Franks v Reuters Ltd. & Anor

Before deciding whether an individual supplied through an employment agency is an employee, a tribunal must determine whether an express or implied contract of service exists with the putative employer. It must consider the whole relationship, including the documents, surrounding circumstances, conduct, working arrangements and the parties’ understanding.

Mutuality of obligation cannot be assessed soundly until the parties’ obligations have been ascertained from that evidence. Contractual labels do not determine employment status, although the documents containing them may remain relevant evidence. Length of service cannot by itself create employee status, but sustained work for the same organisation may contribute to an inference of an implied contract.

The appellant obtained a temporary placement through an employment agency and worked continuously for Reuters Limited for more than five years, initially as a driver and later on its Help Desk. After Reuters ended the arrangement, he claimed unfair dismissal, redundancy pay and damages for breach of contract.

The employment tribunal held that he was employed by neither Reuters nor the agency because the necessary mutuality of obligation was absent. The Employment Appeal Tribunal upheld that conclusion.

The central issue was whether the tribunal had erred in law by deciding that the appellant was not Reuters’ employee without first considering all relevant evidence and determining whether an implied contract of service existed between them.

1. Appeal allowed unanimously. Lord Justice Mummery gave the judgment, with which Lord Justice Thorpe and the President agreed. The employment tribunal had erred in law by concluding that the appellant was not an employee without first determining whether an implied contract of service existed between him and Reuters.

2. In a case involving a tripartite agency arrangement, the tribunal must obtain an overall picture of the relationship between the worker and the putative employer. It must consider the documents, surrounding circumstances, what the parties said and did, their subsequent conduct, the operation of the working arrangements and their understanding of the relationship. The approach in Carmichael v National Power plc [1999] 1 WLR 2042 required that broader inquiry where the documents were not intended to be an exclusive record.

3. Mutuality of obligation is the irreducible minimum required for a contract of service. Its presence or absence cannot be determined soundly until the tribunal has ascertained the parties’ obligations from all the relevant evidence. The tribunal had treated the worker’s theoretical freedom to leave the assignment, and Reuters’ freedom to end it, as decisive without first addressing whether the circumstances had generated contractual obligations.

4. The agreements between the agency and the worker, and between the agency and Reuters, did not determine whether a contract existed between the worker and Reuters. They nevertheless formed part of the factual matrix. A provision describing temporary workers as employees of the client was incapable of fixing their legal status, but it was potentially evidence of the agency’s and Reuters’ understanding and should not have been excluded entirely.

5. Length of service alone cannot turn a worker into an employee. It was, however, relevant that a purportedly temporary worker had remained with the same organisation for more than five years and had been redeployed. Dealings continuing for years may generate an implied contractual relationship and therefore required consideration.

6. The Court of Appeal could not determine the implied-contract issue because it was not a fact-finding court. The matter was remitted for rehearing by a fresh employment tribunal. That tribunal might still find that no contract existed; if it found a contract of service, it would have to determine the substantive claims.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously and the matter was remitted for rehearing by a fresh employment tribunal.

2. Employment Appeal Tribunal: On 27 June 2002 it upheld the employment tribunal’s approach and conclusion.

3. Employment tribunal: On 12 May 2000 it determined the preliminary issue by holding that the appellant was an employee of neither respondent and therefore had no claim against either.