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Employment agency not worker's employer

Employment Law & HR
BG Purple

The EAT has decided that no contract of employment existed between an agency worker and the employment agency when the contract between them did not appear to create an employment relationship and neither mutuality of obligation nor an appropriate degree of control (two key requirements of an employment contract) 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 payment for their work. They suggested that they were employees for the purposes of seeking re-imbursement from the Insolvency Fund. The employment tribunal found in their favour.  But the EAT reversed its decision.

Although the court acknowledged that it was not impossible to find an employment contract between an agency and a worker. But here the contract working (and there was no suggestion it was a sham) suggested otherwise.

Deduction of National Insurance and PAYE was a neutral factor, since the Income Tax (Earnings and Pensions) Act 2003 required it. So the "irreducible minimum" requirements for an employment contract - mutuality of obligation and control exercised by the employer- were not met.

BIS V Studders     EAT/0571/10

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