Agency workers do not have automatic employees rights, even after years

A number of employment tribunal cases have been put on hold awaiting the judgment of an issue that has often been contentious.

Louise Donaldson, an employment law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM, said that the ruling will be welcomed by businesses. "This is a good ruling for employers, it means that they can carry on using agency workers to fill gaps in their staff and not be at risk of being found to be an employer and liable for unfair dismissal claims when they don't need them any more," she said.

Despite there being a number of apparently conflicting judgments for lawyers and tribunals to rely on, the Court of Appeal has said that the law is clear and that it is up to employment tribunals to decide whether or not somebody has become an employee.

Merena James worked for three years for the London Borough of Greenwich, which employed her through first one and then a second agency. She fell ill in 2004 and was absent from work. When she returned she found that her role had been filled by another worker from her agency.

James took a case for unfair dismissal to an employment tribunal. The Council argued that James was not an employee so was not entitled to the rights of an employee, including the right to take part in its disciplinary procedures.

Businesses increasingly rely on agency workers, and one of the benefits to companies of agency workers is that their obligation to them is less than it is to staff.

Some employment legislation, such as anti-discrimination laws, applies to agency workers, but unfair dismissal protection is only available to employees.

The employment tribunal and the Employment Appeals Tribunal (EAT) which heard the case ruled that there was no contract of employment between James and the local authority, and that the mere passage of time was not enough to create one.

Lord Justice Mummery said in his ruling that the employment tribunal had not erred in its application of the law when it found that there was no implied contract between James and Greenwich, and said that the only decision to be made was whether the ruling of the tribunal was perverse.

He said that this was not a situation in which it was necessary to imply a direct contract in order to explain why James was working for Greenwich. "Her only express contractual relationship was with the employment agency … the Council's only express contractual relationship was also with the agency. There were no grounds for treating the express contracts as other than genuine contracts."

"The circumstances in which the Council received and paid for work done by Ms James for the Council and the facts about the working relationship between them did not lead irresistibly to the result that they were only explicable by the necessary existence of a contract of service between them," said the ruling.

Donaldson said that the ruling clears up a complicated area. "Employment tribunals will now have to look at the facts of each case and whether it is necessary to imply a contract of employment," she said. "The Court of Appeal approved the guidelines set down by the EAT which said that if there is a proper tri-partite relationship then it is not necessary to imply a contract of employment."

Lord Justice Mummery surprised some observers by saying that he believed there not to be conflicts between a number of previous EAT and court decisions. "There is no significant difference between the law stated and applied in the decisions of this court and in those of the EAT," he said. "It is apparently thought in some quarters that they are in conflict. I do not think so."

He said that the status of a worker should be established by the principles of implied contract. Though many agency workers will have protection as employees against unfair dismissal under the 1996 Employment Rights Act after a landmark case, that did not mean that every agency worker enjoyed those protections. If it is possible to explain the work done by existing contracts there is no need to imply one between the worker and the end user of the worker's services, he said.

Lord Justice Mummery said that he was sensitive to the problems faced by workers without employment contracts, but that it was not the job of courts or tribunals to rewrite the law according to their own views.

"Through their decisions adjudicating on legal disputes courts and tribunals are builders in the law. They are not architects of economic and social policy. As they must operate within the legal architecture created by others, they cannot confer the right not to be unfairly dismissed on a worker who is without a contract of employment," he said.

"The courts and tribunals are well aware of the nature of the arguments for and against a change in the law, but it is not for them to express views about a change or to initiate change. This is a matter of controversial social and economic policy for debate in and decision by Parliament informed by discussions between the interested parties," he said.

See: The ruling