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Agency worker can only claim implied contract with agency’s client if ‘necessary’ to do so

Employers will welcome a ruling that an agency worker could not argue he had an implied contract directly with the agency’s end-user client, and therefore enjoyed certain employment law rights, unless it was necessary to do so.

An employment agency provided a construction engineer’s services to a client end-user. The engineer was later dismissed at the instigation of the end-user. The engineer claimed the dismissal was because he was on a secret construction industry blacklist (that he only later found out about) because of his trade union activities. He said the dismissal was therefore unfair as it amounted to detrimental treatment on grounds of trade union activities.

For the claim to succeed, the engineer had to prove there was either a direct contract of employment or a ‘worker’ contract between him and the end-user. A worker contract includes ‘any other contract whereby he undertakes to do or perform personally any work or services for another party to the contract who is not a professional client of his’.

There was no express contract between the engineer and the end-user. However, the engineer argued there was an implied contract, because:

  • he was interviewed by the end-user before his appointment was confirmed;
  • he was taken on to work on three long-term projects;
  • he was fully integrated into the management team on each project, and ‘subject to a significant degree of control in the performance of his work’;
  • the ‘dismissals’ were decided upon (or, at least, directed or influenced) by the end-user;
  • there were no written terms between the engineer and his agency.

These facts, he argued, meant any purported contract with the agency was a sham – the true position was that he was treated and behaved as an employee of the end-user. Following a previous legal ruling, this meant he should be treated as an employee of the end-user – whatever the paperwork said.

The Employment Appeal Tribunal (EAT) said a direct contract between a worker and an end-user should only be implied in tripartite arrangements involving an agency and an end-user if it was necessary to imply such a contract in order to explain the work undertaken by the worker for the end-user. If the work being done could equally be explained without implying a worker/end-user contract, then one should not be implied.

It held that all of the factors above could be explained by a tripartite arrangement whereby the engineer was “supplied to the end-user pursuant to the agreement with the agency and the agency’s agreement with the end-user”. It was not necessary to imply a direct contract between the engineer and the end-user. Therefore the engineer was neither an employee nor a worker of the end-user.

The EAT also commented that the ‘true position’ test in the previous ruling was only relevant where the issue was whether a contract for work between a company and a person described as a self-employed contractor was a sham, and they were in fact employees or workers for that company. It was not relevant where the issue was whether a contract should be implied between a worker provided to an end-user by an agency, and the end-user.

Recommendations

Business users of agency workers should:

  • ensure all aspects of the relationship between them, the agency and the workers provided by the agency are covered by express contracts;
  • if in doubt, take specialist advice.

Case ref: Smith v Carillion (JM) Ltd & Anor [2014] UKEAT 0081_13_1701

Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.

This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of  this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice. 

Contact Helix Law on 01273 761 990 or email: [email protected]