Appeal No. UKEAT/0006/06/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 18 December 2006

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
MRS A GALLICO
MR D JENKINS OBE

MS M JAMES	APPELLANT

GREENWICH COUNCIL	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	
MR ROGER BARTON
(Legal Adviser)
Greenwich UNISON
Town Hall
39 Wellington Street
LONDON
SE18 6PW

	

For the Respondent	
MR JONATHAN COHEN
(of Counsel)
Instructed by:
The Solicitor
London Borough of Greenwich
Borough Secretary’s & Solicitor’s Department
29-37 Wellington Street
Woolwich
LONDON
SE18 6PW

	

SUMMARY

Contract of Employment – Definition of employee
The Appellant was supplied by an agency to carry out work for Greenwich Council. She had no express contract with the Council but she contended that there was an implied contract, given in particular that she had worked for the Council for a period of some five years and had been treated in all respects like other permanent employees. The Tribunal considered whether there was an implied contract, following the guidance given by the Court of Appeal in Dacas v Brook Street Bureau (UK) Ltd [2004] ICR 1437. It concluded that there was no mutuality of obligation and therefore no contract with the Council at all. The Appellant submitted that the Tribunal had erred in law and reached a perverse conclusion. The EAT rejected the appeal, holding that the Tribunal had properly assessed the evidence and was entitled to conclude that there was no mutuality of obligations. The EAT made certain observations about the circumstances in which an Employment Tribunal might properly infer an implied contract between the worker and the end user.

  

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1.	This case raises yet again the issue of whether a worker supplied by an agency, in this case BS Project Services Limited, to an end user, namely here the London Borough of Greenwich, has a contract of employment with that end user.  The Tribunal at London South held that the Appellant, Ms Merana James, had no such contract and accordingly was not able to pursue her claim for unfair dismissal.  She appeals against that determination.

The background.
2.	The Tribunal summarised the principal facts.  It did not hear any live evidence because the parties took the view that the basic facts of the arrangement were not in dispute. In addition to the documentary material the Tribunal did, however, have witness statements both from the Appellant and also certain other persons employed by the Council and the agency.  It appears that there may have been more disagreement about the facts than the representatives envisaged. Mr Barton, the union official who argued the case for the Appellant with conspicuous skill, indicated that Ms James does not accept all the factual findings of the Tribunal.  However, unless it is said that there was simply no evidence at all for their findings, we have loyally to accept the findings they have made and determine the appeal on that basis.

3.	Ms James worked full time for the Greenwich Council until 1997. She provided support work in Greenwich Council’s Asylum Seeker’s Team. She ceased working for a while and then began working again for the Council through an employment agency, Greenwich Social Care Staff Agency, from around September 2001. 

4.	In 2003 she effectively switched agencies. She left Greenwich Social Care Staff Agency and joined the BS Project Services Limited agency. This gave her a considerably better hourly wage. 

5.	There were two express contracts regulating her relationship with Greenwich Council. There was no contract directly between her and the Council. However, she signed a document headed “Temporary Worker Agreement” which set out the terms of the arrangement between her and the agency.  The Tribunal recounted certain provisions in the agreement with BS Project Services Ltd . Clause 2 was as follows:
(a) The terms contained in this Agreement shall only apply to each assignment undertaken by the Temporary Worker unless varied by agreement in writing. These terms shall not apply, and none of the obligations under these terms or otherwise between BS Social Care and the Temporary Workers shall apply between assignments or when the Temporary Worker is not working on an assignment for any reason;

(b) The temporary worker contracts with BS Social Care in the capacity of a self-employed worker in relation to each assignment;

(c)  Where these terms apply they shall constitute a contract of services between BS Social Care and the Temporary Worker. The provisions contained in this Agreement shall not give rise to a contract of employment either between BS Social Care and a Temporary Worker or between the Temporary Worker and the client;

(d)  No variation or to alteration of the provisions contained in this Agreement shall be valid unless agreed in writing;

(e)  BS Social Care or the Temporary Worker may terminate this Agreement at any time without notice. Termination of this Agreement shall automatically terminate any assignment on which the Temporary Worker is then engaged.

