Agencies and agency workers: case study
Sue Nickson, Partner and International Head of Human Capital at Hammonds, continues a series of articles on employment agencies and agency workers with a case study.
Seekers has placed Claire with one of its clients, Hotshop Limited, initially on a two-month assignment. Claire has entered into a temporary work agreement with Seekers that makes it clear that she is not employed by it. Unfortunately, Claire is unable to work at Hotshop for two weeks during her assignment due to illness. The temporary work agreement states that she is not entitled to contractual sick pay during her absence. Is she entitled to statutory sick pay (SSP)?
No. This issue was the subject of a recent case, Commissioners for Her Majesty's Revenue and Customs v Thorn Baker Ltd and others [2007] EWCA Civ 626 CA. The Social Security Contributions and Benefits Act 1992, Schedule 11, paragraph 2(b) used to provide that, where an employee's contract of service (agency workers were included for these purposes) was for a fixed period of less than three months, he or she was not entitled to SSP. However, in October 2002, this was repealed by the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, regulation 11.
In Thorn Baker, two agency workers were engaged by Thorn Baker under an agency workers' agreement. During the course of assignments to clients of Thorn Baker, both men fell ill and asserted that Thorn Baker was liable to pay them SSP. Thorn Baker refused on the grounds that both men were excluded from statutory entitlement to such payments because they had entered into contracts of service for a period not exceeding three months. The High Court agreed. The Commissioners for Her Majesty's Revenue and Customs - the authority responsible for monitoring liability to pay SSP - appealed to the Court of Appeal.
The Court of Appeal dismissed the appeal, holding that regulation 11 was subject to the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, regulation 19. This provides that the Regulations do not apply to employment under a fixed-term contract where the employee is an agency worker. As a result, agency workers are excluded from the scope of the regulation 11 repeal and consequently, if the assignment is for less than three months, are not entitled to SSP.
Claire's assignment with Hotshop is extended. A few months later she sends an email to Hotshop's HR director claiming that she has been sexually harassed by Steve, one of Hotshop's employees. Hotshop forwards Claire's email to Seekers. Does Claire's email amount to a statutory grievance?
Both Seekers and Hotshop believe that Claire is not employed by either of them, but instead regard her as an agency worker. If their understanding is correct, Claire's email will not amount to a statutory grievance, as the statutory dispute resolution procedures apply only to employees. However, there is a risk that Claire may try to argue that she is an employee of Seekers or Hotshop.
If Claire were found to be an employee, would the statutory grievance procedures apply?
In order for an employee's complaint to amount to a statutory grievance, it must:
Given the above, if Claire were found to be an employee of Hotshop, her complaint would amount to a statutory grievance and, as she is still working, the standard grievance procedure would apply.
Should Seekers or Hotshop deal with the complaint?
Strictly speaking, the legal position is that it should be Claire's employer that deals with her complaint. However, if this is Seekers, it is arguable that, as this is not a complaint about Seekers or one of its employees, it would not amount to a statutory grievance.
From a practical point of view, as the complaint relates to the actions of a Hotshop employee, Hotshop may be best placed to deal with the issue, although it may be that, under the contractual terms between Seekers and Hotshop, it is legally or commercially necessary for Seekers to deal with the complaint.
It should be noted that even if Claire is not an employee, this does not prevent her from bringing a sex discrimination claim. Seekers and Hotshop would therefore be well advised to work out between them which is best placed to hear her complaint, to try to prevent a tribunal claim.
What should Seekers do if Claire's employment status is not clear?
When an agency worker raises a complaint and the employment status of that worker is unclear, there is a potential risk to both the end-user and the agency (particularly if the contractual terms between them provide that the agency will take responsibility for such complaints). The end-user and the agency therefore have to decide how to deal with the complaint. The problem is that if the relevant statutory grievance procedure is followed, this will provide Claire with evidence that she is viewed as an employee, since the procedures are applicable only to employees. Furthermore, if the statutory procedure is not followed, if Claire persuades a tribunal that she is an employee and had been discriminated against through Steve's actions, any compensation awarded to her could be uplifted by between 10% and 50% due to the employer's failure to follow the statutory grievance procedure. As compensation for discrimination claims is uncapped in the tribunal, this could result in a significant award being made.
One solution may be for Seekers and Hotshop to follow the steps of the statutory grievance procedure, but not label it as such. This could be done on the basis that any complaint by an agency worker (particularly of discrimination) is taken seriously by the agency and the end-user.
After Claire has worked at Hotshop for nearly three years, Hotshop asks Seekers to terminate her services. Claire brings a claim for unfair dismissal against Hotshop. Is her claim likely to succeed?
In order for her claim to succeed, Claire will need to establish, as a preliminary matter, that she is an employee of Hotshop. If she does not, the tribunal will not have jurisdiction to hear her claim. In James v Greenwich Council [2007] IRLR 168 EAT the Employment Appeal Tribunal (EAT) held that a tribunal does not have to imply a contract of employment between an agency worker and an end-user: it merely had to address its mind to the possibility of there being such a contract.
The EAT also said that, contrary to Dacas v Brook Street Bureau [2004] IRLR 358 CA, the fact that an agency worker had been on an assignment for more than a year did not provide automatic grounds to imply that a contract of service existed.
For there to be a contract of service between Claire and Hotshop, the tribunal would need to be satisfied that there was mutuality of obligation between them and that Hotshop had a suitable degree of control over Claire. Factors that a tribunal might take into account in deciding this could include whether or not:
The EAT also said in James that, as a general rule, a tribunal should not imply a contract unless the arrangements between the agency worker, the agency and the end-user were a sham, ie they did not reflect the actual working relationship between the parties.
Provided that the arrangements between Claire, Seekers and Hotshop accurately reflect the real relationship between them, a tribunal should not (and certainly not automatically) imply a contract between Claire and Hotshop, even though she has been working for Hotshop for more than a year. On that basis it is unlikely that Claire's claim would succeed.
Next week's article will feature FAQs on agency workers.
Sue Nickson is Partner and International Head of Human Capital at Hammonds (Sue.Nickson@hammonds.com)
Further information on Hammonds Solicitors can be accessed at www.hammonds.com
