May 31 2005 Employment Law Enews

Welcome to the latest edition of steeles employment law enews. In this issue we look at the Government's legislative programme outlined in the Queen's speech; recent cases on the status of agency and contract workers; plus details of our Norwich employment law update briefing.

QUEEN UNVEILS BLAIR'S THIRD TERM PLANS

On his successful return to Westminster following the 5th May General Election, Tony Blair set out a marathon legislative programme containing 50 proposed bills. His legislative programme was outlined in the 'Queen's Speech', made by Elizabeth II herself as Head of State (full of references to "My Government"), to all elected MPs at the State Opening of Parliament.

With his majority slashed from 161 to 67, Mr Blair may struggle to get his more controversial measures through parliament. The new 18-month parliamentary session has been billed as the Prime Minister's "reform and respect" agenda, accelerating changes to education, health and boosting security through a national identity cards scheme, terror legislation and a clampdown on violent crime. The speech also includes a number of proposed bills to tackle problem areas highlighted in a Company Law White Paper, published in March 2005.

Pensions

Draft legislation on pensions will follow the final recommendations of the Pensions Commission, expected in the autumn. Chancellor Gordon Brown, has already ruled out possible legislation on compulsory saving in the next five years, but David Blunkett, the Work and Pension Secretary, has insisted that all options are open.

Employment

The granting of greater rights for both new and existing parents was a recurring theme in the lead up to the election, with all three major parties promising various reforms to the current position including extending the period of paid parental leave following the birth of a child and also the rights of individuals to request flexible working arrangements.

A proposed Immigration Bill will introduce new stiff civil penalties for employers of illegal immigrant workers.

The government will also overhaul incapacity benefit in a bid to get 1m of the 2.7m claimants into work.

Red tape

The government will beef up its drive against red tape with a bill setting clear targets for de-regulation for Whitehall departments and agencies

Consumer Credit Changes

Another hot-topic at the election was the public's spiralling debt problem. The Consumer Credit Bill is intended to shake-up the consumer credit laws and provide greater protection for consumers by creating a fairer, more competitive credit market. Under the new Consumer Credit Bill, card companies will have to obey tough new guidelines, which will include a minimum type size for the warnings currently offered against only making minimum payments.

Company Law

Whilst the Queen stated that "Company law will be reformed to encourage greater levels of investment and enterprise." the Company Law Reform Bill was considered in a White Paper published in March 2005 although nothing has as yet been laid before the House. The White Paper identified several areas of concern including the need to codify the duties of directors and amendments to existing provisions concerning the control of share capital and capital maintenance.

Corporate Manslaughter

There will be legislation creating the new offence of corporate manslaughter. Under the draft, an organisation will be guilty of the new offence of corporate manslaughter if the way in which any of its activities are managed or organised by its senior managers causes a person's death through a gross breach of a duty of care. The maximum penalty is an unlimited fine.

Fraud

The government will also seek to update the law on fraud to make prosecutions easier, although there is no mention of further moves to get rid of jury trials in complex fraud cases, despite the collapse of the Jubilee Line trial, which cost more than £60 million.

LIFE AFTER DACAS - ARE AGENCY WORKERS EMPLOYEES?

You may remember the case of Brook Street Bureau (UK) Ltd v Dacas ("the Dacas case") where the Court of Appeal ("the CA") held that Mrs Dacas, an agency worker, was not an employee of the employment business ("the Agency") that supplied her and expressed the view that, in certain circumstances, an implied contract of employment could arise between an agency worker ("the Worker") and the client ("the Client") or the Agency. Often there will be two contracts: one between the Agency and the Worker and another between the Agency and the Client. Usually those contracts state that the Worker will not be an employee of the Client's. The CA stated tribunals/courts should look beyond the written terms of those contracts and consider whether there is an implied contract of employment between the Worker and the Client. One of the judges was of the view that the Client will often have enough powers of control or direction over the Worker to be the Worker's employer. Another judge stated that, in these circumstances, it was not credible that a Worker was employed by neither the Client or the Agency. Further, he stated that once the Worker had been working for the same client for 1 year or more it had to be inferred that a contract of employment had been created.