6.	The agreement specified her minimum hourly rate of pay and it contained provisions as to statutory leave.

7.	The Tribunal did not refer to the second agreement, which is the agreement between the agency and Greenwich as end user, but it was before them. Clause 3 of the agreement is as follows:
“The Company will endeavour to supply such Temporaries to carry out Assignments for the Client as the Client shall notify to the Company when placing its order. When placing its order the Client shall specify its exact requirements by providing full details of the type of work for which the Temporary is required and, in particular, by notifying the Company of any special skills or qualifications required for such work. The Client shall not allow any Temporary to undertake any work other than that which has been notified by the Client”	

8.	Clause 5 deals with charges. Essentially, the agency is to receive the sum to cover the worker’s pay, its own expenses in making the arrangements, and the agency’s own commission.

9.	Clause 6 contains a provision described as “status of temporaries”. It is as follows:
“(a) Temporaries are engaged by the Company [i.e the agency] under contracts for services and are deemed to be under the supervision, direction and control of the Client from the time the Temporary reports to take up duties and for the duration of the Assignment. The Client agrees to be responsible for all acts, errors or omissions be they wilful, negligent or otherwise as though the Temporary were on the payroll of the Client and the Client will in all respects comply with all statutes, by-laws, codes of practice and legal requirements to which the Client is ordinarily subject in respect of the Client’s own staff, including in particular the provision of adequate Employer’s and Public Liability Insurance cover for the Temporary during all Assignments, but excluding the matters referred to in sub-clause (b) below.
(b) The Company assumes responsibility for payment of the Temporary’s remuneration and for deduction and payment of all statutory contributions in respect of Earnings Related Insurance and the administration of Schedule E Income Tax (PAYE), applicable to the Temporary as required by law.”  

10.	The Tribunal found as a fact that various terms which would be found in the contracts of employment of those working directly for Greenwich Council did not apply to Ms James. These included the disciplinary and grievance procedures; she was not entitled to the sick pay provisions; she received no holiday pay; and the arrangements were all made by the agency. In the event of sickness, she provided medical certificates to the agency rather than the Council. (That is one of the matters she disputes but there was evidence to that effect.)

11.	The particular circumstances in which her engagement came to an end are not strictly relevant to the issue we have to decide, and it appears that there may be some dispute about that. Suffice it to say that she was absent from work sick in August and most of September 2004. Another worker was provided by the agency in her absence. When she returned to work she was told that she was no longer required; the agency had sent a replacement. There were apparently some criticisms of her performance, although that is disputed. 

The law.
12.	The starting point is that in order to claim for unfair dismissal Ms James has to be employed under a contract of employment. Section 230 of the Employment Rights Act defines a contract of employment in the following way:
“In this Act a ‘contract of employment’ means a contract of service or apprenticeship whether express or implied and (if it is express) whether oral or in writing.”

13.	In Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 MacKenna J identified the criteria for determining whether a contract of employment exists the following way:
“A contract of service exists if three conditions are fulfilled.
(i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master. 
(ii) He agrees expressly or impliedly that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.
(iii) The provisions of the contract are consistent with its being a contract of service.
…As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job either by one’s own hands or by another’s is inconsistent with a contract of service, though a limited or occasional power of delegation may not be.”

14.	That is a passage which has been applied and followed in many subsequent cases, including Nethermere (St Neots) Ltd v Taverna & Gardiner [1984] IRLR 240, 245  per Stephenson LJ, and Clarke v Oxfordshire Health Authority [1998] IRLR 125, Sir Christopher Slade, at para 22. In the former, Stephenson LJ commented that: “There must be a minimum of obligation on each side to create a contract of service.”

15.	These passages were in turn followed by the House of Lords in Carmichael v National Power PLC [2000] IRLR 43. The Appellants were appointed as station guides, taking members of the public around certain power stations. Their employment was on a “casual as required” basis. They sought a written statement of the particulars of their contracts but this depended upon whether they were employees or not. They did not argue the case on the basis that they were on a series of ad hoc contracts when actually working, but rather on the basis that the relationship constituted a single contract of employment. The leading judgment was given by the Lord Chancellor, Lord Irvine of Lairg, who noted that the Tribunal had concluded that there was no obligation on the alleged employer to provide casual work nor an obligation on the worker to undertake it and that consequently there was “an absence of irreducible minimum of mutual obligation necessary to create a contract of service” (para 18).

