Agency Workers can be 'Employees'

The Employment Appeal Tribunal's decision in Dacas v Brook Street Bureau (unreported, EAT/492/02, 11th December 2002) has been placed on the EAT website.

Mrs Dacas had been working as a temp cleaner, via the Brook Street Bureau, for Wandsworth Council for 6 years. Her contract was terminated summarily. The tribunal found that she was employed by neither Brook Street nor Wandsworth. Whilst she accepted the conclusion as against Wandsworth, Mrs Dacas appealed against the finding that she was not an employee of Brook Street.

Burton J.’s decision turned heavily on the precise findings by the tribunal. The tribunal had found that there was “considerable control” exercised over Mrs Dacas by Brook Street, in the sense that it paid her wages, was entitled to discipline her / terminate her services. It held, however, that day-to-day control was exercised over her not by Brook Steet but by Wandsworth.

It went on to hold that, because of a clear statement in the contract that Mrs Dacas was not an employee of the agency, the agreement between the parties prevented her being an employee. Whilst it is not entirely clear from the EAT decision, it seems that the tribunal also relied on the lack of day-to-day control by Brook Street as pointing against an employment relationship.
The EAT overturned the tribunal’s decision. It held that because of the words in the tribunal’s decision that the agency exercised “considerable control”, then the Ready Mixed Concrete test (see above) was met. Since there was plainly mutuality of obligation, and since it was impossible to say that Mrs Dacas was in business on her own account, the only conclusion that could be drawn was that she was an employee of Brook Street. Although the contract provided that she was not an employee, it was settled law that a label would only be determinative when the other pointers were inconclusive. Here, according to the EAT, the other pointers clearly showed that Mrs Dacsas was an employee of the agency.

The result of this decision is in stark contrast to all the previous cases on agency workers. Dacas v Brook Street does not purport to overrule them and – indeed – does not expressly consider the recent authorities such as Hanbury & Brook Street v EDS and Hewlett Packard v O’Murphy. Whilst the EAT may have been straining to achieve a fair result, its legal reasoning is open to further analysis. In particular:

(a) the EAT does not appear to have considered whether the need for control is actually a need for control over day to day activities (which did not exist in Dacas);

(b) whilst the EAT asserts that the Ready Mixed Concrete test is met, it does not appear to have considered stage 3 of that test, i.e. whether there are provisions of the contract inconsistent with it being a contract of service.

Despite my comments, the ramifications of this decision are significant. Previously, tribunals have been prohibited by authority from finding that an agency worker is an employee (of anybody). Now the path is open for them to find that the worker is the employee of the temp agency, irrespective of any denials to that effect in the contract between worker and agency.

This may have considerable impact on potential liabilities for agencies - they may find themselves liable for any actual (or even constructive) dismissals by their client companies, over which they have no control. In the absence of appropriate indemnities in their contracts with their client companies, temp agencies could find themselves unknowingly liable for very significant sums of money.