The Tribunal gave rare guidance on when a contract between a worker and the end user employing company can be implied. The case involved a Ms M James and Greenwich Council.
President of the Tribunal Justice Elias said that where the arrangement between the end user, the agency and the worker reflected the genuine working relationship – and there was no pre-existing relationship between the worker and the end user organisation – it would be unusual for there to be an implied contract between the end user and the worker.
"This decision and the guidance given by the Employment Appeal Tribunal will be welcomed by employers," said Ben Doherty, an employment specialist at Pinsent Masons, the law firm behind OUT-LAW. "Not only does it clarify when a contract of employment could be implied, in doing so it also limits the circumstances when that relationship could be implied."
Previous judgments at the Court of Appeal had ruled that a contract of employment may be implied between the worker and the eventual employer. In cases involving Wandsworth Council and Cable & Wireless, those employers were found to have an implied contract with workers supplied by agencies, but no guidance was given on when an employment tribunal should assume that a contract was in place.
In the Greenwich Council case an employment tribunal ruled that James was not working under an implied contract to the Council. The Appeals Tribunal has backed that ruling.
Elias said that this case was different to that in C&W because in that case the reality of the situation was that the other party to the case, a Mr Muscat, was effectively working for C&W and not the agency.
"In our view, it is clear beyond doubt that in concluding that the contractual relationship between the worker and C&W continued, the Court was effectively holding that the contracts making up the agency arrangements simply did not reflect the reality of the relationship," said Elias in his judgment. "They were never in fact implemented. It was not a matter of indifference to the client or end user who provided the services. There were personal obligations on Mr Muscat to provide work and on the employers to accept it."
In contrast, Elias said that it was undisputed that the agency relationship was a genuine one in the James case. "In this case it was, as we have said, conceded by Ms James that the agency relationship was not a sham and did initially properly reflect the true legal position," he said.
Elias found that the fact of a relationship existing for some time was not enough to imply a contract. That ruling is in contradiction to the Court of Appeal in the Wandsworth Council and Dacas case.
"Typically the mere passage of time does not justify any such implication to be made as a matter of necessity, and we respectfully disagree with Sedley LJ’s analysis in Dacas on this point," said Elias.
That advice, given to assist future employment tribunals, will be of benefit to employers who use agency workers, said Doherty. "In particular the fact that the EAT held that 'the mere passage of time does not justify any such implication to be made as a matter of necessity' will be welcomed by employers who benefit from long running agency placements," he said.
