Agency Workers and Employment Status

5.7.2011

In the recent case of BIS v Studders, the Employment Appeals Tribunal (EAT) affirmed the proposition that an agency worker is more likely to be regarded as an employee of the end user rather than that of the agency. The decision turned on the absence of real control and mutuality between the agency and worker, as well as the lack of intention for the contract to create an employment relationship.

Unity Personnel Limited (“Unity”) was an employment agency which had recently become insolvent causing the claimants, who were agency workers, to be denied remuneration. The EAT had to consider the status of the agency workers and the circumstances in which they could be classified as employees of the agency to determine whether remuneration was recoverable by the workers under s.188 of the Employment Rights Act 1996.

The EAT held that there was no contract of employment between the parties, on the basis that there was no intention to create an employment relationship in the contract between agency and worker. The reduction of the agency workers’ wages for National Insurance and PAYE did not necessarily indicate a contract of employment, as Unity was statutorily obliged to deduct these monies under ss.44-47 of the Income Tax (Earnings and Pensions) Act 2003.

Furthermore, what were considered the two key requirements of an employment contract – an appropriate degree of control and mutuality of obligations – were not satisfied. The question of control is determined by the reality of the situation and Unity possessed only limited control over workers’ holidays, with the end user truly controlling the claimants, including in relation to the timing and manner of the work completed. The requirement of mutuality was also not met, as Unity was not under an obligation to provide work and in return the claimant was under no obligation to accept or complete the work offered.

As the two key elements to the existence of an employment contract were not met, in this case it was impossible to conclude that a contract of employment existed between the parties. However, the judge made it clear that it is merely difficult, rather than impossible, for a contract of employment to be inferred between an employment agency and a worker. This leaves room for discretion and for future cases to be decided on their particular merits.