Evaluate the current legal position of agency workers, as regards the difficulties encountered in establishing employee status, and their exclusion from certain employment rights.

Example Employment Law Essay

In a traditional employment relationship there must be a contract of service between the employee and the employer. The importance of the contract is that only an employee is protected by employment legislation; apart from this, certain terms are implied into a contract of employment at common law. Another aspect of the employment relationship through a contract of employment is the liability for tax and National Insurance contributions and the fact that some social security benefits are reserved for employees; besides all the above, the duty of care towards employees and the responsibility for the acts of the employees is much greater if there is a contract of employment.1

The position of agency workers in the context of employment law is outside the traditional employment relationship, yet, the number of agency workers has increased in recent years and now constitutes around seven percent of the workforce; 2 they form an important part of the functioning of a business.3 This essay looks at the current legal position of agency workers through looking at case law and analysing the effectiveness of the Agency Workers Regulations 2010 (AWR 2010) on creating equal treatment for agency workers.

The employment status of agency workers is problematic because it is not easy to determine who actually employs them. It is important to ascertain whether they are employed by the agency or by the end-user, and to establish if the agency worker is in fact an employee.4 Most of the time, the agency worker has no direct contractual relationship with the end-user, who merely contracts with the agency for a worker to be supplied. 5 However, a contract between the agency and the worker is hard to define because the requirement of mutuality of obligation is absent from the relationship between the agency and the worker: there is no obligation for the agency to provide the worker with work or for the worker to accept the work. Furthermore, the agency does not have control over the worker who, once hired, will be under the control of the end-user.6

In Wickens v Champion Employment 7 the Employment Appeal Tribunal (EAT) decided that there was no contract of employment despite the existence of a written statement that described the temporary worker as having a contract of service with the agency. The decision was made based on the lack of control the agency had over the work carried out, the lack of mutual obligation and the fact that the workers were stated to be responsible for their own safety. 8 However, the Court of Appeals stated in Franks v Reuters 9 that dealings between the parties over a period of years, rather than weeks or months are capable of generating an implied contractual relationship.10 This was further stated in Dacas v Brook Street Bureau11 where the Court of Appeal stated that one year was long enough to create an implied contractual relationship between the agency worker and the end user.12

In a subsequent case, Cable Wireless plc v Muscat 13 the Court of Appeal further reiterated the Dacas decision and also stated that the employer of an agency worker will often be the end-user rather than the agency.14 However, the EAT has not followed the guidance of Dacas in subsequent cases, despite the fact that Dacas remains binding: the EAT has stated that it will be rare to imply a contract if the arrangements between the parties are genuine and reflect their wishes, and that, a contract of employment will only be implied if necessary to give business reality to the situation: a test of necessity, as shown in James v Greenwich LBC.15

Ms. James had a job with the Greenwich Council; she found the job through an agency and she worked with the Council for several years. The Council replaced her and she claimed unfair dismissal. Both the tribunal and EAT decided that she had not been employed by the Council under a contract of service. The Court of Appeal upheld the decision on the grounds that the contracts with Ms. James were paid to the agency, which subsequently paid her; therefore, they concluded, she had a contract with the agency and it was not necessary to imply the existence of another contract with the Council. 16 Mummery LJ, giving the main judgment in James, had given the main judgment in Dacas; despite the contradictory judgments he said that 'there is no significant difference between the decision of this court and those of the EAT'.17

In Tilson v Alstrom Transport 18 an agency worker was summarily dismissed. He was integrated into the business to a very high degree, for instance, he had to apply for annual leave, he was authorised to recruit and fire staff, he represented Alstrom in negotiating contracts and he was provided with a computer, a mobile telephone, and he had full access to technical information and reports. This however, did not make him an Alstrom employee. 19 The Court of Appeal ruled that a high degree of integration was not incompatible with the existence of a contract between the agency and the worker, or with the lack of contract between the worker and the end-user. They stated that neither integration nor having to apply for annual leave were sufficient to imply a contract.20 The test of necessity set in James was not satisfied.21

