Businesses employing agency workers and their clients breathed a sigh of relief on 5 February 2008 when the Court of Appeal dismissed an appeal from the EAT in James v London Borough of Greenwich. The Court held that only on grounds of necessity can an employment tribunal imply a contract of employment between an agency worker and the business or so-called “end-user”.

To explain briefly, there exists a triangular relationship between (i) an agency worker (ii) an employment agency and (iii) the end user of the worker’s services (i.e. the business).

In the present case there were two separate, express contracts between the agency, on the one hand, and the end user and worker on the other. There was no third, express or implied contractual relationship between the worker and the end user. James demonstrates that in particular circumstances it is impermissible to imply a contract from the conduct of the parties and the work done.

Implications

This judgment has a number of implications both for temporary workers and end users.

1. It confirms the principle in Dacas that mere passage of time (possibly covering several years) cannot imply a contract of employment between a “temporary” worker and the end user. Consequently, agency workers should make every effort to enter into an express contract with end users.

2. It confirms that agency workers do not have statutory protection, principally, from unfair dismissal. This will allow end users to continue hiring and firing agency workers with comparitive ease.

3. It shows that it is unnecessary to imply a third contract between the agency worker and the end user in order to give business reality to the relationship between the parties. As Mummery LJ clarified, this relationship is explicable in terms of the two express contracts existing between the agency and the other parties. The judge warned that end users need to ensure they are not maintaining “sham” arrangements which would necessitate the implication of a contract.

It remains to be seen whether Parliament will respond to Mummery LJ’s plea to make policy decisions which will prevent further expenditure of time and money in litigating this issue in tribunals and on appeal. A much more likely source of further legislation is the European Union and the much debated Agency Workers Directive.

For advice on these and other matters please contact:

Nicholas C J Lakeland
ncjl@silvermansherliker.co.uk

Martin D Donoghue
mdd@silvermansherliker.co.uk

Victoria J Russell
vjr@silvermansherliker.co.uk