Human Capital (Employment) - Appealing Times, February 2008

Despite being only two months into 2008, the appeal courts in both the UK and Europe have handed down a number of decisions and opinions that may have a significant impact on employers. These decisions and opinions deal with questions relating to agency workers' status, whether to take expired disciplinary warnings into account when dismissing an employee, whether employees on long-term sickness accrue holiday leave and whether an employee can suffer direct discrimination and/or harassment because she is "associated" with a disabled person.

In James v London Borough of Greenwich (2008) EWCA Civ 35 the Court of Appeal held that only on grounds of necessity could an Employment Tribunal imply a contract of employment between an agency worker and the end-user.

There has been much uncertainty surrounding the employment status of agency workers in recent years. Their status is important as it affects their statutory rights. The Court of Appeal's decision in James should reassure end-users that agency workers are still worth taking on in certain circumstances.

Ms James was supplied by an agency to work for London Borough of Greenwich. She had no express contract with the Council direct but had entered into a "Temporary Worker Agreement" with the agency, which made it clear that she was not its employee.

After a period of absence due to sickness she was informed that she was no longer required by the Council as the agency had sent a replacement. When the agency terminated Ms James' services she claimed unfair dismissal against the Council, contending that in light of Dacas v Brook Street Bureau (2004) IRLR 358 CA the Tribunal should imply a contract of employment between her and the Council. It concluded otherwise, as did the Employment Appeal Tribunal.

Ms James appealed to the Court of Appeal, which has now upheld both of the earlier decisions. The Court has held that when deciding the employment status of an agency worker, an Employment Tribunal should only imply a contract of employment between the agency worker and the end-user of his or her services where it is necessary to do so and, in very extreme circumstances, by exposing sham arrangements between the parties. The Court also made it clear that it is not for the courts or tribunals to extend employment protection rights to agency workers and that further developments will need to come from Parliament.

Key point for employers: Provided that end-users and agencies set up arrangements which...