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Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217 and the new Employment Agencies and “employment business” Regulations 2003 (SI 2003/3319)

Sheily Aly discusses Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217 and the new Employment Agencies and “employment business” Regulations 2003 (SI 2003/3319)

This question will firstly depend on what type of temporary worker has been dismissed. There are two different types of businesses that deal with temporary workers; an “employment business” and an ““employment agency””. An “employment business” is one in which workers are supplied on a temporary basis to clients who want to hire the workers from the business (“end-user”). “Employment agencies” on the other hand specialise in permanent recruitment and introduce workers to be employed directly by the end-users. Temporary workers placed through “employment agencies” should therefore only have a contract of employment with the end-user. In this article, we will be dealing primarily with the situation of temporary workers who are placed through “employment businesses”, with particular regard to the new Court of Appeal decision in Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217 and the new Employment Agencies and “employment business” Regulations 2003 (SI 2003/3319) (“the regulations”).

In the past, employment tribunals have been reluctant to find that temporary workers are employees of anyone. In general, many “employment businesses” work on the premise that there will be no obligation for the agency to provide work and no obligation for the temporary worker to accept work if it is offered, and they therefore cannot be classified as employees for the purposes of the Employment Rights Act 1996. The end users work on the premise that temporary workers can be gained at short notice and usually will not want the worker to form a long term employment relationship with them. Therefore the very nature of temporary work means that many workers will be employed for less than the required 1 year period required for unfair dismissal claims in any event.

The Court of Appeal decision in Dacas is intended to provide some guidance on the issue of whether a temporary worker can be regarded as an employee and if so, by whom. General guidance is offered by the new regulations, but they do not necessarily complement the Dacas case.

“a person who works under (or where the employment has ceased worked under) a contract of employment”.

“a contract of service or apprenticeship whether express or implied, and (if it is express) whether in oral or in writing”.

Mummery LJ in the Dacas decision considered that these definitions had been left deliberately open by Parliament, so that the boundaries of a contract of service could be defined by the tribunals and courts. Munby J, considered that the basic test of whether or not an employment relationship exists is as follows:

“i. there can be no contract of employment – no contract of service – unless there is (a) mutuality of obligation as between the employer and the employee and (b) “control” of the employee be the employer

ii. There can be no mutuality of obligation in the absence of an obligation on the part of the employer to pay a wage or other remuneration”

These criteria, although containing a non contentious test on whether one can be considered an employee, were interpreted differently by each of the Judges in the Dacas case. The problem in agency situations is that there are two potential employers, who both share the functions of an employer. For the usual employer, the obligation to remunerate, control and the mutuality of obligation would all be vested in one entity. However, for temporary workers, the “employment business” is usually liable for paying wages, whereas the end-user has the control over the employee’s day to day activities which ends up in what Mummery LJ refers to as a “triangular arrangement”. The question that the tribunals and courts find themselves faced with therefore is which, if any of them, is the employer.

Under s.13 of the Employment Agencies Act 1973, an “employment business” is defined as:

“the business (whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business) of supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity.”

The words “in the employment of the person carrying on the business”, indicates that it is the “employment business” who is supposed to be the employer of the temporary worker. This temporary worker would then be supplied to other companies, but would still be employed by the “employment business”.

However, regulation 15 of the regulations states that “employment businesses” must include a term in its agreement with its workers to state whether they are employed under a contract of service or a contract for services. The problem of who the employer is would obviously not arise if the temporary worker was employed under a contract of service as it would be clear that the “employment business” was the employer. However, the nature of the job would suggest that the circumstances in which the “employment business” itself will choose to regard the temporary workers as their own employees will be rare. The tension here is that the regulations require the “employment business” to enter into a contract of service with the temporary worker to fit in with the definition of “employment business”. However at common law, courts do have the liberty to look behind the labels given by the parties to decide who the employer is.

In McMeechan v Secretary of State for Employment [1997] ICR 549 that the temporary worker did have a contract of service between the temporary worker and the “employment business” as a contract could be inferred in respect of a single engagement or assignment. This supports the view in Market Investigations v Minister for Social Security [1969] 2 Q.B. 173 which held that the workers were engaged in a series of contracts of employment rather than one contract of employment for the whole period. Based on these decisions, it seems unlikely for a worker to remain an employee of the “employment business” throughout the period of employment if the assignments are always changing. Instead a of one contract of employment for the whole period of a person being “on the books”, a separate contract of employment will be inferred for each individual assignment, meaning that for many temporary workers, it will be very difficult to establish that they have been employed by the agency for over the one year required to bring unfair dismissal proceedings.

