The Court of Appeal has dealt a blow to agency workers seeking to secure employment rights with their end-user client, says Richard Brown, partner at Osborne Clarke.

Mr Tilson, a contractor, claimed he was unfairly dismissed when Alstom Transport (‘Alstom’), the end-user client he was working for, terminated his appointment. Mr Tilson’s engagement with Alstom was via a series of contractual relationships – his service company contracted with a staffing company which in turn contracted with Alstom. 

Mr Tilson was fully integrated into the Alstom business. For example, he worked Monday to Friday each week, his line manager had to approve his requests for annual leave, Alstom employees reported to him and he was authorised to discipline, dismiss and recruit permanent employees. 

An Employment Tribunal initially found he was an employee of Alstom and hence could proceed with his claim for unfair dismissal. However, the Court of Appeal has held that Mr Tilson was not an employee. Whilst Mr Tilson looked like, was treated as and acted like an employee of Alstom, this was not inconsistent with a finding that he was an independent contractor. 

The chain of contracts setting out the arrangements in place and Mr Tilson’s decision to reject offers of employment from Alstom, supported the position that he was an independent contractor engaged to work for Alstom via a service company and staffing company. 

Any inconsistency in the contractual terms between his service company and the staffing company (which provided that Mr Tilson would not work under the control of an end-user client) and what happened in practice did not break that chain. There was no need to imply an employment contract to make business sense of the relationships in place. 

In light of this decision, staffing companies should review their arrangements with service provider companies and make clear that the worker engaged through that company has no intention of entering into an employment relationship with the staffing company or any end-user. 

Staffing companies should also be wary of falling into the trap of dressing up contacts just to suit the tax status of suppliers - so far as possible, such contracts should accurately reflect the realities of the potential relationship the worker may have with any end-user he/she is assigned to

Next October heralds the controversial right for an agency worker, after 12 weeks in an assignment, to receive equal treatment to a comparable permanent employee in some aspects of their engagement, such as pay. However, they will still be denied the benefit of the protection of employment status with their end-user client, including the right not to be unfairly dismissed.

The issue of employment status may therefore still be one that agency workers and contractors will seek to secure through the courts.  However, this case should hopefully provide a practical deterrent to such challenges, given the prospect of legal costs and where services are provided via a service company, the prospect of HMRC scrutinising a contractor’s stated self-employed tax status.

Tilson v Alstom Transport (CA)