Tilson v Alstom Transport

An agency worker has no implied contract with an end user unless implication is necessary to give business reality to the relationship and create the enforceable obligations which the parties’ dealings require. Integration, control and the performance of work typical of an employee do not themselves establish a direct contract. Implication is fatal where the parties would have acted in the same way without one.

The inquiry is objective. The parties’ understanding that no direct contract exists, and their failure or refusal to agree its terms, are nevertheless powerful factors against implication. Contractual rights cannot be created merely to counter arrangements designed to avoid employment liabilities.

The appellant supplied engineering and managerial services to Alstom through contractual arrangements involving Silversun Solutions Ltd and Morson Human Resources Ltd. He was fully integrated into Alstom’s business and worked under its control, but had declined offers of direct employment because he preferred the agency arrangement and its higher remuneration.

The Employment Tribunal implied a contract of employment between the appellant and Alstom. It regarded a provision purporting to exclude supervision and control as bogus and treated the intermediary contracts as no more than a payment mechanism. The Employment Appeal Tribunal held that this reasoning was legally flawed and substituted a finding that no direct contract existed.

The central issue was whether a properly directed tribunal could find that implication of a direct contract was necessary, in which event remission might be required, or whether the absence of such a contract was the only permissible conclusion.

1. Appeal dismissed. Elias LJ, with whom Pitchford LJ and Arden LJ agreed, held that no properly directed employment tribunal could find a direct contractual relationship between the appellant and Alstom. The Employment Appeal Tribunal was therefore entitled to substitute its conclusion that no contract existed.

2. A contract between an agency worker and an end user may be implied only where implication is necessary to give business reality to the dealings and create the enforceable obligations which the relationship requires. It is insufficient that the parties’ conduct appears more consistent with an intention to contract. Implication is precluded where they would or might have acted in exactly the same way without a contract: The Aramis [1989] 1 Lloyd’s Rep 213 applied.

3. The appellant’s extensive integration into Alstom’s organisation and Alstom’s control over his work did not require a direct contract. Such features may help classify an established contract as one of service, but carry little or no weight when deciding whether any contract exists. Agency workers ordinarily require some integration and control to provide satisfactory services.

4. The divergence between the actual control exercised and a term in the contract between Morson and Silversun did not justify implication. Alstom was not a party to that contract and had made no corresponding promise to the appellant. Its contract with Morson adequately explained why the appellant worked for it. A false or misleading provision in one intermediary contract did not invalidate that entire contract or Alstom’s separate contract with Morson.

5. The inquiry remained objective, and a contract could in principle be implied despite a party’s contrary understanding. Nevertheless, the appellant’s deliberate refusal of direct employment, the parties’ common understanding that no direct contract existed, and their inability to agree its terms were extremely powerful factors against implication. The requirement to notify or obtain approval for annual leave did not outweigh those circumstances.

6. An appellate employment court may substitute its own decision only where a properly directed tribunal could reach only one legitimate conclusion. That condition was satisfied here. Section 203 of the Employment Rights Act 1996 could not assist: it avoids terms contracting employees out of existing statutory rights, but creates no unfair-dismissal rights where no employment contract exists.

1. Court of Appeal (Civil Division): Dismissed the appeal and upheld the Employment Appeal Tribunal’s conclusion that no direct contract existed between the agency worker and the end user: [2010] EWCA Civ 1308.
2. Employment Appeal Tribunal: HH Judge McMullen QC allowed Alstom’s appeal and substituted a finding that no direct contract existed. The case number was UK/EAT/0358/09.
3. Employment Tribunal: Held that a contract of employment should be implied and that it had jurisdiction to hear the unfair-dismissal claim.