[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]
The EAT (HHJ Serota) has handed down its decision in BIS v Studders, which is authority for the proposition that no contract of employment existed between an agency worker and the employment agency when the contract between them showed no intention to create an employment relationship and neither of two key requirements of an employment contract- mutuality and an appropriate degree of control- existed.
Unity Personnel was an employment agency which supplied the claimants to an end user. The contract between the agency and worker stated it was not an employment contract. Unity had no obligation to provide work and the claimants had no obligation to accept work when offered. Unity became insolvent, owing the claimants remuneration. They asserted they were employees for the purposes of seeking re-imbursement from the Secretary of State under s 188 of the Employment Rights Act 1996. The employment tribunal found in their favour. The EAT reversed its decision.
It was not impossible to find an employment contract between an agency and a worker (McMeechan v Secretary of State for Employment  ICR 549 was an example). But here the contract (and there was no suggestion it was a sham) was against it. Deduction of National Insurance and PAYE was a neutral factor, since ss 44-47 of the Income Tax (Earnings and Pensions) Act 2003 necessitated it. And the "irreducible minimum" requirement for an employment contract- mutuality of obligation and control exercised by the employer- was not met.