Agency Workers: How important is the concept of control in determining employment status?

Consistent Group Limited -v- Kalwak & Others & Welsh Country Foods Limited Employment Appeal Tribunal

Background
This is the latest in a line of cases relating to agency workers and determining their employment status. This topic has lead to some complex and controversial decisions, examining the nature of the employment relationship and considering the roles played by an agency and end-user of the workers services. In this case, the EAT was required to consider whether the lack of detailed day to day control by the agency undermined an analysis that the worker was an employee of the agency. The EAT considered that a lack of detailed control over work would usually be decisive against a finding of an employment relationship between the agency and the worker, but held that in this particular case, the obligations between the parties were consistent with the existence of an employment relationship despite a lack of day to day control over the workers.

Facts
Consistent Group Limited (CG) is an employment agency, supplying workers to food processing factorys and hotels. Mrs Kalwak was one of many staff recruited in Poland, brought into the UK by CG and put up in a hostel by CG. CG then supplied Mrs Kalwaks services to Welsh Country Foods Limited (WCF). The terms between the respective parties, Mrs Kalwak, CG and WCF were as follows: 1. Mrs Kalwak signed a Self Employed Sub-Contractors Contract for Services with CG. This explicitly stated that she was not employed by CG, they were not obliged to offer her work, and she was not obliged to accept it. The agreement provided an ability for her to use a substitute, provided she vouched for their competence, suitability and experience and permitted her to work for others. It also set out Mrs Kalwaks responsibility for payments in respect of accommodation, transport and other services to be made available by CG. The contract between CG and WCF, although found not to have been a written contract at the time Mrs Kalwak was working, was held to provide that any workers supplied by CG would remain employed by CG and would not be permitted to work at WCF through any self employed mechanism, would not be employed by WCF directly and could not be employed through any other agency. The contract also provided that WCF would be responsible for providing the staff supplied with day to day instructions relating to the services required.

2.

The agency workers asked to join the Transport and General Workers Union. They were initially discouraged and subsequently dismissed. They issued tribunal claims arguing that they had been dismissed for proposed trade union membership contrary to the provisions of the Trade Union Labour Relations (Consolidation) Act and that they had been denied notice pay. These two claims were only available to employees and a preliminary hearing was held to determine their employment status.

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At first instance, the Tribunal held that the workers were employed by CG, relying in part on the content of the Self Employed Sub-Contractors Contract for Services (although choosing carefully which parts were relied upon), and in part on the level of control exerted by CG over the workers working lives as a whole, for example by controlling when days off could take place and by charging for services and actively discouraging unionisation. It found as a question of fact that the suggestion they could accept alternative work, and many other terms of the contract between CG and the Employees, were a sham inserted to give the appearance of a contract for services and did not reflect the actual relationship between the parties. This analysis was further supported by the contract between CG and WCF which fundamentally contradicted the contract between CG and the individual workers in a number of key respects. Effectively CG was aiming to obtain the advantage of avoiding the employment relationship with the workers while also claiming the advantage of being able to fulfil the WCF by claiming that the staff were employees. CG appealed the decision.

Decision
The EAT dismissed CGs appeal. They considered that the nature of the relationship between the workers and CG was exceptional and that the Tribunal had construed that relationship quite properly given its scope to assess the facts when considering the overall degree of control exercised over the employees. CG raised arguments relating to three crucial aspects of the employment relationship: personal service; mutual obligations; and control.

The EAT had no difficulty in concluding that the contract between CG and the individual workers did provide a duty of personal service. The worker could only provide a substitute if he was unable (as opposed to unwilling) to perform the work himself. Similarly, the EAT had relatively little difficulty finding the existence of mutuality of obligation. Again, the contract between CG and the workers appeared to provide that there was no obligation to give or to accept work and that such obligation arose only once an engagement had been accepted. However, this was contradicted by the fact that the contract prevented the worker from providing services to any other person, and given the heavy economic dependence upon CG of these workers, the workers were effectively obliged to accept work from CG. The most difficult of the three issues was the question of control. CG argued that it had no control at all over the day to day work of the employees as this was entirely in the hands of WCF. The workers argued that the type of control exercised by WCF, described as micro management was important in determining the employment relationship, but was not conclusive. They cited authorities which regarded this as a strong indicator of an employment relationship not as a necessary requirement for an employment relationship to exist. This raised an interesting legal issue, which was then examined through the authorities. The workers referred to the classic case on the topic of employment status, Ready Mixed Concrete (South East) Limited -v- Minister for Pensions (1968) where an example had been given where an employment contract could be found to exist even where day to day control is absent. The example was the master of a ship who was employed by the ship owner despite being under the day to day control of the charterer.

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The workers also referred to more recent strands of case law where agency workers have been held to be employed by the agency, including Dacas -v- Brook Street (UK) Limited (2004) and the line of cases following Dacas. The workers also pointed out that in many skilled positions an employer has little or no control over the way the work is performed, and may have very little understanding of how the work is performed, but would still unquestionably be the employer of a highly skilled employee. In addition, even though there was a low level of day to day control over their work from CG, the relationship was such that they were virtually entirely reliant economically upon CG, which controlled effectively all economic aspects of their life (including the amount they were paid, the amount of rent they were required to pay and their debts for travelling to the UK and additional services such as translation required by them upon entry into the UK). The EAT accepted this position holding that while detailed control over the work activity itself certainly is a factor and will often be the decisive factor in determining the employment relationship, it is not a necessary condition. In this case, where the employees were almost entirely economically reliant upon the agency and had little practical alternative but to work as, when and how it required them to, the EAT found that they were indeed employees.

Comment
It seems that the subject of the employment status of agency workers simply will not go away. This case is a useful reminder that it is the substance of the relationship which matters, not what it is called between the parties. Both at Tribunal and EAT level, particular concern was expressed over the level of control exerted over these workers, having been recruited in Poland and brought into the UK in such a way as to make them entirely economically reliant upon the agency. At both levels the Tribunal considered that such workers required some protection, and the protection of employment status was simply the most that the judicial system could offer. The Government consultation on agency workers is ongoing, and this case draws attention to a particular category of agency workers whose interests will undoubtedly be considered during the consultation.

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