To decide if agency workers are employees, numerous cases have now followed the James decision and in many a three-stage approach is used:. Here the Court of Appeal decided that it was not necessary to imply a contract for a blacklisted agency worker who had had management jobs in the construction industry. When his agreement was terminated, Smith claimed he had been unfairly dismissed because of his trade union activities. The CA followed the decision in James and would not imply a contract between him and the end-user.
Case: Tilson v Alstom Transport The Court of Appeal also followed the James decision in this case and confirmed the principle that an employment relationship should be implied only if it is necessary to do so. The mere fact that the worker is significantly integrated into the organisation is not inconsistent with the existence of an agency relationship.
The court emphasised that it is an error to think that because someone looks and acts like an employee, it follows that he or she is always an employee in law. Where individuals are unable to claim unfair dismissal against the end-user, they may claim that the umbrella agreement which covers the relationship generally between themselves and the agency gives rise to employee status with the agency. This argument is unlikely to succeed unless there is:. Workers who cannot establish employee status may still be protected by the Agency Worker Regulations These lay down a basic protective framework for temporary agency workers.
From there will be some changes to these regulations especially regarding those agency workers who have a permanent contract with their agency and are paid between assignments. These workers are currently excluded from the principle of equal treatment in relation to pay under the Regulations.
The Employment Agencies Act and the Conduct of Employment Agencies and Employment Businesses Regulations updated in provide a framework of minimum standards for the recruitment industry in the UK. The regulations distinguish between employment agencies and employment businesses and generally regulate standards of conduct in both.
See also Agency Workers Regulations below. Workers supplied by an employment agency are introduced by the agency to the employer. In the vast majority of cases, the agency finds permanent work for the work-seekers, who will then be employed and paid directly by the employer as employees.
There is no possibility of the agency and the worker having an employment relationship. Workers supplied by an employment business are employees of the agency, temporarily seconded or supplied to a client end-user. The temps are usually paid by the employment business, not the end-user. The end-user may, or may not, be found to be an employer of the worker depending on a number of factors, including the length of the relationship with the worker. Both forms of agency must set out terms for temporary staff including the status and nature of the relationship, pay rates, holiday and notice periods.
Other detailed rules govern other aspects such as fees, working hours, minimum wage. This can all easily be dealt with using a statement of written particulars. Agencies are generally responsible for carrying out pre-employment checks such as checking rights to work in the UK. There are exemptions from some aspects of these regulations for employers such as entertainment and modelling agencies, local councils, certain educational institutions, trade unions, certain membership organisations, charities and services provided for ex-members of HM forces etc.
Only those working under a contract of employment employees have the right to claim, for example, unfair dismissal, statutory redundancy payments, maternity leave and parental leave. Those working as independent contractors self-employed do not have all these rights in full. The current position is regulated by a complex amount of Case law. The most recent guidance suggests that as a general rule the legal status of a temporary agency worker will depend on:. See the related Q: Can a contract between an agency worker and an end user be implied?
The end user and the employment agencies should state in advance whether, in their opinion, the worker is an employee. Some employers and employees may seek to avoid employment rights or tax obligations by using temporary agency workers who then supply services through their own limited companies. This may concern general employment rights dependent on employee status or rights arising under the Agency Workers Regulations Many temporary agency workers have their own limited company and supply their services through that company either through an agency or directly to the end user.
The use of such a company does not prevent employee status arising. For example, in Cable and Wireless plc v Muscat March , CA it was made clear that the implied contract principle applied to an individual providing their services via their own service company. Such a worker can be the employee of the end-user under an implied contract even though the arrangement is set up through an independent employment agency and even though the contract expressly states that the individual is self-employed.
In this case the employee had started out as an employee of the end user; the arrangements subsequently made for contracting out his services via an employment business did not obscure the continuance of that employment relationship. A temporary agency worker placed by an agency may put their earnings through a limited company for tax reasons.
HMRC scrutinise these arrangements carefully. However the Regulations may still apply to that worker. Under the Regulations the definition of an agency worker does exclude those who are in business on their own account. However some workers with limited companies will be in business on their own account and some will not.