The CA was only asked to decide whether Mrs Dacas was employed by the Agency. Although they were not asked to determine whether Mrs Dacas was employed by the Client, they expressed the view that she was. As this was not the central point decided in the case and, therefore, not binding on lower courts/tribunals, it remained to be seen whether they would follow the CA's reasoning.

In the case of Cable & Wireless plc v Muscat, 2005 ("the Muscat case") the EAT had to decide whether a tribunal was wrong to have followed the CA's comments in Dacas regarding the implication of a contract of employment between the Worker and the Client. Muscat had been employed by EI Ltd as a telecommunications specialist, firstly personally and later through his own service company. EI Ltd was taken over by Cable & Wireless ("CW"). This was a transfer of undertakings under the Transfer of Undertakings (Protection of Employment) Regulations 1981. CW asked Mr Muscat's service company to start providing his services via an Agency. There was a contract between Mr Muscat's service company and the Agency and another contract between the Agency and C&W. C&W later asked the Agency to terminate its contract with Mr Muscat's service company and Mr Muscat claimed unfair dismissal against C&W. The tribunal followed the guidance in Dacas and found there was an implied contract of employment between Mr Muscat and C&W. C&W appealed on the basis that the comments in Dacas were not binding and Dacas had been wrongly decided. The EAT decided the comments were binding and the tribunal and the EAT had to follow them. The EAT stated that the tribunal was right to conclude Mr Muscat was employed by C&W. The EAT refused to comment on whether Dacas was wrongly decided. One of the judges went as far as saying that only a "brave" tribunal would not follow Dacas on the basis that it was wrongly decided. They did, however, allow C&W to appeal to the CA against the decision. If C&W appeal, the CA will have to confirm whether or not Dacas was wrongly decided. Watch this space!

More recently, the EAT again found that a Worker was an employee of the client in the case of Royal National Lifeboat Institution v Bushaway, 2005. In this case, Ms Bushaway had been working for RNLI as an agency worker in a temporary position until that post became permanent and she was appointed as a permanent member of staff. She later resigned and claimed constructive unfair dismissal against RNLI. The tribunal had to decide whether Ms Bushaway had been employed by RNLI before she became a permanent employee. There was a contract between RNLI and the Agency and a contract between Ms Bushaway and the Agency. The tribunal concluded that it had to look at not only the written contracts, but also at the parties' conduct and how the arrangement operated in practice. RNLI exercised sufficient control over Ms Bushaway (she worked regular hours, 5 days a week under a line manager with whom she had to negotiate requests for time off) for there to be an employment contract between the two. RNLI appealed and the EAT found the tribunal was entitled to look beyond the written contracts and conclude Ms Bushaway was RNLI's employee.

Given the tribunals' tendency to find employment contracts between Workers and Clients, you should also be aware of another EAT decision, namely Astbury v Gist Ltd, 2005. In this case the EAT suggested that, if Workers issue employment claims against only the Agency or the Client, tribunals should join the other party to the proceedings. If you engage Workers and they bring a claim against the Agency you should expect to become part of the proceedings. This means you can suddenly find yourself having to defend a claim and potentially being liable to pay damages to the Worker!

NORWICH BREAKFAST BRIEFING EMPLOYMENT LAW UPDATE 2005

Employment law is a rapidly developing area and all the indications are that the relentless pace of development is set to continue. We appreciate how difficult it can be for employers to keep abreast of all the changes and, with this in mind, steeles employment team are hosting a breakfast briefing on employment law developments. The emphasis of this briefing is very much on the practical implications of all the changes and what they mean for you and your business. This session will look at Compromise Agreements, Harrassment, Holiday Pay, Redundancies, Maternity Leave, Unfair Dismissal, TUPE, Covenants and Agency issues.

This briefing is taking place at Norwich City Football Club on Wednesday 15 June. It will run from 7.45am (with a 8.00am start) and will conclude no later than 10.30am. The cost is £40 per delegate and a full English and continental breakfast is included in the price.

To book your place please call Beth Wilson on 01603 598000, email rsvp@steeleslaw.co.uk or book online

This article copyright © 2005 Steeles Law llp. All rights reserved.