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AGENTS OF CHANGE

The decisions of the Employment Appeal Tribunal in Astbury v Gist and Heatherwood and Wexham Park NHS Trust v Kulubowila have accelerated changes to the legal status of agency workers.

You might be excused for having a feeling of déjà vu when first reading this article, because this is the latest in a series of articles which attempt to make sense of the employment status of agency workers.  In that case, you might fairly ask, what is the point of this article?  Well, the situation has at last started to become clearer (for employers at least) as a consequence of two recent decisions of the Employment Appeal Tribunal in Astbury v Gist and Heatherwood and Wexham Park Hospitals NHS Trust v Kulubowila, both of which were published on the 28^th March 2007. 

AGENCY WORKERS

There is no point telling you what’s new without first telling you what’s old and how the law has come to be so confused on this issue.

The problem of agency workers is an old one.  An agency worker works under a tri-partite agreement which works as follows.  There will be a contract between the worker and the agency under which the agency agrees to supply the worker to its client (the end user).  There will be another contract between the agency and the worker, under which in return for pay, the agency will place the worker with the end user.  The distinctive characteristic of this is that there is not a contract (or there ought not to be) between the end user and the worker who ends up doing the work of the end user.

However, under employment law a contract of employment does not have to be in writing. There is a requirement for written terms and conditions of employment, but this is only evidence of the existence of a contract and not the contract itself.  A contract of employment can arise through the conduct of the parties, and it can be identified as a consequence of this conduct.  That’s why in certain cases where agency workers have been in place for a long time, tribunals have seen evidence of employment, at least where there is evidence that the agency worker has become integrated into the end user’s organisation and there has developed a relationship based on control and mutuality of obligations (the core elements of any employment contract regardless of the method of pay).  So, some unsuspecting end users have suddenly found themselves to have been the employers of the agency worker all along, the very thing they probably hoped to avoid by using an agency worker in the first place! Unpleasant consequences follow from this when the tribunal makes a finding of unfair dismissal.   

CASE HISTORIES

This has resulted in a series of confusing cases where the Employment Appeal Tribunal and the higher courts have tried to work out when an agency worker is an employee.  Underlying these cases is, I would argue, an attempt on the part of some judges to make social policy.  Some judges clearly feel uncomfortable with the fact that a whole new class of worker has come into being who, as agency workers, are deprived of those rights enjoyed by employees.  This is epitomised by the comment of Sedley LJ in Dacas v Brook Street Bureaux (UK) Limited [2004] IRLR 358 that it is simply “not credible” to assume that a worker has no employer.  Other more conservative judges have argued that there is no problem with this at all – that it is quite possible to be a “worker” without being an “employee”, and indeed this concept is well established in employment law. 

In recent years, the most controversial cases have been Dacas v Brook Street Bureaux (quoted above) and Cable and Wireless PLC v Muscat [2006] IRLR 354.  Both of these cases found that an agency worker was an employee because there was mutuality of obligation and control, and both cases tore up agency agreements that said otherwise.

More controversially Muscat said that it was “necessary” to identify and imply a contract of employment where the parties conduct was consistent with this finding, regardless of what any written agreements had to say on the subject. This has been the natural consequence of the determination of some judges to hold that it is not credible for a worker not to have an employer – as illustrated by the comment quoted above from Sedley LJ in the Dacas case referred to above.

More recent cases have demonstrated the reluctance of the Employment Appeal Tribunal to necessarily declare that longstanding agency workers are employees.  James v Greenwich Council decided in December 2006 and Craigie vs London Borough of Haringey, decided by the Employment Appeal Tribunal in January 2007, are examples.  However, both cases are really an extension of the Muscat principle – that the courts will examine the conduct of the parties to see whether or not this is consistent with a contract of employment, regardless of what any written agreements say.  If it is consistent, then the courts are prepared to imply a contract of employment, if it is not consistent then they are prepared to say that there was no contract of employment.  This is what happened in both James and Craigie. 

This brings us squarely back to the present cases of Astbury and Heatherwood.  Both of these cases are, I believe, a fairly decisive move towards the position of businesses rather than workers.

THE NEW CASES

Both Astbury & Heatherwood were decided by His Honour Judge Peter Clark on 28 March 2007 and both decisions, save to the extent that they are obviously not based on the same facts, can be seen as one commentary on the state of the law regarding agency workers.  Both cases also display the same robust common sense approach.

I will look at the practical implications of both cases a bit later.  Both cases concern agency workers where there were grounds, based on control and mutuality of obligation, to hold that both agency workers were more akin to employees.  In both cases there were contractual arrangements in place that purported to say otherwise.

What is fascinating in both cases is the way that Judge Clark cuts through the early case law and steadfastly refuses to make a decision motivated by social utility or social policy.

