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Agency workers lose out on employee benefits

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The Court of Appeal has rejected a claim by an agency worker that he was unfairly dismissed by the company he was working for, on the basis that he was an independent contractor, rather than an employee.

The agency member was working for Alstrom Transport through his service company, which had contracted with a staffing company for his services. In many ways, the worker was treated by Alstrom Transport in the same way as its employees; working Monday to Friday on a regular basis and having annual leave entitlements. However, the Court cited the fact that he had refused an offer of employment from Alstrom as evidence that he was an independent contractor. There was no need to infer employee status as the chain of contracts that were in place dealt effectively with his status, despite the reality of the working arrangements. The fact that he had chosen these contractual arrangements, which were beneficial to him in terms of tax and pay, meant that he could not also benefit from the protection from unfair dismissal granted to employees.

Following this decision, staffing companies and employers taking on agency workers should ensure that they have adequate and properly drafted contracts in place to prevent workers from becoming their employees. However, even if the courts are reluctant to look behind such contracts, there is still the risk of a challenge from HMRC to the ‘self employed status’ of a so-called self-employed contractor who, according to the IR35 guidance, is in fact an employee. This could result in liabilities for unpaid National Insurance and PAYE.

Agency workers’ rights will be improved in 2011 with the introduction of provisions to ensure that those who have worked for more than twelve weeks in a particular position will receive rights equal to other employees in certain areas. However, their lack of employee status will still result in them being deprived of protection from unfair dismissal.

Written by Andrew Hodges

December 13, 2010 at 10:08 am

Posted in Comment, LinkedIn

Tagged with , ,

One Response

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  1. In addition, workers might want to start asking for employee benefit statements, which would further prove who is or who is not considered an employee.


    December 15, 2010 at 3:45 am

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