The Court of Appeal’s decision in Postworth (t/a SkyBlue) v. Bunce offers a ray of hope for businesses that use agency workers to maximize flexibility and competitiveness.
By Helen Beech, Partner in the Employment team at Clarkslegal LLP
There is a general fear among employers that their power to manage the workforce cost effectively and flexibly is loosening as a result of the never-ending stream of employment regulations; flexible working rights, limitations on working time and increased bureaucracy relating to internal processes.
The Court had to decide whether Bunce was an employee of the agency or not. If the Court found the agency liable for all employment rights and benefits, the cost would undoubtedly have been passed on to the end-users.
SkyBlue supplied agency workers, including Bunce, to various end-user clients. The agreement between Bunce and SkyBlue stated that Bunce was not an employee, that the agreement was one for services, rather than one of services, and that there was no obligation on SkyBlue to offer work and none on Bunce to accept it.
The Agreement also set out the control SkyBlue had over Bunce, such that Bunce had to “co-operate with the client’s staff and accept the directions, supervision and instruction of any person in the client’s organisation to whom he is responsible … ”
In each of the 52 weeks prior to the termination of his agreement with SkyBlue, Bunce worked on an assignment for at least one or two days a week.
Bunce’s claim for unfair dismissal would only succeed if he could show that he was an employee of SkyBlue. If he could, it was accepted that he had one year’s service prior to his termination because there was no gap between any two assignments sufficient to break continuity of employment.
Bunce accepted that the “umbrella” agreement with SkyBlue was not an employment contract. There was clearly no mutuality of obligation between the parties. That meant Bunce had to show that the employment relationship with SkyBlue existed ‘beneath’ the umbrella contract by way of each individual assignment.
Bunce argued that every time he agreed to undertake an assignment with an end-user, mutuality of obligation existed between him and SkyBlue. He was obliged to turn up and SkyBlue obliged to pay him. He also argued that SkyBlue retained control over him, albeit that day to day control was delegated to the end-user.
The Court of Appeal did not accept any of Bunce’s claims. It agreed that it was not impossible to have an ‘umbrella’ contract with a series of contracts beneath it, but where the agreement with the agency clearly set out the detailed terms of the relationship, there was little room for another contract in respect of each assignment.
This contrasts with the McMeechan case where the worker was found to be an employee of the agency because there was no umbrella contract and the relationship was defined by terms and conditions detailed on the workers job assignment sheet on each and every occasion.
On the issue of control the Court did not accept that it was sufficient to show that day to day control originated in the contract with SkyBlue, thus satisfying the requirement of control by SkyBlue. The Court was satisfied that it was the evidence of day to day control that remained important and in Bunce’s case, although the right to control originated in the agreement with SkyBlue, day to day control was clearly provided by the client.
Bunce also argued that if he was not self-employed (which was accepted by all parties) he must be an employee. The Court rejected this claim stating that there was a large and growing number of people who did not enjoy the full range of employment rights because they worked under agency arrangements. Protection of these individuals was a matter for Parliament and not one to be overcome by judicial creativity.
In essence this judgment means that agencies can continue to supply workers in a flexible and competitive structure without passing on increased costs of employment liabilities to end-users. Agencies are advised to have well drafted contracts for services with agency workers, detailing issues of mutuality of obligation, termination and day to day control, making sure that the contract governs each assignment.
Agencies should also audit the pattern of assignments so that no agency worker, works for 52 weeks without adequate gaps to break continuity.
The case did not consider the ongoing problem for end-users that an agency worker may be deemed to be their employee, so whilst agencies may be able to avoid passing on increased costs of employment liabilities to clients, the client remains at risk of a contract of employment being implied between them and the agency worker following the decisions in Dacias and Reuters.
The terms of the relationship between the agency and client may offer some protection here, and end-users should never be complacent when managing agency workers or dispensing with their services.
The moral of the never-ending agency worker story? In essence, what the Court gives with one hand it may take away with another.
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