Agency workers: who is in charge around here?

The NHS relies heavily on agency nurses to plug gaps in hospital staffing. Along with other temporary workers, including consultants and administrators, they cost the health service£1.1bn a year. But who is actually responsible for these workers - the NHS or agencies?

The recent Court of Appeal case of Merana James v London Borough of Greenwich was decided on 5 February 2008. Ms James had been working for the council, through an agency, for three years when the council decided to replace her with another person from the same agency. She claimed unfair dismissal.

The issue was whether, in the absence of an express contract of employment, it is necessary to imply a contract of employment between an agency worker and the employer.

To an onlooker, Ms James, an agency worker, would have been indistinguishable from a council employee. Not only did the council direct her duties, but they organised the procedures to be followed by her and provided her with the materials to carry out her work. Ms James even wore a staff badge for work which displayed the council's logo.

However, despite the similarities between Ms James and a council employee, the tribunal, the Employment Appeals Tribunal and the Court of Appeal all refused to find that she was a council employee and therefore she had limited statutory employment rights.

When will a worker be classified as an employee?

In determining whether a worker is an employee, the Court of Appeal confirmed that the correct method was to analyse any contracts that governed the parties' working relationship before considering the surrounding circumstances.

In this case, although there was an express contract in place between Ms James and the agency and an express contract between the agency and the council, there was no express contract between Ms James and the council.

The Court of Appeal concluded that these express contracts satisfactorily explained the parties' relationships and so it was not prepared to imply a contract between Ms James and the council.

The Court of Appeal confirmed that the ordinary principles of common law applied in determining whether a contract should be implied between a worker and agency client in each case. A contract should only be implied if it is reasonably necessary to give business reality to a working relationship. If in the absence of an implied contract both parties would have acted in the same way, a contract should not be implied.

In this case, although the council had treated Ms James like an employee for more than three years, this was of limited significance as it was fully in accordance with the services she provided through the agency.

When will a contract of employment usually be implied?

Where a contract between an agency and their client contains provisions which allow the client a greater degree of control over the agency worker, a contract of employment between the worker and the end user client is more likely to be implied.

For instance, if any of the following provisions are contained within the agency-client contract, a tribunal will be more likely to imply a contract between the worker and agency client:

• a provision allowing the client to select particular agency workers for engagement or to restrict the agency's power to substitute an agency worker;

• a provision subjecting the agency worker to the client's disciplinary or absence procedures;

• a provision governing bonuses or incentives to be paid to agency workers by the client;

• a provision requiring the worker to obtain the client's permission before taking holiday;

Such provisions may transform the end user client and worker relationship into a relationship which is better characterised as one between employer and employee. This means that an employment contract is more likely to be implied.

Future developments

The Temporary and Agency Workers (Equal Treatment) Bill is currently going through Parliamnent. The bill seeks to widen the protection for agency workers. However without the support of the government, the bill has no realistic chance of becoming law. Therefore, the Court of Appeal's guidance in this case will continue to govern the position of agency workers for the immediate future.

Longer term, the position of agency workers is likely to improve. The prime minister has suggested that an independent commission be formed to consider the limited protection given to agency workers; in particular, issues such as the appropriate time period before an agency worker can accrue additional rights and a suitable method of establishing a comparable permanent worker.

Furthermore, commentators have suggested that when France takes over the EU presidency later this year, it is likely to revive the proposed EU directive granting agency workers rights to equal treatment to employers after just six weeks of employment.