Employment Law for Agency Workers
Employment Law for Agency Workers

Employment Law for Agency Workers

An agency worker is someone with a special working arrangement. An agency worker has a contract with an employment agency. A ‘hiring organisation’ asks the employment agency to supply them with someone for a temporary assignment.

It is a common misconception that agency workers cannot accrue rights against the employer. This is not the case.

Agency workers can accrue rights against the employer. However, specific requirements need to be met.

The main issue is whether temporary agency workers are classed as employees. The employment status of agency workers is crucial for determining whether an employee accrues protected rights. Those who are working under a contract of employment (employees) and who can demonstrate this have the right to claim against the employer, which may include: unfair dismissal, maternity leave and statutory redundancy payments.

The key to deciding whether agency workers are employees is whether an implied contract has arisen between the worker and the end-user, which would give the agency worker employee status.

Points to remember:

  • The Agency Workers Regulations (2010) give some rights to agency workers after 12 weeks of work.
  • There are certain employment rights that apply to workers despite them being unable to show an implied employment contract.
  • An implied contract is a contract awarded by the court where an employment relationship is found to exist between the agency worker and end-user which is outside of their contractual agreements. This results in the agency worker being granted employed status.

Case law provides the greatest guidance when addressing the issue as to whether agency workers are employees.


Muschett v HM Prison Service (2010)

In this case the Court confirmed that there is a valid three-way contractual relationship between the worker, agency, and the end-user. However, the Court are reluctant to imply there is an employment contract between worker and end-user. If the contractual terms are clear, there is no need to imply a contract of employment.


James v Greenwich Council (2008)

During this case the Court established that the passage of time alone is not enough to constitute a contract between the worker and end-user, even if the arrangement continues for longer than originally anticipated, over a year in this case.

It was also decided by the Court that if the original agency agreement is genuine, an implied contract between worker and end-user will only arise where necessary. This entails situations where mutual obligations arise which are not compatible with the agency agreements.


Tilson v Alstom Transport (2010)

The Court of Appeal followed the decision set out in James. In this case it was also confirmed by the Court that an implied contract should only be created where it is necessary to do so. It was explained that an agency worker being significantly integrated into the organisation is not inconsistent with the existence of an agency relationship.

The Court explained that it is a misconception to believe that just because someone looks and acts like an employee, that they are an employee in law.

Agency workers who are not able to claim against the end-user may instead claim that the umbrella agreement which covers the relationship generally between themselves and the agency gives rise to employed status.

This claim is unlikely to succeed unless there is control by the agency and/or mutuality of obligation with the agency. A precise contractual position between agency, end-user and agency worker must be agreed and set out in a single document before starting.


Outcome of Implied Contracts

It is not impossible for the Courts to find an implied contract between the agency worker and end-user. However, the Courts are cautious about finding an employment relationship between agency worker and end-user that did not exist.

The Courts have made it clear that implied contracts will only be applied where it is necessary to explain the work undertaken, not because it is desirable. They will also be used where it is necessary to reflect the reality of the relationship between agency worker and end-user.


Those Who Cannot Establish Employee Status

Agency workers who are unable to establish employee status may still be protected by the Agency Worker Regulations (2010). Such regulations provide a basic protective framework for temporary agency workers.

Under such regulations, certain agency workers have rights to be paid equally when compared to permanent members of staff.


Contractual Rights

An agency worker who has been unable to establish employee status will still be entitled to their contractual rights. This means that all parties concerned are bound by the terms that have been agreed between them in the contract.


Workers Rights

Temporary agency workers who are unable to establish employee status are still entitled to Worker’s rights. Some of these rights include:

  • Written terms outlining your job rights and responsibilities
  • National Minimum Wage
  • Paid Holidays and payslips
  • Protection against unlawful discrimination
  • Protection

The Agency Workers Regulations (2010) provide the terms and conditions of agency workers. It states temporary agency workers have the right to the same basic employment and working conditions as permanent staff once they have worked for 12 weeks in the same position and by the same employer. Such conditions will include pay and holidays.



The Equality Act (2010) widely defines the concept of ‘employee’ which results in agency workers being ‘employees’ for the purpose of the legislation. The end-user is made especially liable to compensate the worker for any unlawful discrimination.

However, claims are not guaranteed to succeed.


Unfair Dismissal

Franks v Reuters (2003) – Suggested the period of one year is significant for a worker to claim unfair dismissal.
This is no longer the case. The qualifying period for unfair dismissal for agency workers against the end-user has increased from one year to two years in any case. However, the likelihood of a successful case is slim.


Dismissed to Avoid Agency Workers Regulations (2010)

It is not unlawful for an employer to dismiss temporary agency workers before 12 weeks to avoid the Regulations. This is not unlawful, even if it is done deliberately.

However, if there is more than one assignment then anti-avoidance provisions may apply to stop employers taking on temporary staff for under 12 weeks. Contractual rights or discrimination rights may also protect the temporary worker.

Anti-avoidance provisions in the Regulations prevent the structuring of assignments to avoid the 12-week regulation period. If it is deemed that the most likely reason for the structure of an assignment is to prevent the agency worker from receiving equal treatment rights, the agency worker will still be entitled to equal treatment.


Future Developments for the Rights of Agency Workers

Agency workers will now have the right to ask for and be provided with a Key Facts Page, to include information on the type of contract they will work under, which party is responsible for paying then, their rate of pay and any deductions/fees.

The ‘Swedish Derogation’ is now abolished. This means workers are no longer allowed to be excluded from the right to have comparable pay with permanent employees.

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