Contract for Employment Agencies

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					Employment Law Update
October 2004




               Pitfalls for agencies and users of
               contract workers
               The UK Court of Appeal’s decision in Patricia           End User for whom Mrs. Dacas worked. It was
               Dacas v Brook Street Bureau Limited (2004 AWCA          the End User which provided her with all of
               217) has clarified important issue as to the            her cleaning materials and other equipment and
               employment status of agency workers and in              directed her work.
               particular:
                                                                       The End User asked to withdraw from the
                • Whether agency workers enjoy the status of           contract in relation to Mrs Dacas as there
                  an employee and the benefits which attach to         was no further work for her. Mrs. Dacas
                  having status as an employee; and                    commenced proceedings against the Agency for
                • Who is or can be deemed to be the employer           compensation for unfair dismissal on the basis
                  of such agency workers.                              that she was in fact an employee of the Agency.
               The case is a UK case but is very likely to be
                                                                       The Court’s decision
               followed and applied in Hong Kong.
                                                                       The Court summarised the position and decided
                                                                       that:
                               Russell Bennett is a Tanner De Witt
                                                                       1. Each case depended upon its own facts and
                               consultant who specialises in              the Court had to look at the contractual
                               employment issues. He advises              arrangements and how they were operating
                               on all aspects of employment law,          in each case to determine the real status of
                               drafting employment contracts,
                                                                          the parties;
                               handbooks and other HR related
                               documentation as well as Health         2. Generally where there was no mutual
                               and Safety matters.
                                                                          obligation to give or accept work and these
                                                                          obligations were split between the obligation
                                                                          to pay and the entitlement to exercise
               Facts                                                      control over work, agency workers were not
               Mrs. Dacas signed a “contract for services”                employees of the agency. This is because
               as a private contractor with an employment                 there is insufficient mutuality of obligation to
               agency Brook Street Bureau (the “Agency”) who              satisfy the minimum necessary requirements
               posted her to work exclusively for their client,           for a contract of employment; and
               Wandsworth Local Council (the “End User”).
               Mrs. Dacas worked exclusively for the End User          3. There could however, depending upon the
               as a cleaner in one of its hostels, for over 4 years.      facts, be an implied employment contract
               She had no contract with the End User but was              between the End User and the agency
               required, under her contract with the Agency, to           worker, making the “agency worker” in fact
               follow the End Users instructions.                         an employee of the End User.

               As is common where agency workers are                   The Court stated:
               provided, the Agency was responsible for paying            “there must be an irreducible minimum of
               Mrs. Dacas as well as having the right to terminate        mutual obligation necessary for a contract of
               her engagement under the contract. The contract            service [i.e. a contract of employment] which is
               did not oblige them to provide her with work and           an obligation to provide work and an obligation
               did not oblige her to accept any. The only mutual          to perform it, with the presence of control…in
               obligation with Mrs. Dacas was that she was to             the absence of a contract, or a contract having no
               be paid by the Agency for work she accepted,               mutuality, the [agency worker] cannot qualify as
               and did. The Agency in turn, contracted with the           an employee of the agency”
                                                                       (continued overleaf)
Employment Law Update
June 2005




               “The [agency] was not under an obligation to provide                                           element of mutual obligation necessary
               Mrs Dacas with work. She was not under an                                                      for an employment contract, in particular
               obligation to accept any work offered by the agency to                                         to provide and to accept work, it is likely
               her. It did not exercise any relevant day-to-day control                                       that such workers will be considered as
               over her or her work. That control was exercised                                               contract workers and not as employees of
               by the [End User] which supplied her clothing and                                              the agency.
               materials when she did the work. The fact that [the
                                                                                                        2. Depending upon the nature of
               agency] agreed to do some things that an employer
                                                                                                           arrangements, the level of control,
               would normally do (payment) does not make them the
                                                                                                           exclusivity and the period of the
               employer.”
                                                                                                           engagement, the end user client may be
            As indicated above, the Court did state that there                                             deemed to be the employer of a worker
            was a possibility of a contract of employment being                                            they had engaged as contract staff through
            implied between the agency worker and the End                                                  an agency. This would render them liable
            User client. The Court said:                                                                   for all benefits and entitlements of an
               “[in these situations, the Court] should at least                                           employee including:
               consider the possibility of an implied contract of                                             • Employment protection / severance pay
               service. The result of the consideration will depend on                                        • Sick leave, maternity leave and annual
               the evidence in the case about the relationship between                                          holiday entitlements
               the [agency worker] and the end user and how that                                              • MPF contributions
               fits into the other triangular arrangements.”                                                  • Statutory employees compensation
               “The [end user client] in fact exercised the relevant                                          • Implied notice periods for termination
               control over her work and over her. Mutuality of                                               • Other statutory benefits
               obligation - the end users was under an obligation                                       3. It would also mean that the end user has
               to pay for the work which she did and she received                                          defaulted under its legal obligations to enrol
               payment in respect of such work from the agency.                                            those deemed employees in MPF funds
               The agency worker was under an obligation to do                                             and to provide for mandatory employee’s
               what she is told and to attend punctually at stated                                         compensation insurance.
               times…in general it would be surprising if in a case                                     4. Depending on the terms of the contract
               like this, the end user did not have powers of control                                      between the agency and the end user client,
               or direction over such a person in such a working                                           the agency may be expressly or impliedly
               environment. The end user is the ultimate pay master.                                       liable to reimburse to the end user client
               The arrangements were set up and operated on the                                            the additional costs of being deemed the
               basis that the end user would pay the agency. What                                          employer of the worker. This is because
               was the end user paying for if not the work done,                                           the contract between them was for the
               under its direction and for its benefit?”                                                   provision of an agency worker rather than
                                                                                                           an employee.
            Implications
                                                                                                        In light of this, agencies and their clients
            The case clarifies and highlights various issues for                                        need to carefully consider the situations and
            employment agencies involved in providing contract                                          positions in which they engage contract staff,
            staff and for their clients, and for employers who                                          keep under review the nature and basis of the
            use “contract” or “agency” workers, in particular:                                          arrangement and carefully consider the terms
            1. The terms of the contractual arrangements                                                of the relevant contracts between all three of
               between the agency and the worker should be                                              the parties.
               carefully considered. Provided there is not the
                                                                                                                            For further enquiries please contact:
                                                                                                                                                  Russell Bennett
                                                                                                                         Email: russellbennett@tannerdewitt.com
                                                                                                                                            Tel: +852 2573 5000
                                                                                                                                           Fax: +852 2802 3553
                                                                                                                                       Website: tannerdewitt.com

                  The above is not intended to constitute legal advice. No reliance should be placed upon this article, and specific legal advice should be sought if needed.

				
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