However, in Montgomery v Johnson Underwood Ltd [2001] IRLR 269 it was held that the “employment business” had no control over the day to day activities and the contract with it therefore lacks the “irreducible minimum” needed to infer a contract of employment in any event, even if the party had been employed for over one year.

In Dacas itself, all three members of the Court of Appeal agreed that the “employment business” could not be the employer in this scenario as the “employment business” has no obligation to provide work to the temporary worker and no right to control the temporary worker once they are employed in the end-user’s organisation. This on the face of it seems to be in direct conflict with the regulations as the regulations imply that the “employment business” is to be the true employer. If the “employment business” does not employ the individual, then they begin to look more like an “employment agency” which is defined under the act as follows:

““employment agency” means the business (whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business) of providing services (whether by the provision of information or otherwise) for the purpose of finding workers employment with employers or of supplying employers with workers for employment by them.”

Hence if a temporary worker is not the employee of an “employment business”, they are a worker which would make the “employment business” an “employment agency”. If the “employment business” is actually an “employment agency” for the purposes of the regulations, it can have all sorts of implications for the firm involved as the obligations for both types of firm differ. For example, an “employment agency” is not allowed to pay the temporary worker for the work that is carried out under regulation, but in the case of an “employment business”, they would be in breach of the regulations if payment was withheld from the worker in regulation 12. It is unclear how the Dacas case and the regulations will work together, but the primary point for an employer to consider is whether they wish to operate as an “employment business” or an “employment agency” and follow the obligations under the regulations accordingly.

For the employee, the answer to whether the “employment business” can be the employer should be that they should always be considered to be the employer. This is in direct conflict with the Dacas case, but it may be the case that the courts will follow Dacas in cases where an individual is employed under a contract for service and probably deem the “employment business” to actually be an “employment agency”.

Mummery and Sedley LJJ in the Dacas case were keen to avoid the situation in Montgomery which decided that neither the “employment business” nor the end users were the employers, as each lacked the irreducible minima for the contract of employment. Sedley LJ went on to state that a situation in which no one is held to be the employer is simply wrong and cannot be upheld. The tribunals are therefore encouraged to find that at least one of the parties is the employer in these circumstances and it seems that the entire decision is based on the premise that it is wholly undesirable to leave a temporary worker in the situation where neither the end user nor the “employment business” are the employer in an unfair dismissal case.

The Dacas case indicates that in most cases, it should be the end-user that should be the employer. As stated above, this would only be the case where the “employment business”/agency specifically states that the temporary worker is employed under a contract for services. The Dacas decision itself was based on the fact that the end user has the day to day control over the temporary worker’s activities. The question of remuneration was resolved by the way in which payment is made to the temporary worker. Although the temporary worker is actually paid by the “employment business”, the end-user has to make a payment to the agency for the temporary worker’s services. There would be no point in making this payment if the end-user did not employ the temporary worker.

Sedley LJ additionally uses the reasoning that it would be a nonsense for the end-user to be regarded as an employer in cases of vicarious liability, but not when it came to basic rights such as unfair dismissal. Mummery LJ suggested that the Employment Tribunals should at least consider the question of whether there is an “implied contract of employment”. The statute clearly allows for the possibility of an implied contract, and this can arise in situations such as these where the employment arrangement is triangular. The concept of an implied contract can also arise in non temporary worker situations.

Employment Tribunals are therefore encouraged to make a legally proper appraisal on a case by case basis to decide whether or not an implied contract of employment has arisen between the end user and the temporary worker. In cases such as Dacas, in which she was employed for over a year, it is suggested that she would have been successful in establishing that the end-user was her employer had she appealed that aspect of the decision. This contrasts with the situation in Franks v Reuters 2003 IRLR 423, which suggested the fact that the applicant was employed for five years could be indicative of a contract of employment between the temporary worker and the end user. Dacas has shortened this period to bring temporary workers on par with other employees bringing unfair dismissal claims by suggesting that they only need to be employed for one year should an implied contract of employment arise.

The Dacas case tries to avoid a situation in which neither potential employer is the employer. Although the finding in the Dacas case did not help Mrs. Dacas herself, the case nevertheless provides a benchmark for future cases of this nature in the sense that the Court of Appeal encourages the tribunals to find that at least one party is the employer. The decision itself would seem to make it more likely that the party deemed to be the employer will be the end-user rather than the agency. However, Dacas was decided when the new regulations were not yet in force.

