Appeal judges rule on who 'employs' temps

The Court of Appeal overturned the ruling of the Employment Appeal Tribunal decision in Dacas v Brook Street Bureau, which concerned a cleaner who was placed with Wandsworth Council for six years through via the Brook Street Bureau.

The Appeal judges not only held that the agency was not the employer but directed tribunals in future cases to consider whether an implied contract of service may have arisen between the employee and the end-user, or the client company, which in this case was Wandsworth. Lord Justice Mummery, giving the lead judgment, talked of the "considerable uncertainty" about the legal status of individuals who obtain work through employment agencies.

"Some may be surprised to learn that a significant number of people in the labour market, who cannot be accurately described as casual, intermittent or temporary workers, who reasonably think that they are in stable employment relationships and whom reasonable people would regard as employees, may not be employees after all and will be denied the protection of such basic employment rights as the right not to be unfairly dismissed," he said.

The Court ruled that in determining whether an implied contract might arise "the fact and degree of control" over the work done by the employee was "crucial" and concluded that the council "exercised the relevant control over her work and over her". It continued: "As for mutuality of obligation, (a) the Council was under an obligation to pay for the work that she did for it and she received payment in respect of such work from Brook Street, and (b) Mrs Dacas … was under an obligation to do what she was told and to attend punctually at stated times. As for dismissal, it was the Council which was entitled to take and in fact took the initiative in bringing to an end work done by her …"

In particular, the Appeal judges ruled that the fact that there was a contract between the worker and the agency expressly stating that the worker was not an employee of either the agency or the end user did not determine the issue. Lord Justice Sedley said that "once arrangements like these had been in place for a year or more, I would have thought that the same inexorable inference [that she was employed by the Council] would have arisen".

"Clearly, the Court was determined through a purposive approach to find that someone must be the employer in tripartite agency situations," said Joanne Edwards, a solicitor at Berwin Leighton Paisner. "It considered it undesirable for agency workers to be classified as non-employees and consequently denied basic employment rights, such as protection in unfair dismissal and redundancy situations, which apply only to 'employees'". In this instance, the Court of Appeal concluded that the end-user was the employer and Edwards added that it steered tribunals in future cases, "subject to a review of all the evidence and a thorough analysis of the overall working relationship", to reach a similar conclusion." "What seems desirable for all parties concerned is a legislative review of this difficult area," she added.

Next month, sees the Conduct of Employment Agencies and Employment Businesses Regulations 2003 coming into force, which update the regulation of employment agencies. The rules include measures to prevent certain agencies being allowed to charge upfront fees before they find them work; as well as banning the practice of withholding workers' pay because they cannot produce an authenticated timesheet; and limiting provisions that prevent temporary workers from taking up permanent jobs with hiring companies unless a fee is first paid to the agency.