Summary
 
In the recent case of Muschett v HM Prison Service, the Court of Appeal was asked to decide whether a temporary agency worker was an employee as defined by discrimination legislation and, therefore, entitled to bring a claim for race, sex and religious discrimination.

Background

In order for an individual to say that they are employed, they must satisfy Section 230 of the Employment Rights Act 1996 (the “ERA ‘96”), which states that an employee is an individual who has entered into, or works under a contract of employment. For the purposes of the ERA ’96, a contract of employment is an express (whether written or oral) or implied contract of service (or apprenticeship).

The definition of an employee is given a wider interpretation under discrimination. Section 78 (1) of the Race Relations Act 1976 (the “RRA ’76) defines employment as being any “employment under a contract of service or of apprenticeship or a contract to personally execute any work or labour”. Section 7 of the RRA ’76 provides protection for contract workers who are employed by an agent who supplies them to a principal. Agency workers are usually considered to be contract workers and are afforded protection from discrimination by the agency and the principal.

The Facts

Mr Muschett signed a contract with Brook Street Agency (“Brook Street”) and was supplied to HM Prison Service (“HMPS”) to work as a cleaner at Feltham Young Offenders Institute. Under the terms of Mr Muschett’s contract with Brook Street, the assignment could be terminated at any time by Brook Street, HMPS or Mr Muschett himself, without prior notice or liability.

After four months, HMPS terminated the assignment. Mr Muschett brought a claim against HMPS for unfair dismissal, wrongful dismissal, race, sex and religious discrimination. At a pre-hearing review the Employment Tribunal decided that Mr Muschett was not an employee under Section 230 of the ERA ’96 because he could terminate the assignment at anytime without giving notice, as could HMPS. Since the terms of the agreements between Mr Muschett and Brook Street and HMPS and Brook Street were clear and had been followed, the Employment Tribunal refused to imply a contract of employment existed between Mr Muschett and HMPS. Mr Muschett was therefore unable to pursue his claims for unfair and wrongful dismissal.

The Employment Tribunal also found that Mr Muschett was not an employee for the purposes of discrimination legislation. The tribunal found that because the agreement could be terminated by Mr Muschett or HMPS, at any time, Mr Muschett was not employed by HMPS and so could not claim for discrimination. Finally, the Employment Tribunal found that Mr Muschett was not employed by Brook Street and so could not seek protection from discrimination under Section 7 of the RRA ’76.

Mr Muschett appealed to the Employment Appeals Tribunal, however, his appeal was dismissed.

The Court of Appeal Decision
 
Mr Muschett appealed to the Court of Appeal on two points. Firstly, that the Employment Appeals Tribunal had failed to consider whether a contract of employment should have been implied and secondly, that the Employment Appeals Tribunal had failed to consider whether his work fell within the wider definition of employment under discrimination legislation.

The Court of Appeal dismissed the appeal stating that there was no evidence of an employment contract between Mr Muschett and HMPS and no basis on which to imply one. The Court of Appeal also found that there was no contract for services between Mr Muschett and HMPS or Brook Street and so Mr Muschett was afforded no protection under discrimination legislation.

Conclusion

The decision appears to expose a loophole which is that agency workers who do not have an employment contract with their agency or with the principal will not be afforded protection under current discrimination legislation. Commentators have been surprised that the Employment Tribunal did not find Mr Muschett to be an employee under the wider definition of employment and was not a contract worker for the purposes of Section 7 RRA ’76. Little reasoning was given for this decision by the Employment Tribunal or by the Employment Appeals Tribunal who refused permission to appeal the point. It may be that since this is a first instance decision and is not binding, the point will be clarified by future caselaw.

The Agency Workers Regulations 2010 are due to come into force in October 2011, however, the new legislation is unlikely to close the loophole exposed by this case since the new regulations will require an agency worker to have a contract of employment with the agency to perform work and services personally for that agency, in order to be protected.

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