Businesses often worry that temporary agency workers have become their employees, particularly if the individual has been working for the company for a number of years and is integrated into the business through access to the same training sessions and social events as permanent employees. This doesn’t tend to be an issue until it comes to terminating the relationship and the prospect of unfair dismissal rears its head.

In order to identify whether an agency worker is actually the end user’s (i.e. your company’s) employee rather than the employee of the recruitment agent, you will need to look at how the relationship works in practice. The leading case on this, James v Greenwich London Borough Council, is summarised here. Using this case as a guide, the agency worker will only be your employee if it is necessary to imply a contract of service between the agency worker and you. Below are some pointers to help you decide whether or not you believe it is necessary to imply such a relationship:

  • What does the documentation look like? Does the individual have a worker agreement with the employment agency? Has the employment agency entered into an agreement with you as the end user? If so, is that documentation clear that the individual is employed by the agency (for example, they are not obliged to work for you in particular and you are not obliged to offer work to the individual)? If so, this would be a good indicator that the individual is not your employee.
  • If no such contractual arrangement exists, how does the relationship work in practice? If the individual is fully integrated into your business, to the extent that you (and not the recruitment agency) pay the employee, deal with holiday and sickness absence, and handle any grievance or disciplinary issues, the likelihood of the individual being employed by you rather than the agency is greatly increased. On the other hand, if the recruitment agency deals with all of the above then this helps you to argue that they are the employer.
  • Length of service is unlikely to be a factor unless there is no clear tripartite contractual relationship between you and the agency, and the agency and the individual. If there is a risk the contractual documentation is not clear as to which entity employs the agency worker, it is useful for end users to have regular review periods with the agency to assess staffing needs. Engaging workers through agencies for specific projects or cover for fixed periods (such as maternity leave or sabbaticals) helps you to manage the risk of individuals being deemed your employee rather than the employee of the agency.
  • If the individual has previously rejected the opportunity to become your permanent employee and instead remained an agency worker, this is a strong indicator that he/she is not your employee even if the contractual documentation is unclear as to his/her status (see the Court of Appeal’s recent decision in Tilson v Alston Transport).

You will need to consider the above factors in detail, perhaps taking legal advice, in order to decide whether based on law and on fact the individual is your employee.

Here are our top tips for risk management of agency workers:

  • It is advisable to work with agencies who are reputable and well organised and who have contractual documents which are consistent with agency worker status.
  • Consider seeking an indemnity from the agency to cover your legal costs and any compensation should the individual argue that he/she is employed by you rather than the agency.
  • Make sure that the agency has a hands-on role in managing the worker (dealing with disciplinary and grievance issues, managing sickness/absence, carrying out appraisals, etc.).
  • To reduce the risk of unfair dismissal claims, it is recommended that the recruitment agency actively participates in any dismissal process. For example, the recruitment agency should invite the worker to attend a meeting and notify the individual that his/her assignment to your business is being terminated. Ideally, there will be sound business reasons for wanting to end the relationship to help both the recruitment agent and you to defend any allegations of discrimination even if the prospects  of successful unfair dismissal claims is low.
  • Be aware of the provisions of the Agency Worker Regulations 2010 which come into force in October 2011 and which give agency workers the right to equal treatment compared to permanent workers as regards basic working conditions.

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