Tax Temps - who employs you?

By Simon Godley
(Legal source: Field Fisher Waterhouse LLP)

In the long-awaited decision of James v London Borough of Greenwich, the Court of Appeal has upheld the decision of the employment tribunal that an agency worker, supplied by an employment agency, was not employed by the end-user (and therefore was not entitled to those statutory rights which are only available to employees, such as the right not to be unfairly dismissed).

The Court of Appeal has clarified, to some extent, in what circumstances an agency worker is or is not an employee of the end user, emphasising that the implication of a contract of service must be necessary to give effect to the business reality of a relationship between the worker and end user.

The Court of Appeal confirmed that the correct legal question is not whether the individual is an "agency worker" but whether he is employed by the end user under a contract of employment. The two types of contract - agency agreement and contract of employment - are not necessarily mutually exclusive and it is legally possible for a worker to have one kind of contract with the agency and another with the end user. A tribunal should therefore assess the factual evidence carefully to determine whether the individual is an employee. Where there is no express contract, the tribunal must consider whether it is necessary to imply a contract of employment between the parties.

In this case, the tribunal was entitled to conclude that the individual, Ms James, was not an employee of the end user (the Council) because there was no express or implied contractual relationship between her and the Council. Her only express contractual relationship was with the employment agency and, similarly, the Council's only express contractual relationship was also with the agency. The tribunal was correct when it found that it was unnecessary to imply a third contract between Ms James and the Council to give business reality to the relationship between the parties: what both Ms James and the Council did was fully explained by the express contracts they had respectively entered into with the employment agency.
Interestingly, the Court added that it is aware of the controversy at both a domestic and EU level about the absence of job protection for agency workers. However, it emphasised that courts and tribunals cannot confer the right not to be unfairly dismissed on a worker who does not have a contract of employment. It is not for them to express views about a change or to initiate change: this is a matter of social and economic policy for debate in and decision by Parliament.

The above case shows that the whole area of companies 'employing' temps via agencies is still a bit of a minefield, particularly regarding the rights of the worker (temp). It seems that the pressure is on the agencies to be very clear about contracts that are put in place, and between which parties.

Any other input or views on this would be very welcome.