The good news in these circumstances is for temporary workers as following the decision in Dacas and the regulations, it make it less likely that they will be left in the unsatisfactory position of not being able to sue anyone for unfair dismissal because neither party can be considered to be the employer. Temporary workers may still fail the test of whether there is an implied contract of employment in place on other grounds, but there is no guidance on this point yet as the Dacas case was not remitted to the employment tribunal in order to decide exactly which factors should be taken into account when deciding whether or not an implied contract has arisen. It will also be interesting to see the circumstances in which implied contracts are held to arise in cases where a worker has to be an employee for the purposes of the legislation, but need not have a one year qualifying period, for example whistle blowing cases.

The bad news is for “employment businesses”. The new regulations mean that the “employment business” will have to employ the temporary worker if they are to fit into the definition of “employment business”. If a court were to hold that they were not the employer in light of the decision in Dacas, they would really be an “employment agency” for the purposes of the regulations and would therefore be in breach of regulation 8 if they have paid the temporary worker directly. Regulation 12 states that an “employment business” is not allowed to withhold payment from a temporary worker, but if the firm was really an “employment agency” it should never have received the payment in the first place! The obligations differ depending on whether a firm is an “employment business” or an “employment agency” so if there is any confusion as to which definition a firm falls under, the firm will have no idea which obligations it will be bound by and which terms to agree with their temporary workers. The result of the regulations and the Dacas decision therefore is to insure maximum confusion for all involved!!!

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“I don’t understand why I’m being punished for practicing my faith. My tradition tells me that if I cut my hair, I may face taunting and ridicule from deceased members of my tribe. I would prefer to take state’s punishment than violate my faith”[1]

This is a quote from Billy Soza Warsoldier, a Cahuilla Native American who believes that cutting his hair would mean losing all the strength and wisdom he has accumulated over his lifetime. The California Department of Corrections does not allow hair longer than three inches in length. The ACLU are representing him on the grounds that an individual should not have to choose between his faith and seeing his family. In this article, I shall explore what the boundaries of religion and philosophical belief are in the The Employment Equality (Religion or Belief) Regulations 2003 in English law, and whether this definition would extend to less conventional “religions”.

The Regulations do not provide much assistance on the issue of what religious belief actually is, as the only definition offered is:

2. – (1) In these regulations, “religion or belief” means any religion, religious belief, or similar philosophical belief.

The government seemed to prefer a broad definition of religion as a narrower definition would become out of date very quickly.

One starting point for the tribunal to define this further is the Oxford English Dictionary which defines religion and philosophy as follows:

The tribunal are also likely to find some assistance in the ACAS guidance which states:

“Religion or belief is defined as being any religion, religious belief or similar philosophical belief. This does not include any philosophical or political belief unless is similar to religious belief. It will be for the Employment Tribunals and other Courts to decide whether particular circumstances are covered by the regulations.”

But this doesn’t help me understand who is included! Who would be protected?

The ACAS code provides a very useful list of the most popular religions in Britain today including less well known ones such as Baha’i and Zoroastrians. Although ACAS is not binding on tribunals, it is likely that the tribunals will use this list to assist them. Cults would also be protected under the regulations; even though their beliefs may be bizarre to some, they too are likely to hold strong religious beliefs. These would have the same status in terms of protection as people who hold beliefs in one of the more conventional faiths.

The question becomes more difficult when considering what is to be included within the definition of “similar philosophical belief”. Lord Sainsbury of Turnville[2] stated that:

“It is clearly the intention that where people have strongly held views, which include humanism, or atheism, or agnosticism, they would be covered under the phrase ‘or similar philosophical belief’”[3]

ACAS suggests that factors that must be considered in beliefs which are not mentions are those such as collective worship, a clear belief system and a profound belief affecting the way of life or view of the world. It states that it will be clear in most cases where the line should be drawn, but it remains to be seen how Tribunals will treat non-conventional beliefs.

One commentator has suggested that those believers who do not believe anything could be denied protection if they do not have any “strongly held views”. Atheism is formal belief and may not help those who simply decline to subscribe to any form of belief.

The DTI states that political or philosophical beliefs will be excluded unless it can be should that they are similar to a religious belief. The line to be drawn here is not a clear one as there are some political or philosophical beliefs that are similar to religious believes such as pacifism, a belief in animal rights, or some political ideologies such as National Socialism. It is likely that in such cases, the tribunal will consider the ACAS factors to decide whether the belief in question is worthy of protection.

