21 December 2010

Employment news: Agency workers and employment status


Emma Sanderson

Consultant | UK

In recent times, case law has turned against agency workers being able to easily assert a direct employment relationship with the end user/client. A new Court of Appeal case (Tilson v Alstom Transport) continues this trend.

Essentially, the position remains that an employment relationship between an agency worker and an end user client can be implied – but only if it is necessary to give effect to the reality of the relationship (and this will not be done lightly). The Court of Appeal quoted an earlier case in which it was said: “It is not enough to form the view that because the Claimant looked like an employee, acted like an employee and was treated as an employee, the business reality is that he was an employee and the ET must therefore imply a contract of employment.”  Tribunals will always look into the facts of any individual case, including the documents that purport to record the arrangements between the parties and how the relationship works in practice.

In Tilson, no employment relationship was found to exist despite the fact that the individual was fully integrated into the end user's business (in a managerial position, in which he was responsible for the business and had the power to dismiss, discipline and recruit on its behalf).  The Court of Appeal even said: “Absent any agency arrangements, there can be no doubt that even if there were no express contract, one would readily be implied given this working relationship.”

That said, it was an important factor in this case that Mr Tilson had in fact chosen not to be an employee of the end user Alstom – until the relationship was terminated. Alstom had apparently offered him, more than once, a permanent job as an employee under an employment contract, but he had specifically rejected these approaches, partly because he was on a higher rate of pay under the agency arrangement than he would have been as a direct employee (so he wanted more guaranteed hours to make up the difference) and partly because he also perceived there to be tax advantages in the agency arrangement.

The Court of Appeal makes clear that a direct employment relationship can be implied where the parties act in a way that, contrary to what the documents say, suggests there is a common intention or desire that there should be an employment relationship between them. But it would be inappropriate to imply a direct employment contract where this would be inconsistent with the stated intentions of one or both of the parties.

Be wary of sham clauses

The Court of Appeal also hints that end user clients should be careful not to put terms into their contractual documents that they have no intention of abiding by as this will give credence to an argument by the individual that certain clauses in the contract and potentially the whole contract is a sham.  In this case, the Court decided that Alstom had not misled Mr Tilson in the contractual paperwork about the nature of their relationship (eg about the amount of control it would exercise over him). The fact that the agency had included misleading clauses in its paperwork did not make any difference to Mr Tilson's relationship with Alstom.  But if it had been Alstom itself that had described the relationship as being something different from the reality, the outcome of the case might have been different.     

Emma Sanderson

Consultant | London

Category: Article