There was no need to imply a direct contract between an agency worker and an employer just because the worker's conditions did not exactly match those described in the agency agreement, the Court of Appeal has said.
The fact that the worker was fully integrated into the employer's business and asked permission to take holidays does not necessarily mean that he was an employee, the Court has found.
The worker claimed that there was effectively a contract in place, but the Court said that this did not make commercial sense because the worker had previously declined offers to become a permanent employee.
Andrew Tilson worked for Alstom Transport, which provided train maintenance services to a train operating company. Tilson worked as a manager in the business but was not directly employed. He worked via a complicated agency agreement.
Tilson wanted to bring a case of unfair dismissal against Alstom but to do so he needed to show that he was an employee of the company. Alstom argued that he was not and the case was heard by the Court on an appeal from the Employment Appeals Tribunal and the Employment Tribunal.
"Absent any agency arrangements, there can be no doubt that even if there were no express contract, one would readily be implied given this working relationship," said Lord Justice Elias in the ruling. "To all intents and purposes the appellant was performing work in just the same way as any other employee would do.
"Moreover, the mutual obligations of work for pay, coupled with the significant degree of control, manifestly satisfy the test for determining whether there is a contract of service laid down in the seminal case of Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance," he said.
But the agency agreement complicated the issue. The Court had to decide whether or not it should imply a direct contract between Tilson and Alstom because the contract between Tilson's agency, Morson Human Resources, and Alstom did not match the reality of his working conditions.
A court can imply a contract if the lack of one or the details of an existing one do not match the commercial reality of a person's relationship with a company.
Tilson had a payment agreement with Silversun Solutions, which received and passed on his pay for a 3 per cent charge. It provided his services to agency Morson Human Resources, which in turn provided them to Alstom.
Silversun's contract with Morson said that "neither the company nor the client shall be entitled to or seek to exercise any supervision, direction or control over the contractor or the operatives in the manner or performance of the project".
It was this clause which was said not to reflect the reality of Tilson's employment, where he did accept Alstom's supervision. It was clause three of the contract.
"Clause 3 ... plainly did misrepresent in a blatant way the extent of the control which Alstom would exercise over [Tilson]," said the Court ruling. "The relationship between the appellant and Alstom was not conducted remotely in the manner which that contractual term envisaged that it would be. Is it necessary to infer a contract to explain this divergence between contract and practice?"
"I do not accept that it is. It is pertinent to note that Alstom never made any representation to [Tilson], or gave any contractual undertaking, that they would not seek to control his activities," said Lord Justice Elias. "The fact that [Tilson] was subject to a considerable degree of control was no doubt inconsistent with clause 3.1 of the contract between Morson and Silversun. But even if it can be said that there was a representation or contractual promise effectively made to [Tilson], through Silversun, that does not create any inconsistency between Alstom's conduct with respect to [him] and any undertakings it has given."
The ruling said that the inconsistency between clause three and the actuality of his working life could have allowed Tilson to refuse the placement with Alstom, but he worked there for some years.
"The contract between Morson and Alstom under which Morson undertook to provide his services fully explained why he was working for Alstom, and there was no evidence before the Employment Tribunal that in their dealings with [Tilson], Alstom acted inconsistently with the terms of that contract," said the ruling.
The Court said that Tilson was an integrated part of the Alstom workforce does not mean that he had to be considered a permanent employee.
"The mere fact that there is a significant degree of integration of the worker into the organisation is not at all inconsistent with the existence of an agency relationship in which there is no contract between worker and end user," said Lord Justice Elias. "Indeed, in most cases it is quite unrealistic for the worker to provide any satisfactory service to the employer without being integrated into the mainstream business, at least to some degree, and this will inevitably involve control over what is done and, to some extent, the manner in which it is done."
"The degree of integration may arguably be material to the issue whether, if there is a contract, it is a contract of service. But it is a factor of little, if any, weight when considering whether there is a contract in place at all. This argument repeats the error of asserting that because someone looks and acts like an employee, it follows that in law he must be an employee," he said.
"The need to apply to the line manager before taking annual leave is not sufficient to justify the implication of a contract," he said.
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