The AWR 2010 was enacted to provide protection for agency workers and to close the gaps left by common law. Under the AWR, agency workers have the right to equal treatment in relation to the employees of the end-user. However, the regulations do not deal directly with employment status, which is a very important point affecting agency workers, nor does it deal with the fact that long-term agency workers do not acquire the right to claim unfair dismissal or redundancy as employees can.22 For instance, regulation 3 (1)(b) (i) defines an agency worker as an individual who has a contract of employment with the agency; 23 in reality this is not always the case, because the agency does not have control over the worker and there is no mutuality of obligation in their relationship.24 Under 3(1) (b) (ii), an agency worker is an individual who has any other contract to perform work or services personally for the agency; however, Pitt argues that an agency worker does not work for the agency in any sense, but for the agency's client, the end-user (referred to as 'hirer' in the AWR), on behalf of the agency, and she further argues that it would take some very creative purposive construction to ensure that the Regulations 'are not deprived of any effect at all'. 25

A further point regarding Regulation 3 is the fact that the work done by the agency worker has to be temporary. The EAT looked into this point in Moran v Ideal Cleaning Services Ltd 26 where a group of cleaners employed by Ideal Cleaning Services were placed with a specific end-user; they never worked for any other client. The EAT decided that the workers were not covered by the AWR because temporary meant short-term and the contracts under which the workers were placed with the end-user were of long duration and therefore not temporary and they fell outside the scope of the AWR.27

The AWR aims to protect temporary agency workers by applying the principle of equal treatment as defined in Art 5 of the European Convention on Human Rights. In order to effect equal treatment, it provides for two-tiered equality rights: day one rights such as equal access to facilities (canteen, childcare, vacancy lists) under Regulation 12. 28 For more detailed requirements such as equal pay, annual leave, rest periods and paid time-off for ante-natal appointments, Regulation 5 provides the guidelines. In order for the worker to be covered under Regulation 5, there is a twelve-week qualifying period under Regulation 7; providing that the worker complies with the period, he is entitled to the same rights as if he had been hired directly by the end-user.29 Regulation 7 aims to protect the agency worker from the hirer breaking the assignment by providing that continuity of the twelve-week period will not be broken unless at least six weeks have passed between periods.30 Pitt questions the protection afforded to the worker by regulation 7 and argues that if the hirers want to avoid the equal treatment provisions, they will simply provide workers with shorter assignments. 31

Under Regulation 13, the agency worker is entitled to be informed by the hirer of any relevant vacancies in order to find permanent employment with the hirer as would a comparable worker; for the purpose of this section an employee of the hirer would be a comparable worker. However, in Coles v Ministry of Defence32 the EAT upheld the decision that the scope of Regulation 13 is limited to providing agency workers with a right to be informed of vacancies within the hirer company but rejected the argument that agency workers are afforded the same status as employees when being considered for a vacancy.33 Cole had been informed of vacancies by the Ministry, although he never activated the facility provided; the EAT ruled that informing was all the Ministry had to do to satisfy Regulation 13, and that, the interpretation of 'the same opportunity as a comparable worker' did not confer a right to be interviewed or considered for employment.34

The use of a comparator creates difficulties. In Cole, the EAT decided that the Ministry's employee who was given Cole's position was not a comparable worker. The Ministry had a grading system, and besides, the employee was in a redeployment pool, and therefore, had 'stage 1' status which gave priority for vacancies. 35 A further difficulty when using a comparator can be seen when applying Regulation 6 in respect of equal pay. Pitt argues that a major issue is how to determine what terms the agency worker would have got if hired as an employee but furthermore, if the worker is hired to do a unique job, the comparator does not exist, and therefore it is not possible to determine the individually negotiated terms that a comparable employee would have been given by the hirer. 36

