New Court of Appeal ruling on status of agency workers

The Court of Appeal's 5th of March judgment in Brook Street Bureau v. Dacas is likely to set the benchmark for cases concerning the employment status of agency workers. Recent cases have grappled with the issue of whether agency workers are the employees of the employment agency, employees of the end user or are not employees at all. The majority opinion, which for legal reasons is not binding, was that where there is no express contract of employment at all it is likely that the end user will be the legal employer.

Mrs Dacas worked as a cleaner. For many years she worked at a mental health hostel run by Wandsworth Borough Council. She had been supplied to the Council by Brook Street Bureau under a general agreement between them for the supply of labour. She had a written Temporary Worker Agreement with Brook Street, but there was no written contract at all between her and the Council. After the Council told Brook Street they no longer wanted her services Brook Street did not give her any further work. Mrs Dacas subsequently claimed unfair dismissal against both the Council and Brook Street. The Employment Tribunal decided that she was neither an employee of the Council nor Brook Street. Accordingly her claim for unfair dismissal failed. The Employment Appeal Tribunal allowed her appeal and held that Brook Street was her employer, but let off the Council.

The Court of Appeal unanimously overturned the Employment Appeal Tribunal decision that Brook Street was Mrs Dacas' employer, but the Court then went on to consider the position of the end user, namely the Council, even though Mrs Dacas had not included them in her appeal. The consensus of the majority, in obiter comments, was that a worker like Mrs Dacas had to be the employee of someone. It was wrong to say that she would be the employee of the agency and in their view the basic presumption should be that the end user was the employer.

The majority of the Court of Appeal concluded that in dealing with cases of this kind in future, Employment Tribunals should not determine the status of the applicant without also considering the possibility of an implied contract of employment between the end user and the worker and making findings of fact relevant to that issue.

It was noted by one of the majority Judges, Lord Justice Sedley, that conduct "may become unequivocal if it is maintained over weeks or months" in relation to establishing the necessary mutual intentions for a contract of employment to exist. He also stated "once arrangements like these had been in place for a year or more, I would have thought that the same inexorable inference [that she is an employee of the Council] would have arisen."

The majority's view should sound a clear warning bell for all employers obtaining the benefit of labour via agency contracts. Those employers need to reassess the risk/reward balance inherent in those arrangements in light of this strong expression of judicial opinion. Employment businesses should, however, be able to draw comfort from the Court's unanimous decision that the employment business, that is Brook Street Bureau , was not an employer in these circumstances. It is doubtful this is the last word on the subject and it is possible the Government may yet invoke its power under Section 23 of the Employment Rights Act 1996 to legislate on the status of agency workers.

This judgment comes at a significant time as the new Conduct of Employment Agencies and Employment Businesses Regulations 2003 come into force on 6 April 2004. Amongst the new requirements are that the "employment business" (that is the "agency" providing the workers) must inform the workers in writing whether they are employed or engaged under a contract of employment or a contract for services and the terms that apply.

If you require any advice or assistance on agency workers please contact Simon Jeffreys by telephone on 020 7367 3421 or by email at simon.jeffreys@cms-cmck.com or Anthony Fincham by telephone on 020 7367 2783 or by email at anthony.fincham@cms-cmck.com