Spot the difference

There have been a number of cases in recent years involving claims by agency workers seeking to argue an employment relationship with the end user client. The recent Court of Appeal decision in Tilson v Alstom Transport reinforces the position that a contract of employment should not be implied unless it is necessary to make business sense of the relationship – even if the relationship has all the usual characteristics of employment. Let's look at the facts. Mr Tilson provided services to Alstom as an independent contractor under a quadripartite relationship involving three separate contracts. The first was between Tilson and a limited company (Silversun). The second was between Silversun and an agency, Morson. Finally there was a contract between Morson and Alstom, in which Morson contracted to provide workers to Alstom. A clause in the contract between Silversun and Morson purported to prevent Morson or Alstom from exercising any supervision, direction or control over Tilson in the performance of his services to Alstom (the 'supervision clause'). However, Tilson was fully integrated into Alstom's business. He was supervised by Alstom's managers and had to seek their consent to take holidays. He also supervised Alstom staff. Tilson was asked if he would like to become an employee of Alstom but declined. When his engagement with Alstom was terminated, Tilson brought an unfair dismissal claim against Alstom. The key question was whether he had been employed by Alstom. Decision The case was first heard by the employment tribunal; it held that the supervision clause was bogus as it was merely an attempt to avoid any employment liabilities. The judge held that Tilson was fully integrated in the business and that an employment contract should be implied. The employment appeal tribunal overturned this decision and the case ultimately reached the Court of Appeal. The Court of Appeal held that it is not permissible for a tribunal to conclude that a worker must be an employee simply because the worker does the kind of work that an employee typically does. Nor is it legitimate for a tribunal to imply a contract because it objects to arrangements of this kind. The tribunal was also wrong to conclude that if the supervision clause was bogus, the whole contract was invalid. Even though the supervision clause did not reflect the reality of the working relationship, Alstom was not party to that contract. The contract between Alstom and Morson (under which Morson undertook to provide Tilson's services) fully explained why Tilson was working for Alstom and there was no evidence that Alstom had acted inconsistently with that contract. Also the fact that Tilson had abstained from entering into a contract of employment demonstrated that he had no intention of becoming an employee. Accordingly, a contract of employment should not be implied between Tilson and Alstom, and Tilson was not able to claim unfair dismissal. Advice to employers The Court of Appeal's decision helpfully reinforces the recent line of case law authority that courts will not easily imply a contract of employment between an agency worker and the end user client. When considering whether it is necessary to imply a contract of employment, tribunals will look at all the circumstances of a case – the documents that purport to record the arrangements between the parties, as well as the reality of the situation. Manufacturers can take steps to protect themselves against such claims. It is clearly important to document the intentions of the parties and this can be achieved with a clear contract between the agency and the manufacturer. It is also good practice to pass dealings with the agency worker through the agency, as this demonstrates a lack of control by the manufacturing client company. Ideally, the client company should seek an indemnity from the agency in relation to any claims brought on the basis of employment status by the agency worker. Previously, organisations were encouraged to minimise the integration of agency workers into the workforce, by not involving them in employee events or training, for example, or not giving them supervisory roles. This latest case suggests that as long as the intentions between the parties are clearly documented, such approach is no longer necessary. Indeed, this approach could be risky given the Agency Workers Regulations that are coming into force in October 2011. Once these Regulations are in force, denying agency workers access to employment, facilities and training may well give rise to claims under those Regulations. For more on the implications of the Agency Worker Regulations, see WM's December 2010 issue – all previous employment law columns are available at www.worksmanagement.co.uk/ employment-law. Sara Sawicki is a partner at law firm Pinsent Masons: www.pinsentmasons.com