Commenting on the earlier decision in Dacas (where an agency worker was found to be an employee) Judge Clark found that this did not “sit comfortably with the structure of the employment protection legislation”.  The legislation, of course, distinguishes between employers and workers -who do not enjoy employment rights.  There is nothing controversial in this, and Judge Clark goes on with relentless logic to show that if Parliament had intended agency workers to enjoy protection from unfair dismissal, then they would have said so in the first place.  After all, Parliament did make such a distinction with respect to whistle blowers and those seeking the protection of the discrimination legislation (those rights are clearly stated to be available to “workers” as well as employees). So, if Parliament intended for agency workers to have protection from unfair dismissal, they would have drafted the law in such a way as to make that clear. The fact that they did not means that they had no intention of doing so, and does not give the courts the right to make social policy on their behalf. If what is needed is a policy change to give agency workers better protection, then only Parliament can sanction this.  It is not for the courts to pre-empt Parliament, no matter how desirable they consider a change in the law to be.

In His decision on Heatherwood, Judge Clark provides some further analysis, particularly in relation to whether it is “necessary” to “imply” a contract of employment.  This idea was introduced in Dacas and applied in Muscat.

Muscat was a decision of the Court of Appeal, and was therefore binding on Judge Clark sitting in the Employment Appeal Tribunal.  However, Judge Clark carefully analysed the courts finding in that case and found nothing in it which lead him to the conclusion that it was “necessary” to imply a contract of employment where the circumstances appear to indicate that an agency worker is being treated more like an employee.  For a contract of employment to be implied, it must be understood not only from the conduct of the parties but also from their intention.  Only then will a contract of employment be a “necessary inference”.  However, this must be more then an “appearance” of a contract of employment – “…it is not enough…to form the view that because the Claimant looked like an employee of the Trust, acted like an employee and was treated like an employee, the business reality is that he was an employee and the Employment Tribunal must therefore imply a contract of employment”.

AGENCY WORKERS TODAY

Prior to Astbury and Heatherwood, I advised my employer clients that there was every possibility that when an agency worker had been employed for any lengthy period of time (usually more than a year), there was every possibility that they could be regarded as an employee and when terminated bring a claim of unfair dismissal. When an agency worker has been around for a while, it’s quite natural for the agency worker to be treated by his line managers as an employee, to become subject to their control as to the way in which he performs his work and when he does it and for him to become dependent on their supply of work to him and for them to become dependent on him doing it for them. This gives rise to control and mutuality of obligation – the key factors in an employment relationship. Usually, there would be agency worker contracts in place saying the opposite – but it did not matter if the way in which the contract was performed showed otherwise. I would have advised my clients that this clearly showed that employment was not a question of what a piece of paper said, but that it was a relationship and what counted was the way things worked out “on the ground”.

I am not going to stick my neck out and say this is definitely not going to be the case any longer, but I am going to say that the decision of the Employment Appeal Tribunal in Astbury and Heatherwood marks a definite change in direction, at least for now, and its going to be down to subsequent cases in the higher courts either to confirm that approach or arrest its development. I think the courts are going to follow the lead of Judge Peter Clark – at least until Parliament legislates on the issue of agency workers (this legislation is badly needed because the law is clearly in a mess).

So how would you advise a client today when employing an agency worker? Employers (and agencies) need to be very sure that the true nature of the working relationship is thoroughly recorded in written agreements. This was the case before, but the difference now is that after Astbury and Heatherwood the Tribunals are going to have to give priority to contractually expressed intentions over the way the relationship has actually worked in practice.

How is this going to be applied by the Tribunals? And, this is the crux of the whole argument, the most important point to absorb. In Astbury and Heatherwood Judge Clark emphasised that the correct test is whether or not the conduct of the parties is consistent – the presumption will be that where there is a clearly defined set of agency agreements, the employee will be an agent. If the nature of the working relationship points to an employment relationship because, for instance, there is control and mutuality of obligation, then the balance starts to tip towards an employment relationship – but, all that is required is for there to be one fact or finding that shows some conduct that points back to the agency relationship, something which is inconsistent with a finding of employment status, and that single piece of inconsistent evidence will be enough to tip the balance back to the over-riding presumption of the agency relationship and to give effect to what the parties clearly intended from the contractual documents.

That is good news for employers – the evidential threshold is has been set very low and should not be difficult for most employers to meet.

THE FUTURE OF AGENCY WORKERS

Agency workers are an important source of casual labour for employers, and those who are agency workers often work as such because they appreciate the flexibility. The confusion in the law is not to anyone’s advantage and there are also clear arguments for protecting vulnerable agency workers who are sometimes abused. A balance needs to be found, and several recent judicial pronouncements have emphasised the need for legislative change. As the Employment Appeal Tribunal noted in James v London Borough of Greenwich - “A careful analysis of both the problems and the solutions, with legislative protection where necessary, is urgently required”. A  DTI consultative document has been issued, and a private members bill introduced in Parliament, so we could see some legislation before long. In the meantime, we can see that the law has definitely made a turn towards favouring the business rather than the worker.

Author: David Malamatenios

Publication: New Law Journal

Date: May 2008