The Regulations do not apply if the hirer is genuinely a client or customer of a profession or business undertaking that is, there is a genuine business to business relationship. The key issue is the true relationship between the temporary agency worker, the agency and the hirer. By contrast, a lawyer in business providing services to the same company would usually not be working under its superviion or direction, but will be in a client or customer relationship.
Potentially the clause could be used as a way around the Agency Workers Regulations It enabled agencies to pay their agency workers less than permanent workers employed by the end-user business after 12 weeks in an assignment, provided the agency:. The case Bray and others v Monarch Personnel Refuelling UK Ltd , ET suggested that end users may be able to successfully avoid the Regulations and maintain a pay difference between temporary and agency workers by relying on the Swedish derogation.
However, the Swedish derogation is abolished from 6 April so, after that date, workers with a contract giving a minimum level of pay between assignments can no longer be excluded from the right to comparable pay with permanent employees. In any case, no employer should be trying to circumvent the Regulations but should work with them.
If an employer really wishes to keep a temporary worker, it should consider employing them. Some larger companies are replacing temporary staff with permanent ones with a degree of flexibility in the permanent employment contracts. If a temporary worker works intermittently, even if there is no mutuality of obligation between assignments, that individual can still be an employee see Cornwall County Council v Prater, From 6 April , agency workers who are considered to be employees will be protected from unfair dismissal or from suffering a detriment if the reasons are related to asserting their rights under the Agency Worker Regulations The law provides that if an employee resigns or is dismissed in one week but is re-engaged by the same employer before the end of that week, there is no loss of continuity of employment.
If this change does come into force, employers would need to track temporary agency employees much more closely as they will accrue the two-year service necessary to qualify for unfair dismissal rights more easily. There would also be a significant impact on the rights of employees on low pay or zero-hours contracts. If a temporary worker is unable to establish employee status, or perhaps does not have one or two years' continuity of employment, they will still have some rights, just not as many as they would if they were employed.
Importantly, under the Agency Workers Regulations , certain agency workers have rights to be paid equally when compared to permanent members of staff. The different types of rights are summarised under separate headings below. A 'non-employee' temporary worker will be entitled to all their contractual rights.
This means that both parties are bound by the terms of what has been agreed between them. If so, they will be entitled to rights granted by the legislation to workers, for example, the right of all workers:. The Working Time Regulations provide that the organisation responsible for ensuring compliance with the Regulations including providing the agency worker with paid holiday is the person responsible for paying them. They are also protected against sex, gender reassignment, pregnancy and maternity, marriage and civil partnership, race, religion and belief, sexual orientation, age, and disability discrimination.
For further information see the related Q: Can a temporary agency worker bring a discrimination claim against the end user? The Agency Workers Regulations govern the terms and conditions of agency workers. Most importantly temporary agency workers have the right to the same basic employment and working conditions, such as pay and holidays, as permanent staff once they have worked for 12 weeks in the same role for the same hirer. Other less important protection for temporary workers may arise under special regulations governing the conduct of employment agencies and employment businesses.
Agency workers do have the right to be informed about vacancies with the end user and should therefore have the same opportunity as a comparable existing permanent worker to find a permanent job with the hirer. There is nothing in the Regulations that actually prevents employers from choosing permanent staff or new recruits over agency workers for the actual job vacancies.
Agency workers do not get preference ahead of an employer's permanent employees, although obviously no discrimination on the grounds of a protected characteristic such as race or gender or religion etc should occur. Agency workers can, and do, bring discrimination claims against the organisation where they are working temporarily. However, under most discrimination legislation there must be 'employment' which means employment under a contract of service or a contract personally to carry out any work.
The organisation where they are working temporarily the end user is made specifically liable to compensate the worker for any unlawful discrimination under the Equality Act For most discrimination purposes a temporary worker supplied by an employment agency to an end user may pursue a discrimination claim against both the end user and the agency.
However claims in such circumstances will not always succeed. In Muschett v HM Prison Service , CA the Court of Appeal eventually dismissed claims by a prison cleaner for unfair dismissal, wrongful dismissal and sex, race and religious discrimination. The claims failed against both the agency and the prison service because the cleaner was neither an employee of the prison service for unfair dismissal law, nor in the 'employment' of the prison service under the discrimination legislation.
