Case law: contract of employment implied for agency worker

Businesses that use agency workers or independent contractors, with a view to reducing their employment obligations, need to review the terms on which they do so, following a recent Court of Appeal decision.

In this case, the applicant had been employed by a telecoms company which had dismissed him, in preparation for a sale of the business, and re-hired him as a contractor. The company was then taken over by Cable &Wireless, which told the applicant that he had to deal with them through an agency; the agency agreement stated that nothing contained in it should be construed as constituting or establishing any relationship of employee and employer between the parties.

When Cable &Wireless terminated the agency agreement, the applicant claimed that he had been unfairly dismissed, on the basis that he had been employed by Cable &Wireless. The Court of Appeal upheld the applicant's claim, stating that a contract of employment could be implied, and confirmed earlier case law that, in deciding the true employment status of a worker, consideration must be given not only to the written contract governing the arrangement but also to all the evidence as to the factual reality of the arrangement.

As a result, businesses need to minimise the risk that a contract of employment will be implied in such circumstances (eg by keeping contracts short), and should seek legal advice at the outset in order to avoid costly litigation at a later date.

Immediate

See the full transcript of the case