Issue 86 - Janurary 2007

Employees or not? – Agency workers revisited (again!)
It has in recent years become widely accepted that in certain circumstances an agency worker can be an employee of an end user/client under an implied employment contract, despite the fact that the agency worker is supplied to the client and paid by a third party. Dacas v Brook Street Bureau (UK) Ltd [2004] has been the leading case on this issue to date and remains good law. Nevertheless, the recent case of James v Greenwich Council has provided further clarification

It has in recent years become widely accepted that in certain circumstances an agency worker can be an employee of an end user/client under an implied employment contract, despite the fact that the agency worker is supplied to the client and paid by a third party. Dacas v Brook Street Bureau (UK) Ltd [2004] has been the leading case on this issue to date and remains good law. Nevertheless, the recent case of James v Greenwich Council has provided further clarification.

Mrs James was an agency worker and had worked for Greenwich Council for five years. She argued that an implied employment contract had arisen between her and the Council. The Tribunal found that in all respects Mrs James was not an employee of the Council; she was not paid by the Council, the Council did not provide her with benefits such as sick pay or holiday pay and when Mrs James was absent through sickness the agency supplied another worker to the Council. Overall, the Tribunal found that there was no obligation on the Council to offer Mrs James work and no obligation on Mrs James to accept any work offered and as such Mrs James was not an employee of the Council. The Employment Appeal Tribunal (EAT) upheld the decision on appeal confirming that Dacas only indicated that an implied contract could be established in certain circumstances and the fact that Mrs James worked for the Council for a long period of time does not alone result in an implied contract of employment

The EAT commented that provided the agency arrangements between the parties are genuine and not a sham (which is likely to be the case where there is no pre-existing contract between the worker and end user) then it will be a rare case where there will be evidence entitling the Tribunal to imply an employment contract. For this to happen, the EAT held that there must be some words or conduct which demonstrate that the agency relationship no longer accurately reflects how the work is actually being performed.

Whilst this is helpful guidance for any organisation using agency workers, it should be approached with caution, given that the Court of Appeal decision in Dacas remains good law and most cases of this nature turn on their particular facts.

Tribunal “speculation” in an unfair dismissal claim

Polkey is a commonly used argument by employers in unfair dismissal claims to try and reduce the compensation payable to an employee (and since the introduction of the Statutory Dismissal Procedures to avoid the dismissal being unfair in the first place). It is often argued when a dismissal is procedurally unfair but where following the correct procedures would have made “no difference”. It can also be applied where an employee may have been fairly dismissed some time later for a different reason, for example, redundancy. Tribunals are often cautious to embark upon assessing what might have happened if an employee had not been unfairly dismissed however the Court of Appeal in the recent case of Scope v Thornett [2006] held that any prediction of future loss inevitably involves an element of speculation and Tribunals must not shy away from making such predictions merely because the task is difficult and involves some speculation.

Preparing to compete

Every contract of employment contains an implied term that the employee must act with good faith and fidelity, which includes not working in competition with their employer whilst still employed. Employees may even take some preparatory steps to compete with their employer but it is often difficult to assess where mere preparation stops and active competition starts.

In Helmet Integrated Systems Ltd v Tunnard the Court found that Mr Tunnard, a middle-ranking senior salesman, had not breached the duty of fidelity implied into his employment contract or any fiduciary duties by taking some preparatory steps to compete with his employer whilst still employed by them. His preparation included obtaining funding from the DTI to develop his competing product, commissioning concept drawings and sending those drawings to his employer’s rival (who later invested in the project).

This case is a stark reminder of the need to include express terms in an employee’s contract of employment prohibiting the employee from competing or preparing to compete during their employment.

Whistleblowing – what is protected?

The Court of Appeal has now delivered its judgment in Bolton School v Evans on the scope of the protection from detriment given to workers who have made a “protected disclosure”.

Mr Evans, a technology teacher at Bolton School, had been concerned that the school’s computer system might not be secure. To test the system, Mr Evans accessed encrypted passwords using a student’s PC, and informed managers that he could do a simple test to see if pupils could gain access to staff information. He then decoded the passwords (assisted by a former pupil) and accessed the school’s computer system remotely (disabling some of the user accounts). He informed managers of his actions and was subsequently disciplined and given a written warning for deliberately hacking into the school’s computer system. Mr Evans resigned and brought a claim arguing that he had been constructively dismissed and had suffered a detriment (the warning) as a result of having made a protected disclosure (i.e. informing staff that the system was not secure).

The Tribunal upheld Mr Evans’ complaint in the first instance and found that Mr Evans’ conduct in hacking into the system formed part of the protected disclosure and he had therefore suffered a detriment as a result of the warning. This was overturned by the EAT which found that Mr Evans had not been given a warning because he disclosed information concerning the security of the computer system but rather because he had deliberately hacked into the system to substantiate his concerns. It held that the Employment Rights Act 1996 protects disclosures of information and not other conduct by an employee which may be connected to the disclosure and that the law does not allow employees to commit what would otherwise be an act of misconduct in the hope that they may be able to substantiate their concerns. The Court of Appeal upheld the EAT’s decision confirming that the act of Mr Evans informing managers that the system may be unsafe was the protected disclosure and not the whole course of conduct, including his actions in hacking into the system and that Mr Evans was dismissed for misconduct and not because of his disclosure.

This decision demonstrates the importance for employers to take care and be clear with employees, both verbally and in writing, about the basis of any disciplinary action in circumstances which could give rise to a whistleblowing claim.

Quick Fire

• The High Court has agreed to refer an application by the National Council on Ageing (the “Heyday” group) challenging certain aspects of the Age Regulations to the European Court of Justice. Heyday is understood to be challenging the default retirement age of 65, the exemption which permits employers to refuse to recruit employees over 65, the justification for direct discrimination and the fact that employers are not obliged to provide reasons for refusing an employee’s request to work past retirement. They say all these aspects are contrary to the European Directive on Age Discrimination. Only time will tell, watch this space…….
• The Tribunal has found that the Gate Gourmet employees who gathered in the canteen on that fateful day in August and who were subsequently dismissed by the Company for refusing to work had been participating in unofficial industrial action and therefore have no right to pursue claims for unfair dismissal.
• The DTI has confirmed that it will be conducting a review of the Statutory Dispute Resolution Procedures with a view to simplifying and improving them (hurrah!). Recommendations for change are expected to be made in Spring 2007.

Early Bird Workshops

We will be running our Early Bird Workshops in Ipswich and Norwich from Tuesday 20th February 2007. For further details please see attached invitation.

To book your place please contact Kristina Elliott on 01473 406250 or kristina-elliott@birketts.co.uk

If you have any questions about this, or any other employment law related matter, please be in touch with any member of the team. Also, if you think that you should have received an invitation to our Early Bird seminar recently, but did not, please let us know.

Team News
We are delighted to welcome Lisa Hayward to our employment team. Lisa joins us from the London Borough of Harrow where she trained and qualified. We look forward to being able to introduce her to as many of you as possible over the coming months.

The content of this document is for general information only. As always, specific professional advice should be taken on each individual matter © Birketts Solicitors 2007. Birketts LLP is constituted as a limited liability partnership in accordance with the Limited Liability Partnerships Act 2000. Where we refer to a 'partner' of Birketts LLP, whether in this brochure or in any other correspondence or communication with you, the term 'partner' means a member of Birketts LLP, and shall not be construed as indicating that the members of Birketts LLP are carrying on business in partnership within the meaning of the Partnership Act 1890.

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