The directive simply states that discrimination should not be allowed on the grounds of “religion or belief”. There is no further guidance. However, some assistance can be gained from the cases relating to Article 9[4], the freedom of thought, conscience and religion. Although this is a much wider definition than the regulations, the Strasbourg Court has looked at the concept of faith specifically and found it to include Druids, Vegans, Moon Sect, Krishna Consciousness movement, Atheism and the Church of Scientology. It has been held that the rights are a precious asset for “atheists, agnostics, sceptics and the unconcerned”[5]. However, the European Courts have also held that this did not cover purely idealistic or political goals.[6] This is a similar stance to the guidance which has been given in Britain, and it is likely that the tribunals will find Europe’s previous definitions on which groups are to be included very useful.

Freedom of Religion is protected in the First Amendment to the American Constitution which states:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…and to petition the Government for a redress of grievances.”

This only makes a reference to religion and not similar philosophical beliefs, although as can be seen from Mr. Warsoldier’s example, religion can encompass a wide range of bizarre beliefs. Witchcraft and ritual have been held to be a religion as long as they occupied a place in the individual’s life that was parallel to that of more conventional religions[7] and long as such beliefs were sufficiently widespread.[8]

Another American example saw an individual who belonged to the “Church of Marijuana”, who believed that he should distribute marijuana for the benefit of mankind and planet earth. In this case, it was held that for a belief to be defined as a religion, it must include:

The “Church of Marijuana” worshipper failed to convince the Court that he was following a religious belief, as he failed to meet these standards. Not all of these criteria need to be present, but an overall picture needs to be ascertained. Therefore, in the American example, although the beliefs that have been found to be religions can seem strange, the definition is much narrower than the European definition as some of the requirements would not be met by all forms of belief.

The tribunals may seek guidance from Europe or even the American examples, even if they are persuasive rather than binding authority. In most cases that appear before the tribunals, it will be clear whether a particular set of beliefs is a religion or similar philosophical belief. The boundaries will become less clear when an individual has a non conventional faith.

The consultation documents surrounding the regulations suggested that political beliefs that were not an attitude towards God should be excluded. This means that beliefs such as Secularism[9], Atheism, [10]Agnosticism,[11] and Humanism[12] would all be included as they all involve an attitude towards God or a supernatural being. This interpretation is problematic for those that do not have the existence or non-existence of God at the focus of their beliefs, although it still means that the vast majority of beliefs that could be classified as religious. With the specific example of Witchcraft, it is likely to be included if it is found to be a strongly held belief. As illustrated above, it was accepted as a religion in America. Furthermore, ACAS makes reference to Wicca being a religion or similar philosophical belief. On this basis, the tribunals are likely to accept witchcraft as a belief which is capable of protection. It remains to be seen how tribunals will deal with other non conventional examples. However, all is not lost for those who do not fit into the regulations as there are other methods of protection under the law such as the Freedom of Expression in Article 10, which would be more suitable for pure political beliefs in any event.

[1] American Civil Liberties Union Website

[2] The minister responsible for approving the Regulations in the House of Lords.

[3] Hansard, HL, Vol. 649, col. 792 (17 June 2003)

[4] European Convention of Human Rights

[5] Kokkinakis v Greece (1993) 17 ECHR 397, ECtHR (para 31)

[6] Vereniging Rechtwinkels Utercht v The Netherlands (1986) 46 DR 200

[7] Dettmer v Landon 799 F.2d 929 Const Law 84.5(14) Prisons 4(14)

[8] Fleischfresser v Directors of School District 200 15.F.3d 680 Const Law 84.5(3); Schools 167

[9] a belief that religion should be ignored or excluded

[10] a belief that God doesn’t exist

[11] a belief that God is unknown or unknowable

[12] a belief rejecting supernaturalism and asserting the essential worth of man

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Articles

(1) I’m a temp; who can I sue if I get dismissed?!

(2) Witchcraft - A Religion Worthy of Protection? (doc)

Send mail to sean@phoenix-chambers.co.uk with questions or comments about this web site.

Articles

(1) I’m a temp; who can I sue if I get dismissed?! (2) Witchcraft - A Religion Worthy of Protection? (doc)

Send mail to sean@phoenix-chambers.co.uk with questions or comments about this web site.

(1) I’m a temp; who can I sue if I get dismissed?!

(2) Witchcraft - A Religion Worthy of Protection? (doc)