The topic of employment status has been very newsworthy lately, in particular with individuals working in the ‘gig’ economy, where courts were required to rule on whether individuals were self-employed or had worker status (like the cases of Uber and Deliveroo). However what about the status of agency workers? Employees are directly employed by an end user, whilst agency workers are typically individuals who have an agreement with an agency, and then work for different clients of the agency’. Generally the end user will have entered into a separate agreement for services with the agency.
There are three types of status; ‘employee’ (who have extensive employment rights and protections), ‘worker’ (who have some employment rights and protections) and ‘self- employed’ (who have very little employment rights).
This article looks at what the law says about agency workers being classed as employees.
The criteria for being an employee
Caselaw sets out the legal test for how to recognise an employment service. There are three ingredients:
- Personal service – an assessment of whether the agency worker is required to provide a personal service (of whether they can send someone else in their place).
- Control – does the end user have control over the agency worker (e.g. the power of deciding what is to be done, the way in which it is done, the time and place of where it should be done and day-to-day control).
- Mutuality of obligations – does the individual contractually have to work and does the would-be employer have to provide work?
Are agency workers employees of the agency?
No. The caselaw says that only under ‘exceptional’ circumstances would an agency worker be an employee of an agency. They came to this conclusion because typically:
- The agency doesn’t have day-to-day control of the agency worker;
- The work carried out by the agency worker is not done for the direct benefit of the agency; and
- There is no obligation on the agency to find work for the agency worker, and no obligation on the agency worker to accept it.
Are agency workers employees of the agency or the end user?
There are generally two agreements in an agency worker situation (one between the agency worker and the agency; and another agreement between the end user and the agency). Assuming the typical agency worker model is used, the end user will have day-to-day control but not mutuality of obligations. The agency will have mutual obligations with the individual but not day-to-day control over the them.
The law as it stands makes it unlikely the vast majority of agency workers are ‘employees’ of the agency, nor the end user. However most agency workers will still have the status of ‘worker’, meaning that they will have some employment rights, such as the right to whistle-blow and the right not to be discriminated against. They will not have some key rights and protections reserved for employees, such as the right not to be unfairly dismissed, maternity leave (and potentially statutory maternity pay), and parental leave.
The judges left some wiggle room but in fact, we’re not aware of any situation where agency workers are employees.
Therefore the end user in particular, can be safe in the knowledge that liability for a potential unfair dismissal claims is slim to none in relation to agency workers. However both the agency and the end user must be aware that agency workers do have the right under the Agency Worker Regulations 2010 to be entitled to parity of basic pay and working conditions compared to their employee counterparts, after 12 weeks of service in a particular job.
By Zahid Reza
Caselaw: James v Greenwich Council, Ready-Mixed Concrete (South East) Limited v the Minister of Pensions and National Insurance
Image used under CC courtesy of Fraser Valley University