Court rejects agency worker's claim to be an employee

Being fully integrated into an employer’s business, where you act and look like a ‘permie’, does not dictate that you are that company’s employee, judges have signalled to agency workers.

Protections due to an employee, it follows, may not be entitled to an agency worker, even if that worker has been found by an employment tribunal to be “absorbed” by the employer.

This interpretation, handed down by three Appeal court judges, effectively defeats Andrew Tilson, an agency worker who has fought hard to pin unfair dismissal on his end-user.

To be successful, the engineer had to prove he was an employee, on a contract of service, of the end-user, Alstom Transport, from August 2004 until he was asked to leave in 2006.

He was successful at an employment tribunal in July last year, when a direct contract was implied, but Alstom went to the Employment Appeals Tribunal, which disagreed and overturned the ruling.

Unusually, the EAT substituted its decision (rather than remitting back to the ET), prompting the Court of Appeal to hear the case because Tilson claimed that the EAT was wrong.

Hearing the initial findings of the Appeal judges, specifically those from Lord Justice Elias, the technical worker must have let out a sigh of relief, as they sounded in his favour.

“Absent any agency arrangements, there can be no doubt that even if there were no express contract, one would readily be implied given this working relationship," Justice Elias said.

"To all intents and purposes the appellant was performing work in just the same way as any other employee would do.

"Moreover, the mutual obligations of work for pay, coupled with the significant degree of control, manifestly satisfy the test for determining whether there is a contract of service”.

But Tilson’s relationship with his agency, Morson Human Resources, was "complex," and involved his services being provided to Alstom through a third party, Silversun Ltd.

(Silversun verbally agreed with Tilson to pay him his salary less 3%, and it was noted that the contractual relationship between the two parties was a payment mechanism, nothng more.)

“Although a casual observer might have assumed that Mr Tilson was one of their [Alstom’s] employees, in fact he was not,” the judge added. “Indeed, it was his choice that he should not be.”

This point about choice, which clearly shows the intent of the parties was that there should not be a contract between them, was key in helping the court to determine what they were asked to: whether there was a need to imply a direct contract between Tilson and Alstom.

Employment status experts Bauer & Cottrell explained: “This case shows that Mr Tilson chose to enter into these contracts to provide his services to the end client.

“Indeed, he at one point refused an offer of permanent employment on the basis that he earned ‘a significantly higher rate of pay’ [and paid a lower rate of tax] under the arrangements.”

And while the judges accepted that Tilson was ‘part and parcel’ of Alstom, which controlled his work, they suggested that being integrated into an end-user organisation is the reality of the agency relationship.

“In most cases it is quite unrealistic for the worker to provide any satisfactory service to the employer without being integrated into the mainstream business, at least to some degree, and this will inevitably involve control over what is done and, to some extent, the manner in which it is done,” the CoA ruled.

“The degree of integration may arguably be material to the issue whether, if there is a contract, it is a contract of service. But it is a factor of little, if any, weight when considering whether there is a contract in place at all.”

So, had the judges been assessing Tilson under IR35, Alstom’s ‘control’ that he was subject to could have tipped the hypothetical contract towards being one ‘of services,’ but for their narrower purpose, it serves as a moot point.

The Appeal judges concluded, therefore, that it is a mistake to assert that “because someone looks and acts like an employee, it follows that in law he must be an employee.”

An agency worker having to apply to a client staff manager before being permitted to take annual leave, as Tilson had to, is “not sufficient to justify the implication of a contract.”

In the ruling , Justice Elias added: “In my view, there is no legitimate basis to imply a contract on these facts, even when considered cumulatively.

"In my judgment the only proper inference is that the parties would have acted in exactly the same way if there had been no contract”.

The Court also heard that there was” no common intention or desire that there should be a contract between these parties [the worker and the end user] or at least, not on the wage rates the appellant [Tilson] was receiving.”

Friday 3rd Dec 2010