It is estimated that around 20% of those employed in the oil and gas sector in the north east of Scotland are agency workers.  While they represent an incredibly valuable addition to a business, many companies may be oblivious to the fact that these workers could be deemed as employees.   The ramifications of this are significant.  Potentially these "employees" could claim for the likes of unfair dismissal, redundancy (if they have sufficient service) and sick pay.

The confusion arises where a worker has entered into an agreement with an Employment Agency on the basis that he will work for the agency's client, the end user.  Commonly, there is a contract between the worker and the agency and a separate contract between the two organisations.  The temp rarely has a written contract with the company where they are working. 

Company bosses might think that an agency worker not having a contract with them would result in tribunals finding that if the worker is an employee at all, then he must be an employee of the agency.  But a developing area of case law suggests this is not the case and that courts usually find workers are not employed by the agency.  Instead, Tribunals are being guided to consider whether, as a matter of business reality, there is an implied contract of employment between the worker and the company where they've been working.  This will involve looking not only at the contractual position, but also at all the facts of the relationship.  However in some cases, it seems as if Tribunals are also prepared to consider that the worker has two Employers - the agency and the company.

The fact that the worker is paid by the agency rather than their place of work will not in itself be sufficient to establish that the worker is not an employee of the end user.   One Court of Appeal judge noted that once an agency worker had worked for a company for more than a year, it was likely that the worker would be deemed to be their employee under an implied contract of employment. However, it seems clear that most judges will be looking at all the facts rather than just duration in making a determination on the status of the worker. 

Judgements will come on a case-by-case basis - this does not provide clear guidance to companies on what steps can be taken to minimise the risk.  However, it is vital that companies deal with agency workers as a distinct group which is treated differently from its employee group. Companies need to be vigilant that there is no blurring of the distinction or integration of the two groups.

Suggestions that Companies could adopt include:

  • Ensure that there is no mutuality of obligation, for example, that the agency worker can opt not to attend at the End User's premises to provide his services and that the End User does not have to provide work to the agency worker
  • Reduce the length and scope of assignments – avoid the agency worker that has worked exclusively for the Company full time for several years
  • Reduce the day-to-day control over agency workers.  Ensure the Agency is obliged to provide instructions on how the work should be performed and to deal with HR matters such as reporting sickness absence, return to work interviews, appraisals, disciplinary and grievance issues, induction and approval of holidays
  • Avoid integration – exclude agency workers from employee briefings, access to employee policies, and access to Company equipment and possibly even social events
  • Do not automatically accept standard terms and conditions of Employment Agencies – consider whether these should be amended to seek warranties and indemnities from the Agency regarding the status of agency workers and the risks of employment status
  • Make the contracts as clear as possible (between End User and Agency and between Agency and Worker)

Recent Employment Appeal Tribunal decisions have sought to place a restrictive interpretation on when an agency worker will be viewed as a company's employee but legislation is urgently required to provide clarity on this confusing area of the law.  This would be very welcome for all concerned.

Kim Pattullo is an Associate specialising in employment law with UK law firm Shepherd and Wedderburn. 

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