Employment status – where are we now?

The issue of the employment status of an agency worker has been one on which there has been a flurry of judicial activity over the past two years. The recent trend in court decisions has been to find that there has been an implied contract of employment between the agency worker and the end user client.  Whilst this may at first, appear to be more of a concern for the end users than recruiters, the knock on effect on the recruitment industry may not be insignificant as end user’s turn to their supplying agencies to cover the costs involved. Dacas v Brook Street Bureau Court of Appeal 2004 After 4 years of working as a cleaner through Brook Street for Wandsworth Borough Council Mrs Dacas’ assignment was abruptly ended due to a dispute between her and the council. Even though her written contract was with Brook Street, the Court reached…

When is an agency worker an employee?

The issue of employment status is rapidly becoming a minefield for recruitment agencies and their clients.  Failure to keep up to speed with the constantly changing legal position can prove very costly. In Cable & Wireless v Muscat, for example, the Employment Appeal Tribunal held that an agency worker was an employee of the end user, despite the contract between the agency and worker stating otherwise.  There are further recent relevant cases that affect the position between an end user, agency and its worker. These may pave the way for agency workers to claim full entitlement to employee rights and compensation – including unfair dismissal.  The decision raises some fundamental issues such as, are agency workers entitled to employment rights?  How will end users of agency workers respond?  How can recruiters protect existing business? Central to the concept of agency work is the client’s need for flexibility, in particular the ability…

Cable & Wireless v Muscat – Agency Clients Respond

Following the case of Dacas -v- Brook Street Bureau last year the Employment Appeal Tribunal (EAT) has upheld a decision of an Employment Tribunal that an agency worker, operating through a personal services company, is the employee of the end user. In Dacas there was relief in the recruitment community that the agency Brook Street had not been held to be the employer. However the Court of Appeal gave a very strong indication that the end user in that case, Wandsworth Council, may have been an employer of the agency worker, Mrs. Dacas, under an implied contract of employment. The Dacas case therefore set an unhealthy precedent so far as recruiters are concerned for the likelihood that agency workers may actually be employees of the end users depending on the circumstances of the engagement. The case of Cable and Wireless -v- Muscat has taken this one step further. Now the…

End User held to be the employer of agency worker

Following the case of Dacas –v- Brook Street Bureau last year the Employment Appeal Tribunal (EAT) has upheld a decision of an Employment Tribunal that an agency worker, operating through a personal services company, is the employee of the end user company. Although subject to a right to appeal, in the case of Cable and Wireless –v- Muscat it has been found that express terms in a contract between the agency and the worker cannot affect the existence of an implied employment relationship between the worker and the end user company. This is because the terms between an agency worker and an end user company are not set out in the agency and worker contract, but are instead implied from the circumstances and actions of the worker and the end user company towards each other. The EAT has also held that the fact that the worker operated through a personal…

Brook Street case opens the door for tribunal claims

Following the result in the Brook Street v Dacas case earlier this year in the Court of Appeal we are starting to see evidence of temps ‘chancing their arm’ in tribunal claims against end user clients.  Two claims have been notified to us in the last three weeks indicating that the Brook Street judgment may not be as favourable to agencies as first thought. The Brook Street case related to a claim by Mrs. Dacas, an agency worker engaged on a contract for services, that she was an employee of Brook Street which had supplied her to work for the end user Wandsworth Borough Council over a period of several years.  The Court of Appeal found that Mrs. Dacas was not an employee of Brook Street, but in reaching that conclusion two of the three Appeal Court judges stated that she may have been an employee of the Council under…

New EAT case poses danger

A recent decision by the Employment Appeal Tribunal (EAT) could have significant implications for all agencies placing PAYE temporary workers with clients. The EAT held that a Temp who had worked as a cleaner for a hostel through the agency Brook Street was an employee of Brook Street and was therefore entitled to pursue a claim against them for unfair dismissal. Temps assigned by an agency to work for a client are not usually considered employees of either the agency or the client. As a result temps do not have full employment rights such as the right not to be unfairly dismissed, to maternity and parental leave, to redundancy payments, to statutory notice nor to any new rights to be introduced under the Employment Act 2002. Although the temp’s contract said that she was not an employee of Brook Street or the client, and that she was to work under…

DTI’s employment status review

The Employment Status Review (ESR) was first announced by the government on 11th July last year in document called ‘discussion document on employment status in relation to statutory employment rights.’ The consultation period to reply to this paper has now passed. However, the ESR does offer an interesting insight into the government’s thoughts on the issue of extending employment rights to atypical workers such as agency workers, temps, contractors and labour only subcontractors (in the construction industry). The ESR has its roots in section 23 of the Employment Relations Act 1999, which enables the Government to extend the coverage of many statutory employment rights by secondary legislation. However, it would seem that the actual discussion document was encouraged by the remarks of Mr Justice Buckley in Montgomery –v- Johnson Underwood. In this case it was stated by Mr Justice Buckley that the there appears to be considerable uncertainty concerning the…

EU agency workers directive

Whilst many of you have no doubt heard of the proposed Agency Workers Directive (AWD), do you really understand the possible effect this proposal could have on your business and the recruitment sector? The general aim of the AWD is to help the EU “become the competitive and most dynamic knowledge-based economy in the world, capable of sustained economic growth with more and better jobs and greater social cohesion” and specifically: To improve the quality of temporary agency work by applying the principle of non-discrimination to establish a suitable framework for the use of temps in the EU Although recruitment agencies are well established in the UK, this is not the case throughout the EU (for example in Italy until recently the operation of an employment agency was deemed illegal). Indeed, some estimates suggest that as many of 1/3 of all agency workers in the EU are based in the…

Working time and holiday pay

Employment Tribunals (ETs) have made heavy weather of the provisions in the Working Time Regulations (WTR) relating to holiday pay. No one doubts that workers are entitled to payment, and many agencies include a sum in respect of that pay with normal “wage” payments. Conflicting results have arisen from applications to ETs, on the one hand indicating that inclusive payments are not legal, and on the other hand indicating they are. To the rescue comes the Court of Appeal, which has indicated that if the parties agree that pay includes holiday pay then it can be held to be a valid arrangement. The lesson from this is that you should not include payment for holidays within the normal pay rate unless you have the worker’s express agreement, or you want to run the risk of a claim. However, this particular sea is murkier than first appears. A recent decision makes…

Risk management and insurance

Effective risk management is crucial to businesses of all sizes and is no less important to a recruitment agency when the market is in a downturn. It may be tempting to ignore risk when the times are tough but storing up potentially dangerous liabilities could prove costly in the long term. Contracts An important aspect of reducing risk is assessing the commercial terms of the contracts that the agency signs. These will include the trading contracts signed with clients and contractors as well as contracts with suppliers. It is vital that every agency is fully aware of rights, obligations and restrictions contained in commercial contracts. This requires checking which terms are absolute obligations, which terms require the agency to use its reasonable endeavours and which terms require using best endeavours. There are important legal distinctions and being aware of these will be an important part of a strategy to minimise…