When is an agency worker not an employee? Answer – most of the time

A recent case considered by the Employment Appeal Tribunal has confirmed that in the vast majority cases there will be no employment relationship between an agency worker and the employment business that supplies them, writes Adrian Marlowe, managing director of Lawspeed, a recruitment law specialist. Only if there are exceptional facts in a case can such an employment relationship be brought about.

The case, The Secretary of State for Business Innovation & Skills v Mr J Studders and others, concerned a number of individuals who were supplied on assignment to an end-user by Unity Personnel Limited. This was a traditional temporary worker arrangement with direction and supervision being exercised by the end user and payment to the individuals was made by Unity.

The contract between Unity and the individuals clearly stipulated that it did not give rise to a contract of employment and the individuals were temporary workers, although legally Unity had to make deductions for tax and National Insurance from their pay. The individuals were not obliged to accept an assignment, nor were Unity obliged to offer them work. Also, either party was entitled to terminate the contract at any time.

Unity became insolvent and the individuals claimed employment status (and therefore specific employment payments). The Secretary of State stepped in as Unity was insolvent. Initially, the Employment Tribunal agreed that they were employees but this was appealed.

The EAT examined the whole range of case law on the issue of employment status of agency workers and said that the initial decision was incorrect and the individuals were not employees of Unity. There was nothing exceptional about the facts of the case and the contract terms were clear and unequivocal.

The EAT very specifically pointed out that the two necessary requirements of a contract of employment – mutual obligations to do and provide work and an appropriate degree of control – did not exist between the temporary worker and agency. This follows the Court of Appeal decision in the case of James v London Borough of Greenwich (2008) which effectively provided that contracts that reflect the arrangements are determinative of status.

This case therefore once again establishes that agency workers are not employees of the agency where a proper contract for services is used.