Employment Alert - 5 February 2008
Employment status of agency workers

Alert! The Court of Appeal has today handed down its judgment in James v London  Borough of Greenwich and held that long term agency workers are not necessarily employees. However, definitive guidance on this vexed question has not been provided. Anne Palmer reports on this key case dealing with the employment status of agency workers.

Since the Court of Appeal’s decision in Dacas v Brook Street Bureau (2004) it has been thought that, where an agency worker has been treated like an employee for an extended period of time, they can transform from an agency worker into a full blown employee. How, and when, this happens was not explained in Dacas and, since 2004, the judiciary has grappled with these knotty questions in various employment agency worker cases. The latest in this line of cases is the decision handed down today by the Court of Appeal.

After a period of working for the London Borough of Greenwich (“the Council”) as an employee, Ms James’ left the Council’s employment and, in 2001, returned to work for them through an employment agency. The agency supplied a different worker to the Council when Ms James was unwell and, when she recovered and was ready to return to work, in September 2004, Ms James was told that her services were no longer required. Ms James claimed that this amounted to an unfair dismissal and that, as an employee of the Council, she had the right to bring such a claim. The Council argued that Ms James had no right to bring a claim of unfair dismissal against them, as she was employed by the employment agency.

The Employment Appeal Tribunal (EAT) agreed with the Employment Tribunal that there was no implied contract of employment between the Council and Ms James.

Ms James appealed this decision to the Court of Appeal, which has decided that Ms James was not an employee of the Council. Unfortunately, the Court of Appeal declined to provide definitive guidance on the question of the employment status of agency workers. Instead, it suggested that each case will need to be decided on its facts by tribunals, and they will need to consider the question of whether an implied contract between the employee and end-user client is necessary. Employers will be pleased to note that the Court of Appeal has said that long term agency workers are not “employees in disguise” and the implied contract test will be applied in all but the most extreme cases (such as where the involvement of an agency is a sham).

This may well not be the end of the matter for the parties in this case, as they may make an application to appeal to the House of Lords. We will keep you informed of any developments, but this case has not provided the hoped for resolution to the question of agency workers’ employment status.

In the meantime, a legislative solution to this issue is also proving to be elusive. A private member’s bill, the Temporary and Agency Workers (Equal Treatment) Bill 2007-2008, is due to be read for a second time on 23 February 2008 but a similar Bill was introduced last year without success. In Europe, EU Member States failed to reach agreement in December 2007 in relation to the draft EU Temporary (Agency) Workers Directive, which aims to give agency workers similar rights to employees.