Are agency workers employees after all?

Do you use long-term temps? When their services are no longer required, do you pay them redundancy pay? Are they entitled to the same rate of pay and the same benefits as your employees? And have you factored in the risk of unfair dismissal claims from such workers?

You might not have thought you needed to think about these issues before. But a recent decision in the Court of Appeal means you should now consider them very carefully.

Since the Court of Appeal's decision in Franks v Reuters Limited and another (2003 IRLR 423) the status of agency workers has been unclear.

In that case, the Court of Appeal acknowledged that an employment relationship could be implied between an end-user (for example a housing association or local authority) and an agency worker.

The Court of Appeal advised that employment tribunals should look at the ongoing reality of the situation to determine whether a contract had evolved between the hiring company and the agency worker.

While the Court of Appeal accepted that no-one became an employee simply by reason of the length of time that they were engaged, the fact that Franks had started as a temporary employee and stayed at Reuters for more than five years, during which time he was redeployed, was relevant.

In March this year, the Court of Appeal extended this concept further in Dacas v Brook Street Bureau. It found that where a temporary worker is engaged via a temping agency, the "end user" – in that case, Wandsworth council – will, in most cases, be the employer for unfair dismissal purposes.

In reaching its decision the Court of Appeal overturned the Employment Appeal Tribunal's earlier decision that Mrs Dacas was an employee of the temping agency Brook Street Bureau, on the basis that Brook Street paid wages and had the right to terminate.

In having the right to exercise disciplinary functions, it had sufficient control to be her employer, the tribunal decided.

The Court of Appeal made it clear that its judgment was intended to set the benchmark for future cases concerning agency workers.

The mere fact that the contract recorded that Dacas was not an employee of either Brook Street or Wandsworth council could not be determinative and an employment tribunal should always investigate whether an implied contract of employment had arisen between the employee and the end user, in this instance Wandsworth.

Employers should carefully review their use of temporary workers in light of this decision.