James v London Borough of Greenwich

In a genuine tripartite agency arrangement, the decisive question is whether an employment contract between the worker and the end user must be implied. Such a contract is implied only where it is necessary to give business reality to the relationship and create enforceable obligations. A lengthy engagement, end-user control and payment through an agency do not alone make implication necessary when genuine express contracts with the agency fully explain the work. Mutuality of obligation is principally a question about the character of an existing contract, not the prior question whether any direct contract exists.

Ms James worked as a housing support worker for the Council for about three years after agencies supplied her services. She had contractual arrangements with the agencies, and the Council contracted with them for her supply. The Council controlled aspects of her day-to-day work, but did not provide its employee benefits.

The Employment Tribunal rejected her unfair dismissal claim, holding that no contract of employment between Ms James and the Council should be implied. The Employment Appeal Tribunal upheld that decision in [2007] IRLR 168. The appeal concerned whether the Tribunal had erred in law or reached a perverse conclusion in finding that Ms James was not the Council’s employee.

Appeal dismissed. Mummery LJ gave the leading judgment, with which Thomas and Lloyd LJJ agreed.

1. Part X of the Employment Rights Act 1996 protects only a person employed under a contract of service. The question for an agency worker is not whether the worker is generally described as an agency worker, but whether the end user employed that person under an express or implied contract of employment.
2. In a tripartite arrangement, the initial issue is whether it is necessary to imply any direct contract between worker and end user. Applying the necessity test in The Aramis [1989] 1 Lloyd's Rep 213, implication is justified only where it is needed to give business reality to the transaction and create enforceable obligations. It is insufficient that the parties’ conduct is compatible with a contract.
3. The Tribunal was entitled to find that implication was unnecessary. The genuine express contracts between Ms James and the agency, and between the agency and the Council, fully explained the provision, performance and payment of the work. The length of the engagement, control exercised while work was done, and appearance of integration did not irresistibly require a further contract. Time alone did not impose reciprocal obligations to offer and perform work.
4. Mutuality of obligation was not the essential issue. It assists in deciding whether a contract already concluded is one of employment, but here there was no direct contract to classify. The different direct-contract context of Carmichael v. National Power [1999] ICR 1226 did not govern this preliminary question.
5. An appellate court may intervene only for an error of law. The Tribunal applied the correct test and its conclusion was not perverse. Any broader extension of unfair-dismissal protection to agency workers without contracts of employment is a matter for Parliament, not judicial adjudication.

• Court of Appeal (Civil Division): Dismissed Ms James’s appeal and upheld the conclusion that no contract of employment with the Council should be implied.
• Employment Appeal Tribunal: On 21 December 2006, dismissed the appeal, holding that the Tribunal had made no error of law: [2007] IRLR 168.
• Employment Tribunal: On 13 October 2005, rejected the unfair dismissal claim on the basis that Ms James was not employed by the Council under a contract of service.