23 March 2018
The tripartite relationship between a client, the employment agency it uses and the workers supplied by that agency has statutory underpinning in the form of the Employment Agencies Act 1973 (‘the EAA’) and regulations made under the EAA.
However, these statutory provisions do not govern the status of the relationship between the worker and the client.
It used to be thought unlikely that an agency worker would ever be found to be an employee of the client. However, the case of Dacas v Brook Street Bureau (UK) Ltd and Wandsworth LBC changed traditional thinking in 2004. This case made it clear for the first time that in certain circumstances an agency worker could become an employee of the client.
Dacas has now been followed by the Court of Appeal in Cable & Wireless v Muscat.
Dacas Brook Street (the well-known agency) placed Ms Dacas in a cleaning job at a hostel belonging to Wandsworth London Borough Council. Ms Dacas worked at the hostel for over four years, during which time she worked prescribed hours and was subject to the day-to-day control of the Council; however, Brook Street retained responsibility for paying Ms Dacas, administering sickness and holiday absence and dealing with matters of discipline. The documents in place stated that there was no contract of employment between Ms Dacas and Brook Street or the Council.
After an altercation at the hostel, Ms Dacas was told not to return, and Brook Street gave her no further work. Ms Dacas claimed unfair dismissal against both Brook Street and the Council.
The employment tribunal held that Ms Dacas was not an employee of either Brook Street or the Council. Ms Dacas was convinced she was an employee of Brook Street so she appealed this part of the tribunal’s decision. The Employment Appeal Tribunal upheld her appeal but the Court of Appeal overturned this decision – Ms Dacas was not an employee of Brook Street.
The Court of Appeal was unable to hold that Ms Dacas was an employee of the Council, because she had not appealed that part of the tribunal’s decision. However, it was clear from the Court’s decision that it would have been tempted to make that finding if it had been able, notwithstanding that the documents stated that there was no contract of employment between Ms Dacas and the Council.
Mummery LJ said: “Although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions… In determining the true nature of the relationship (if any) between each of the respective parties, it is necessary to consider the total situation occupied by the parties. The totality of the triangular arrangements may lead to the necessary inference of a contract between such parties, when they have not actually entered into an express contract with one another.”
Several cases since Dacas have found that there can be an implied contract of employment between a client and an
agency worker, including the EAT cases of RNLI v Bushaway and Astbury v Gist Ltd, but the most important is
Cable & Wireless plc v Muscat.
In Muscat, the agency worker (Mr Muscat) was held to be an employee of the client (C&W), notwithstanding that he was engaged by the agency through a personal service company (making this a quadrangular, rather than a triangular, relationship).
The Court of Appeal confirmed the Dacas trend that an implied contract of employment can be found to exist between an agency worker and a client in appropriate circumstances (where it is necessary to give business reality to the relationship and arrangements between the parties), even where a fourth party (a personal service company) is involved.
The end of the agency worker?
As a result of Dacas and Muscat, end-users will now have to think carefully about the implications of using agency staff and consider what can be done to minimise the risk of them being found to be employees. This will have a knock-on effect on agencies, who will need to be extra vigilant on behalf of their clients in order to retain them.
Provided agency staff are used only for short-term assignments, the practical consequences of an agency worker being found to be an employee of the end-user are limited. This is because employees (who, unlike mere ‘workers’, have the right not to be unfairly dismissed) normally need to have been employed continuously for at least a year to claim unfair dismissal. That said, as both Dacas and Muscat show, short-term assignments often get extended.
- Both agency and client should diarise when the placement begins and put in place a reminder system at month 11 to alert themselves to the possibility that the agency worker might be about to gain a right not to be unfairly dismissed.
- The documentation between agency/agency worker on the one hand and agency/client on the other should be reviewed to ensure that all rights and obligations are clear.