The status and rights of agency workers has been the subject of much debate over the last decade. The Courts seem to have found it difficult to strike a balance between the rights of end-users, agencies and agency workers which is acceptable to all parties. This led to a huge number of cases brought by agency workers uncertain of their employment status and rights. However, the Government has now created the Agency Workers Regulations 2010 in an attempt to settle the matter.
The legal set up surrounding an agency worker is tripartite. The agency has a contract with the agency worker governing issues such as holiday entitlement and pay, and the agency also has a contract with the end-user (the business in which the agency worker will work on a day to day basis) under which they are paid for provision of the agency worker. However, there is no contract between the agency worker and the end-user.
Previous Case Law
Agency workers are a valuable source of flexible staff for a business, but have limited rights in comparison to ‘bona fide' employees. Most of the case law surrounding agency workers stems from agency workers claiming that in reality the tripartite arrangement between themselves, the agency and the end-user constitutes an implied contract of employment which would make them an employee. If it is established that an agency worker is in fact an employee of either the agency or the end-user this gives them the right to bring unfair dismissal claims against the nominated employer where they had no right before.
Previous case law has suggested that end-users are much more likely to be held to be the agency workers employer than the agency even though the agency will actually often dictate or agree the agency workers basic terms. These may include the amount of holiday which the agency worker will receive or the rate of his/her pay. If an end-user is found to be the employer of such an agency worker, this leaves it in a position where it has an employee (with all the rights and liabilities which are associated with that status) in relation to whom it has not negotiated or controlled the basic contractual terms. Clearly this is not an ideal situation for a business.
Although the case law has now settled down due to the reassertion of the requirement for it to be ‘necessary' for business reality to imply a contract of employment into an agency worker relationship in order for the courts to do so, which must only occur in exceptional circumstances, agency workers remain in a kind of purgatory in respect of their employment rights.
Under the Employment Rights Act 1996, an employee is defined as "an individual who has entered into or works under (or where that employment has ceased, worked under) a contract of employment". If an agency worker can bring themselves within this definition he/she will have the right not to be unfairly dismissed.
Currently, the Courts will only imply a contract of employment into a tripartite agency worker arrangement where it is ‘necessary' to give effect to the business reality of the situation. The Court will first assess the terms of any written contract between the agency and the agency worker and between the agency and the end-user. If the agency worker challenges the terms of the written contract by claiming that they do not reflect the reality of the arrangement and/or the terms under which he/she understood him/herself to be working, the court will review the conduct of the parties.
The terms of the implied contract of employment will be gleaned from the conduct of the parties which will be used to assess the way in which the relationship between the parties operated in reality. In particular, the court will consider the minimum criteria for an individual to be an ‘employee' which were set out in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance. Under these conditions an individual would be an employee, if the contract terms (express or implied) required them to perform the services personally, the services were performed in return for wages or remuneration, the ‘master' had control over that individual and the remaining terms of the contract were not contradictory to an ‘employer - employee' relationship.
If an agency worker cannot establish him/herself as an employee, he/she is still afforded some rights. For example, agency workers have protection under the Data Protection Act 1998, discrimination law, whistleblowing legislation, national minimum wage legislation, the Working Time Regulations 1998 and can also receive statutory sick pay among other rights.
The Agency Workers Regulations 2010
The Government has been attempting to develop regulations which all parties to the tripartite agency worker arrangement will accept for some considerable time. However, on 21 January 2010, The Agency Workers Regulations were laid before Parliament for approval and will come into force on 1 October 2011 (the "Regulations").
The Regulations are designed to give agency workers increased rights in employment law without having to make them an employee. This will avoid having to give a genuine agency worker a status which was never envisaged by any of the parties to the arrangement in order for them to gain additional rights.
The Regulations provide that after twelve weeks of working in the same role with the same end-user the agency worker will be entitled to equal terms in respect of certain rights to employees working for that end-user doing the same or similar work at the same location. The terms effected include pay (including bonus', commission and holiday pay amongst others), duration of working time, the length of night work, rest periods, rest breaks and annual leave.
In addition, unless it can be objectively justified, an agency worker has the right to be treated no less favourably to an employee in relation to access to a canteen, childcare facilities and transport services provided by the end-user.
Agency workers will have the right to bring a complaint in an Employment Tribunal for infringement of the above rights. A Tribunal will determine the liability for any infringement by having regard to the extent to which each of the parties (the agency and the end-user) are responsible for the infringement to which the complaint relates.
Where an agency worker believes that the agency and/or the end-user have acted in such a way as to infringe their right to equal terms, they will also have the right to ask for a written statement setting out their basic working conditions and those of a comparable employee.
The Regulations will therefore provide agency workers with far greater rights than they have under the current law. However, they are still not afforded protection from unfair dismissal or redundancy. In addition, once the regulations come into force, it seems very unlikely that a Court would imply a contract of employment into a tripartite agency worker arrangement.
After substantial and uncertain case law the Regulations provide some welcome clarity in relation to the rights of agency workers. However, although business will still be able to dismiss agency workers with greater ease than its employees providing some flexibility, essentially, after twelve weeks, one of the reasons to use agency workers (the lower wage cost) will disappear. This may, in reality, see business hiring fewer agency workers overall.
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