This decision confirms that although in many cases agency workers can bring discrimination claims as they have a contract of employment with the employment agency, this will not always be the case. Although Muschett suggests some agency workers might not be able to bring themselves within the contract worker definition. However the following case confirms a more generous interpretation. The claimant was obliged to perform work personally during assignments and was therefore 'employed' by the agency as a contract worker as far as discrimination law was concerned.
She was supplied to Camden under a contract with an agency and Camden provided work for her to do. Although there are arguments which employers can raise concerning the nature of the contract with the worker, the safest course of action is to assume that most temporary workers supplied by an employment agency to an end user may pursue a discrimination claim against both the end user and the agency. To protect themselves employers could insist that agencies only supply workers who are not employed by the agency, to avoid the risk of discrimination claims.
Note that both the employment agency or business and the end-user can be joined as a party to tribunal proceedings depending on the facts. With employment agencies, there is often employee status with the end-user, and therefore less possibility of the worker claiming an employment relationship with the agency.
Claims against an employment business as employer are more common. The Employment Appeal Tribunal EAT has emphasised that where there is a triangular case involving status of a worker, an employment business and the end-user, a tribunal must examine what is going on in day-to-day practice at the end-user's premises.
Employers can decide only to employ temporary staff for 11 weeks thereby avoiding the Regulations. This is within the law even if they are doing this deliberately.
However if there has been more than one assignment then the anti-avoidance provisions may apply. There may also be other rights such as contractual rights or discrimination which protect the worker.
Although it may be legally permissible, it is not good practice to ensure that temporary staff never complete more than 11 weeks. For example, skills, training and induction time will be wasted. There may also be a negative impact on other staff or customers if the employer is seen to be taking such trouble to avoid paying temporary staff equally.
Anti-avoidance provisions in the Regulations deal with situations where there is an attempt to structure assignments to avoid accrual of the week period. The provisions prevent assignments from being structured in a way that stops the worker from completing the qualifying period or from being entitled to the equal treatment rights. A number of factors are used to determine if a hirer was engaged in an avoidance scheme, including:.
This means that if the most likely reason for the structure of an assignment is to prevent the agency worker from being entitled to, or from continuing to be entitled to, the equal treatment rights, then they will still be entitled to equal treatment. For further information on this, see Q: How is the qualifying period for rights under the Agency Workers Regulations calculated?
The taxation of some workers supplied through agencies has been a difficult issue for some time. HMRC considered that some agencies were avoiding the responsibility for deduction of income tax and employer and employee national insurance contributions NICs. As a result, tax rules applying to workers supplied through agencies, or other intermediaries have been tightened.
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Agency workers temps are usually contracted and paid by the Agency who employs them, and the Company that hires them pays a fee to the Agency for their work. Here though, we consider if it's possible for an agency worker to be seen as a permanent employee of the company they work for not the Agency they are employed by.
This is important as it determines if they have the employment rights of an employee, e. Ultimately, an agency workers employment status can only be decided by an Employment Tribunal on the basis of the facts of each case and the reality of the situation.
The temporary worker agreement she had with Brook Street stated that she wasn't an employee and that the Bureau wasn't liable if it failed to obtain engagements for her. Mrs Dacas claimed unfair dismissal against the council and Brook Street. The Court of Appeal ruled that the crucial test is who controls the worker — and they concluded that Mrs Dacas was an employee of the Council. They felt the agency was under no obligation to provide Mrs Dacas with work and she was under no obligation to accept work offered by it; the agency didn't exercise any relevant day-to-day control over the tasks she carried out.
The Court went on to suggest that if an agency worker remains on the same assignment for a period of 12 months, this would be sufficient time for an implied contract of employment with the hirer to have arisen. However, in James v Greenwich County Council , the Court of Appeal said it would rarely be appropriate to imply a contract between the worker and the end user where the arrangements between the agency and the temp are genuinely and properly documented.
Ms James had worked for Greenwich Council since , providing her services through several temp agencies. She had signed a contract with the temp agency which described her as a self-employed worker; she had no contract with Greenwich Council and wasn't entitled to sickness or holiday benefits. In , the arrangement with the council came to an end and James started unfair dismissal proceedings, relying on the Dacas decision. The Tribunal disagreed and concluded that the agency was free to substitute James with another agency worker at any time and there was no obligation on James to provide services to Greenwich, or the Council to provide James with work.
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