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Employment Agency Worker not Employee (CA decision)

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The Court of Appeal has handed down its decision in Montgomery v Johnson Underwood Ltd. (CA, 9.3.2001), on the issue of whether a worker for an employment agency is employed by the agency (for the purpose of claiming unfair dismissal).

Mrs Montgomery signed up with Johnson Underwood (an employment agency) and was assigned to work for X Ltd. as a receptionist. She worked for X Ltd. for almost 2 1/2 years, being paid by Johnson Underwood ('JU'). X Ltd. eventually asked JU to terminate the assignment because they were dissatisfied with the number of personal phone calls she was making. Mrs Montgomery claimed unfair dismissal against both JU and X Ltd.

The Employment Tribunal, as upheld by the a majority of the EAT, held that Mrs Montgomery was employed by JU but not by X Ltd.. NOTE: The EAT decision was summarised in my bulletin of 6th May 2000.

The Court of Appeal disagreed, and reversed the finding of the ET and EAT. It stated that Mrs Montgomery was not an employee of the employment agency. There had been no appeal against the finding that she was not an employee of X Ltd.. Thus Mrs Montgomery is left without any remedy.

The reasoning of the Court of Appeal is as follows:

• the first 2 of the 3 steps set out by McKenna J. in Ready Mixed Concrete v Minister of Pensions and National Insurance, ie mutuality of obligation (as developed by the House of Lords in Carmichael) and control, are the irreducible minimum for finding a contract of employment exists.

• In other words, mutuality and control are not factors amounting to "material for the melting pot" - they are the two "basic and essential facts". If either of these are lacking, there cannot be a contract of employment as a matter of law.

• The employment tribunal found as a fact that JU lacked control over Mrs Montgomery. Accordingly she was incapable of being an employee.

• Obiter: it is likely that, in these circumstances, there is sufficient mutuality of obligation. The agency is obliged to pay, and the worker obliged to work for the agency's client.

The Court of Appeal echoed the EAT's call for legislative intervention into the status of agency workers, so as to clarify whether parliament intended agency workers to be covered by unfair dismissal legislation.

A final note for those who occasionally feel frustrated at delays in the EAT: Brooke LJ was highly critical of the delays to this case which occurred at EAT level, and commented that it "besmirch[ed] the administration of justice." He directed that his criticisms be sent to the President of the EAT so that he can consider what administrative steps need to be taken to "ensure that the law's delays do not cause so much hardship in future."

The decision can be downloaded from$FILE/montogmery_v_underwood.htm