The Importance of establishing Implied Contracts

Smith v Carillion raised an important question of whether a contract of employment could be implied between an agency worker and an end-user client.

The Employment Tribunal had to decide whether to imply such a contract in order to determine whether the worker was an ‘employee’. If he was, he would be entitled to bring protected disclosure claims against the end-user companies.

Whilst contracts between recruitment/employment agencies and end-users often exist, contracts between agency workers and end-users are less common. In the absence of a written contractual relationship, implied contracts of employment can also be identified, but only where it is necessary to do so.

The ‘necessity’ test requires consideration of the business reality of the relationship, and how the relationship exists and operates in practice, in addition to how it exists on paper. Evidence of a ‘paper relationship’ is a factor to consider, albeit it will not be a deciding factor when taken in isolation.

Even if such a contract can be implied, an Employment Tribunal has to satisfy itself that the worker is also an ‘employee’, in order for him/her to bring various employment claims. Here, the various ‘employment status’ tests we have looked at in previous articles are of relevance.

In the case itself, Mr Smith had previously been placed on a ‘blacklist’ due to his trade union activities, and sought to bring claims on this basis, when his assignments ended with various end-users. He cited the fact that a number of construction companies ended his assignments before they were complete, and that a number of construction companies had referred to a secret ‘blacklist’ that had been compiled by The Consulting Association (TCA), which included his name.

His claim was rejected as no implied contract of employment could be found between himself and the construction companies (the end users). The Tribunal rejected his arguments to the contrary, that the assignments often existed on a long-term basis, and that he was sufficiently integrated into construction companies for a contract to exist, amongst others.

The case is therefore an important reminder to recruitment and employment agencies, that end-users may be attempting to avoid employment risks such as these when taking on workers via this route. In particular, Mr Smith argued that the lack of written terms between himself and the employment businesses, meant that he should be considered an employee of the end-user.

Whilst this argument was ultimately rejected by the Tribunal, ensuring such written terms do exist may in some cases provide further comfort to end-users in taking on workers via employment businesses, on the premise that there is a lower risk of the worker arguing that he/she is their direct employee and has various employment rights against the end-user as a result.