Another issue regarding equal pay is an exception to equal treatment under Regulation 5 and known as the "Swedish derogation'. It is contained in Regulation 10 and it states that if a worker has a permanent contract with the agency, the right to equal pay ceases to exist.37 A requirement is that the contract between the agency worker and the agency must exist before the beginning of the first assignment under that contract in order to comply with Regulation 10(1)(a).38

The effect of the derogation was looked into in Bray v Monarch Personnel 39 where a group of agency workers employed by an agency, Monarch Personnel (MP) were hired to BP. Anticipating the enactment of the AWR, BP told MP that they would only accept agency workers employed under Swedish derogation contracts.40 The workers took legal action against MP on the basis that Regulation 10 could not apply to those new contracts as they had been hired to work for BP months before, and the contracts did not comply with the requirements stated in Regulation 10(1)(a). The judge ruled that the requirement did not mean the entire period the worker had been working for the hirer and that it could mean a specific and distinct part of that period. Therefore, the Swedish derogation applied. 41

In view of all of the above, the conclusion is that the AWR have failed to resolved some of the most important issues to do with an agency worker's ability to achieve employment status with a hirer and it can be argued that the tri-partite relationship between agency, worker and hirer remains largely undefined, leaving the agency worker in an employment vacuum. Although the AWR provides for equal treatment for agency workers, recent case law shows that this can be complicated by the need to use a comparator. Furthermore, hirers can use the Swedish derogation to avoid equal pay. Pitt argues that the most significant problem regarding job security is a very pressing issue and that the AWR leaves it unresolved.42


1 Gwyneth Pitt, Employment Law (8th edn, Sweet & Maxwell, 2011) 85,86

2 Ibid, 97

3 Ibid

4 Hugh Beale, Chitty on Contracts (31st edn, Sweet & Maxwell, 2012) Volume 2, Specific Contracts, Chapter 39, 39-027. Available through Westlaw UK- search Books- Under C- Chitty on Contracts, accessed on 12 September 2015.

5 Pitt (n 1) 98

6 Pitt (n 1) 97

7 1984 ICR 365; (1984) 134 NLJ 544 EAT

8 Pitt (n 1) 97

9 2003 IRLR 423

10 Charles A Cross, S H Bailey, Cross on Local Government Law (Sweet & Maxwell, 2015) 8A-10. Available through Westlaw UK- search legislation- Agency Workers Regulations 2010- 3 The meaning of agency worker- left hand menu- books- Cross on Local Government Law. Accessed on 12 September 2015

11 2004 EWCA Civ 217; {2004} ICR 1437; 2014 IRLR 358

12 Cross (n 10) 8A -11

13 2006 IRLR 354

14 Cross (n 10) 8A-11

15 2007 IRLR 168

16 Gillian Phillips, Karen Scott, Employment Law (College of Law Publishing 2014) 18

17 Ibid, 18

18 2010 EWCA 1038

19 IDS Employment Law Brief, Case comment: Integrated agency worker not employee of end-user (2011) 918, 13-15

20 Ibid

21 Ibid

22 Pitt (n 1) 100

23 Agency Workers Regulations 2010 (SI 2010/93)

24 Pitt (n 1) 100

25 Pitt (n 1) 100

26 2014 IRLR 172 EAT

27 IDS Employment Law Brief (2014) 991, 6-7

28 Phillips (n 16) 19

29 IDS Employment Law Brief (2013) 983, 15-19

30 Pitt (n 1) 100

31 Pitt (n 1) 100

32 Appeal No. UKEAT/0403/14/RN

33 IDS Employment Law Brief (2015) 1027, 17-18

34 Ibid

35 Ibid

36 Pitt (n 1) 100, 101

37 IDS (n 26)

38 IDS (n 26)

39 Bray v Monarch Personnel Refueling (UK) Ltd (ET/1801581/12)

40 IDS (n 26)

41 IDS (n 26)

42 Pitt (n 1) 101