Agency Workers

Due to the flexibility they provide, many businesses have used temporary agency staff in the past, and still do so, as a way of plugging skills gaps and ensuring cover over particularly busy periods.

The company that provides you with the staff is technically known as an employment business. They source the staff, pay them and ensure they attend work. You pay a fee to the employment business and gain the skilled staff you need
- at the time you need them - but do not end up creating an employment relationship with the person carrying out the work.

Practically speaking, this means that once the work has been completed the agency worker can be let go and there are no employment repercussions for you. Or that is how it should be, but with recent case law the employment status of agency workers is confused.   

Employment rights flow from employment status, so it is very important to be aware of the status of your employees.

The following are the different types of employment status:

Employees

People employed under a contract of employment – enjoy all employment rights after twelve months’ service, including the right not to be unfairly dismissed and holiday pay.

Workers

Distinguished by the lack of mutuality of obligation; this means that you are not obliged to offer those under contract any work and if you do, they are under no obligation to accept it. Workers do not attract the right of protection from unfair dismissal and cannot claim breach of contract, but do enjoy the protection of the Working Time Regulations and can also bring discrimination claims.

Self-employed

These people are employed on a contract of services and provide their own tools and resources. If they are unable to attend to carry out the work, they can substitute someone else to carry it out and generally take the financial risk of running their own business. They are typically paid an invoice for completing a job, rather than receiving a wage for hours worked.

However, the situation regarding employment status is never clear-cut and, if it is part of an Employment Tribunal claim, the Tribunal will look to see how the relationship was carried out in practice. While, contractually, it may appear obvious that the person in question is self-employed, when the way the relationship has been managed is actually looked at, it could be that the person is perceived to be an employee with all the attendant employment rights.

Agency workers fall between the cracks of these classifications of employment status. They will have a contract with the employment business that expressly states it is not a contract of employment and that there is no mutuality of obligation; the employment business is not obliged to offer the person in question any work, nor are they obliged to accept it once it is offered.   

Case law has left such people in limbo and actually suggests two very different explanations of their employment status.

The first line of cases suggest that you should consider a triangular relationship between the end user (the business where the work is carried out), the employment business and the person carrying out the work, especially when the agency worker has been working for you for a long time. In this line of cases, it is possible that there may be a contract of employment with the end user, though the agency worker will not necessarily have a contract of employment with the end user.

The second line of cases would suggest that the agency worker is not employed by anybody and thus has no employment rights.   

However, with two lines of cases with the same levels of precedence, this area of law is not very clear and if you were to be involved in any Employment Tribunal claims regarding the status of an agency worker, it would be difficult to predict an outcome.

A recent case has decided that, while the contract explicitly stated it was not a contract of employment, the way the relationship was managed in practice, meant there was a contract of employment in place. The Tribunal felt that the deciding point was that there was mutuality of obligation in that the level of dependency on the employer was such that they would have to accept any work they were offered.   

While this case has been sent back to an Employment Tribunal from the Court of Appeal - meaning a new decision has to be made because the Court of Appeal felt the original decision was flawed in law - it is a clear indication that the way the relationship actually works is crucial to employment status.   

This could all change, though how it will work in practice is not very clear. The Government has recently announced that agency workers will receive equal treatment with full-time permanent employees. However, at the moment there is no indication of what shape this will take.   

What is quite clear is that if you use agency workers regularly, there will no longer be any flexibility in doing so if they gain full employment rights after 12 weeks' service. However, until we know exactly the shape of the legislation that implements this, it is hard for us to clearly understand the impact.   

We will, of course, be monitoring the situation and informing you of the impact as soon as we are aware of it. Keep your eyes on future editions of ESsential News and if you have any queries regarding employment status, please call our 24 Hour Advice Line.