Expectations therefore ran high for a definitive ruling from the Court of Appeal on the status of agency workers when it handed down judgment in the case of James v London Borough of Greenwich last month. The judgment, however, while reasserting a contractual orthodoxy on the issue, falls short of a prescriptive conclusion which gives a definitive answer in every case and leaves the question to be determined by the tribunal on the facts of each case.
Briefly the facts may be stated as follows. In September 2001, James, who had previously worked for Greenwich Council as an employee, began an engagement with the Council through an employment agency which had recruited her services. In the performance of her duties for the Council she was subject to a degree of control consistent with that over an employee. To the user of Greenwich Council’s services, no discernable distinction would have been apparent between James and official employees. In 2003, James changed the agency which provided her services to the Council but this appears not to have changed the services she provided or interrupted the continuity of her provision of those services. The terms of James’ contract with her agency made clear that her status was that of a self-employed worker and it expressly stated that no contract of employment existed between James and the agency. The tribunal determined that James was not subject to the Council’s disciplinary and grievance procedure and she was not entitled to sick or holiday pay from the Council. Following a period of sickness, during which the agency provided a substitute worker to Greenwich Council, and over which period she did not receive sick pay, James returned to find that the Council no longer wished to use her services. James brought a claim before the employment tribunal claiming that she had been unfairly dismissed.
Greenwich Council’s case before the tribunal was that she was not an employee; she was a self-employed worker whose services had been provided to the Council by the agencies and she was free to leave at any time, just as the Council had been free to choose not to continue to use her services. The tribunal accepted the argument, concluding that there was no mutuality of obligation between James and Greenwich Council such as to give rise to a contract of employment between them and a contract of employment could not be implied from the relationship that had been taking place.
James appealed to the EAT which dismissed the appeal. The case was of note at this stage because of the review by the EAT of the case law on the issue of the status of agencies workers. In particular there was consideration of the decisions of the Court of Appeal in Dacas v Brook Street Bureau and Cable and Wireless v Muscat. Those decisions being advanced as authority for the proposition that a contract of employment might be implied between the worker and the end user at the base of the triangular relationship crated by the agency intermediary. But when might such a contract of employment be implied? The EAT noted that the Court of Appeal in Dacas had emphasised that in order for a contract to be implied, the question was whether it was necessary to imply such a contract.
James appealed to the Court of Appeal, Lord Justices Mummery, Thomas and Lloyd. As observed by the Court of Appeal, and the EAT before it, the core of the appeal was essentially an argument that the conclusion of the employment tribunal, that no contract of employment could be implied between James and Greenwich Council, was a perverse one. Perversity appeals have an Olympian high jump to clear and the conclusion of the EAT and the Court of Appeal that the original tribunal’s decision was one it was entitled to reach on the facts. That was sufficient to dispose of the appeal. In doing so Mummery observed that the mere length of time that James provided her services to the Council did not give rise to a necessity to imply a contract between them. Further, the provision of James’ services to Greenwich Council could be explained in legal terms by the existing contractual relationships between James and the agency and the agency and the Council. Those contracts had not been found to be shams. Thus it was not necessary to imply a third contract to give business reality to the relationship between the parties.
Having dispatched James’ perversity appeal to the boundary, Mummery reviewed the state of the authorities on the agency worker issue and concluded that they were not, as some had seen them, in conflict. The test in the tripartite agency relationship remained one of necessity, whether it was necessary to imply mutual contractual obligations between the worker and the end user so as to give rise to an implied contract of employment. This was, save in some extreme cases of sham arrangements, a question of the common law principles of implied contract. In determining that question, Mummery expressly approved the guidance given to tribunals by the president in the EAT in James as to how to determine whether a contract should be implied.
So it remains then a mixed question of fact and law for the employment tribunal in any case to determine whether it is necessary to imply a contract between the agency worker and the end user. Mummery did observe that if the employment tribunal properly directs itself to apply the test of necessity in considering that question it would be very unusual for an appeal against the tribunal’s decision to have any real prospect of success.
In practical terms, because the question remains a fact-sensitive one, the decision in James does not given a definitive answer for every case. Thus it will not be possible to avoid the prospect of claims continuing to being made or for agency workers to be certain that their claims will succeed. Where, however, there are genuine contractual arrangements between the worker and their agency and between the agency and the end user, this will typically explain the business reality of the provision of the worker’s services. In such circumstance there is simply no necessity to imply a contract of employment between the worker and the end user, however desirable that might be for policy reasons.
David Reade QC is a member of Littleton Chambers.