Recruitment Industry: Case Law Update
Case 1: the meaning of “agency worker”
The case of Moran and others v Ideal Cleaning Services Limited and Celanese Acetate Limited examines the definition of “agency worker” as set out in the Agency Workers Regulations 2010 (“AWRs”). Regulation 3 states that “agency worker” means an individual who “is supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer;” and has a prescribed type of contract with the agency or to perform services personally for the agency.
The Claimants were employed by Ideal as cleaners. For many years they had been placed by Ideal to work at Celanese.
After the AWRs came into force on 1 October 2011, the Claimants issued Employment Tribunal claims seeking to enforce their regulation 5 rights, i.e. to receive the same basic working and employment conditions as they would have been entitled to, had they been directly recruited by Celanese, having all completed the relevant qualifying period.
At a pre-hearing review, the Tribunal decided that the Claimants were not in fact, agency workers, within the meaning of regulation 3 because they had not been placed with Celanese to work temporarily, but had been placed there on an indefinite basis.
It was argued on appeal that it could not have been intended by the legislators that agency workers could only receive the protection of the AWRs if their placement was for a fixed term. The purpose must have been to protect all agency workers from inequality of basic working and employment conditions. Surprisingly, this argument was rejected.
The effect of this case is that it identifies a huge gap in the protection of agency workers provided by the AWRs. Agency workers who are assigned to an end user with no end date are not entitled to equality of basic working and employment conditions as comparator permanent employees whilst those placed with a defined end date will be if they complete the required qualifying period.
The judgment should be treated with some caution as it is a surprising result which will be unpopular, given the perception that agency workers are subject to exploitation and in need of the protection of the AWRs. It is unlikely that gap in protection will be allowed to remain in place in the long term.
In November 2011, the government announced it wished to review the AWRs to simplify and streamline the recruitment sector. When such review occurs, the effect of this judgment will surely be on the agenda.
Case 2: post termination restrictions in the recruitment sector
The primary assets of a recruitment company are its relationships with its clients and candidates. A wise agency seeks to protect such relationships by contractual terms with its employees prohibiting solicitation of and dealing with such business contacts, in competition with the ex-employer, for a period after termination of employment.
However, it is accepted that information in the public domain cannot be considered confidential. With the rapid expansion of social media, including business networking sites such as LinkedIn, which make important contact details readily available, are employers in the recruitment sector still capable of protecting its connections with clients and candidates?
According to East England Schools CIC v Palmer and others, the answer is yes.
In this case, the Claimant carried on business as a recruitment agency in the education sector. Ms Palmer was employed as a recruitment consultant. Her contract of employment contained covenants restricting her from soliciting or dealing with candidate teachers or client schools with whom she dealt in the last 12 months of her employment, for a period of 6 months after termination. She left the Claimant’s employment with effect from 29 March 2013 and joined a competitor on 2 April 2013. She was suspected of breaching her post termination restrictions and in due course, proceedings were issued.
When seeking to enforce restrictive covenants, it must be shown that the employer has a legitimate proprietary interest to protect and the covenant in question goes no further than is reasonably necessary to protect that interest.
As part of the East England case, one of the issues considered was whether the Claimant had a legitimate proprietary interest to protect. It had cited its trade connections with clients and candidates as being such an interest, but the Defendants argued that all relevant client and candidate information was in the public domain and could not be confidential to any particular agency. Therefore client and candidate connections could not be a legitimate proprietary interest of the Claimant.
However, the judge found on the basis of the particular facts of this case, that whilst much of the relevant information about teachers and schools was publicly available, the legitimate proprietary interest which the Claimant was entitled to protect went beyond mere information. The interest they could protect was the relationships which the First Defendant had built up during her employment which were in effect the Claimant’s property. In addition, she would have acquired confidential information beyond that in the public domain which could influence the choice of recruitment company used by schools and candidates. These factors warranted protection.
Case 3: Employment status of agency workers
The issue of whether agency workers can amount to employees of either of the agency or the end user (and therefore enjoy the same statutory rights as employees) has long been the subject of debate in case law. That debate appeared to have been brought to an end by the 2007/2008 case of James v London Borough of Greenwich. In that case, it was found that a contract of employment should only be implied between an agency worker and an end user or agency where it was necessary to do so to reflect the reality of the situation. If the relationship between the three parties was satisfactorily explained by the existence of the usual tripartite contractual arrangement in agency situations (i.e. a contract between the agency and the worker and a contract between the agency and the end user) it would not be necessary to imply an employment contract. Such arrangements would not be set aside as a sham unless there was a common intention of all parties to misrepresent the true facts of the situation.
However, in Autoclenz Ltd v Belcher (2011) a case on employment status involving a car valetting company and it’s valeters whose contracts described them as “self-employed contractors”, it was found that when determining an individual's status, employment tribunals and courts will be able to set aside express contractual terms which are inconsistent with the reality of the relationship of the parties, without establishing a common intention to mislead.
Optimistic commentators suggested that this judgment would make it easier for agency workers to establish employment status.
In January, in Smith v Carillion (JM) Limited, tested this theory. Mr Smith claimed that he had been subjected to unlawful detrimental treatment by John Mowlem Construction by reason of his trade union activities or activities as a health and safety representative. However, before 2004, when the basis for Mr Smith’s claim arose, only employees were permitted to bring such a claim. At the relevant time, Mr Smith was supplied to John Mowlem by an agency, Chanton.
It was argued on Mr Smith’s behalf that since the judgment in Autoclenz, a different “purposive” approach was required when assessing the existence and implication of an employment contract in employment agency situations. It was argued that the test of necessity of implication as required by James was no longer good law. The EAT disagreed.
Autoclenz therefore does not make it easier for agency workers to establish employment status. It will be a rare case in which an agency worker is capable of doing so.
For further information on the issues raised in this article, please contact Helen Wyatt on 020 7925 8083 or by email at firstname.lastname@example.org.