Are you your agency worker's employer?

11 March 2004

Dacas v Brook Street Bureau

Many businesses supplement their workforces with agency workers. But is such a worker an employee of the employment agency or the 'end user' organisation to whom the worker is supplied?

It is important for workers to know whether they are employees, and therefore qualify for the various employment rights available to employees, such as protection from unfair dismissal. From an employer's point of view, it is important to know to whom such protection is owed, and also, since employers are liable for their employees' wrongdoing to third parties in the course of their employment, the extent of their liability.

In this case, Ms Dacas had been working for Wandsworth Council as a cleaner for four years. She had been supplied by the agency, Brook Street Bureau, with whom she had a contract that specifically said she was not an employee of either the agency or Wandsworth. Nevertheless, when her employment ended, she claimed unfair dismissal against both the agency and the council. The Employment tribunal decided that she was the employee of neither, so could not claim unfair dismissal.

Ms Dacas appealed to the Employment Appeal Tribunal against the finding that she was not employed by the agency, (she accepted the finding that she was not employed by the council). The EAT decided she was employed by the agency, as the agency paid her, had the right to terminate her contract and put her through a disciplinary procedure.

The agency appealed to the Court of Appeal, which has just given its decision that Ms Dacas was not an employee of the agency, and so had no right to claim unfair dismissal against it. Alarmingly, the Court of Appeal decided that she was the council's employee, given that the council had control over her work, could tell her what to do, and was obliged to pay for the work that she did, even though she received payment from the agency. The council had also taken the initiative to terminate her contract. The Court of Appeal concluded all this pointed to an implied contract of employment between Ms Dacas and the council.

Whilst this finding does not help Ms Dacas as she abandoned her action against the council, it is highly relevant for employers, as the Court of Appeal stated that someone must be the employer in these situations, and typically, it will be the end user.

The most striking aspect of this decision is that the Court of Appeal said that the mere fact that someone works for the same end user for one year (which is the amount of time it takes to qualify for protection from unfair dismissal) is enough to imply a contract of employment.

What should organisations which use agency-supplied workers do in the light of this case? First, there is no harm in continuing to include a written term in the contract that there is no contract of employment with the end user. Second, where possible, use agencies which have a contract of employment with the workers they supply, and third, where agency workers have worked in your organisation for a year or more, be very careful when dealing with termination of their contracts, both in terms of reasons for termination and the procedure for doing so.

This might in any case not be the final word in this matter as an appeal to the House of Lords is possible.

We will take a more in-depth look at the implications of this case, and the status of agency workers in our Spring newsletter.