Jackaman Smith & Mulley

By Liz Whitehead, Solicitor - Employment Team
Footing the bill for staff you didn’t employ?
Whilst many businesses use the services of agency workers they may not be aware that the workers are potentially acquiring employment rights against them. Liz Whitehead of Jackaman Smith & Mulley solicitors explains some of the practical risk areas and legal obligations which businesses can unwittingly find they have taken on.

The use of agency workers is very common in many sectors of industry. It can offer businesses a flexible and adaptable work force without the requirement for permanent overhead increases which may not be attractive against fluctuating trading cycles or for other reasons. However there remain situations where the true status of the agency worker’s rights can become far more than the ‘end user’ company bargained for.
Who employs agency workers?

The common assumption is that the Agency is always responsible for the workers it supplies. This is not necessarily the case. The end user company may also be, or become, the employer. The fact that the Agency pays the worker and deducts tax and NI from his or her pay is not conclusive. If the worker has been working exclusively at your site and under your control then for legal purposes an employment relationship may well arise. Likewise, if the worker has been working for the same end user business for months or years, the probability of the business being the ‘real’ employer becomes far greater.

Agency Contracts

The contract the end user business has with the Agency does not always defeat the possibility of the worker being or becoming an employee, even if it states the worker will not be the end user’s employee. The existence of the employment relationship largely depends upon practical factors such as control and integration of the worker into the business. There is no requirement for the worker to have a written contract directly with the end user.

The Conduct of Employment Agencies and Business Regulations 2003 were intended to clarify the employment status of agency workers. However, although regulating the Agency industry, they have not succeeded in protecting end users from becoming unwilling employers.

Rights and Obligations

If it is established that the agency worker is really your employee, a whole raft of additional legal responsibilities come into play for the business. These can include redundancy payments; protecting workers’ rights on the sale of the business; following proper grievance and disciplinary procedures; and (potentially) ultimately paying compensation for unfair dismissal or discrimination if the worker has not been properly and fairly treated.
The “Barn Door” Principle

Many businesses only become aware of the true extent of their obligations after a problem has arisen or the agency worker arrangements have been terminated. The bad news often arrives in the form of an Employment Tribunal claim against the business and the Agency. By that stage the horses have long since bolted and the end user business can be looking at an expensive outcome. If the Agency and end user both deny employee status existed, the Tribunal may find either liable on the facts.
Risk Management
The problem for many businesses who face these types of disputes is that they often have little legal armoury available to defend themselves. Because they have assumed the agency worker did not have formal employment rights, few (if any) of the steps have been taken which could have mitigated or avoided the liability. Businesses regularly using agency workers should therefore keep their arrangements under review and obtain advice on actual or potential responsibilities, particularly where individuals are being retained for long periods or are becoming “part of the furniture” in reality.

Liz Whitehead is a solicitor specialising in Employment Law and can be contacted at liz.whitehead@jsm.co.uk















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