU's public support of agency workers when it joined the TUC in calling on the Government to support a bill giving agency workers equal treatment rights at work. On 22 February 2008, a Private Member’s Bill proposing greater rights to agency workers passed its second reading in the House of Commons. A similar bill failed last year due to lack of government support. Gordon Brown has also offered to set up an independent commission to consider the rights of temporary and agency workers.

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