16.	The authorities do not speak with one voice as to precisely what mutual obligations must be established. The relevant cases were analysed carefully by Mr Justice Langstaff in Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 at paras 19-23. As he points out, sometimes, the employer’s duty is said to be to offer work, sometimes to provide pay. The critical feature, it seems to us, is that the nature of the duty must involve some obligation to work such as to locate the contract in the employment field. If there are no mutual obligations of any kind then there is simply no contract at all, as Carmichael makes clear; if there are mutual obligations, and they relate in some way to the provision of, or payment for, work which must be personally provided by the worker, there will be a contract in the employment field; and if the nature and extent of the control is sufficient, it will be a contract of employment.

17.	In short, some mutual irreducible minimal obligation is necessary to create a contract; the nature of those mutual obligations must be such as to give rise to a contract in the employment field; and the issue of control determines whether that contract is a contract of employment or not.

18.	The question whether a contract of employment exists arises in a number of situations. First, it is frequently accepted that there is a contract in place between the employer and the employee and the only issue is whether it is a contract of employment or a contract for services. In that situation the only issue is whether there is sufficient control so as to constitute a contract of employment. (We term this the “control” test, as used in the Ready Mixed case, although it has sometimes been thought that other descriptions are more apt, such as the “organisational”, “economic reality” and “business integration” tests: see generally, Harvey on Industrial Relations and Employment Law, Part A paras [20] ff).

19.	Second, other cases, of which Carmichael, Nethermere and Clarke are all examples, are situations where a worker does some casual work for an employer and for one reason or another it is necessary to show that there is a contract of employment in place even where there is no work being performed. Plainly, there is a contract of some kind in place whilst the work is being performed, but the question which frequently arises is whether there is also a contract governing the relationship - what is variously described as an over-arching, umbrella or global contract - in the periods where there is no work being carried out. It is in that context that the courts have held that there must be this irreducible minimum of contractual obligation in order for a contract to be established. 

20.	The third situation is where there is an agency relationship, as exemplified in this case.  Typically, as here, there is a contract between the agency and the worker under which the worker agrees to provide his or her services to the ultimate client or end user, and a contract between that client and the agency. Normally there is no express contract of any kind between the end user and the worker. In those circumstances, unless some contract can properly be implied according to established principles, it will not exist at all.  Rights which are dependent on there being a contract of some kind will then simply not arise.

21.	The issue in agency cases is, therefore, different to that which arises where the purpose is to determine whether there is some over-arching or umbrella contract. In the latter situation there is no day to day relationship in the periods when work is not being provided and the only question is whether there are sufficient legal obligations to create a contractual nexus; is there the irreducible minimum? In the agency cases there is a relationship between the end user and the worker. In this case, for example, there is significant control exercised over the way in which the work is performed, and plainly the work itself is for the benefit of the end user. The question is, however, whether that work is being provided pursuant to a contractual obligation between the end user and the worker.

22.	It is not necessary to rehearse all the agency cases which have been the subject of consideration by the courts. It is plain that whilst of course every case turns on its own particular facts, it will be an exceptional case where a contract of employment can be spelt out in the relationship between the agency and worker: see Montgomery v Johnson Underwood [2001] IRLR 269; Bunce v Postworth Ltd [2005] IRLR 557; and Dacas v Brook Street Bureau (UK) Ltd [2004] ICR 1437 at para.64 per Mummery LJ. Typically, the agency does not have the day to day control which would establish such a contract. Nor, indeed, is the worker carrying out the work directly for the benefit of the agency, and there is usually no obligation on the agency to find work or on the worker to accept it, let alone personally to do it. In any event, it has not been suggested in this case that there is an employment contract with the agency.

23.	The issue, therefore, is whether the rights which are conferred on employees can be preserved for these workers by establishing a contractual relationship with the end user. 

24. There are two authorities in particular which are central to the arguments in this case and which need fuller consideration. In Dacas v Brook Street Bureau (UK) Ltd [2004] ICR 1437 the Court of Appeal held, in a triangular agency relationship very similar to this case, that the Tribunal were right to find that there was no contract of employment with the agency both because of the lack of any mutual obligations and the absence of control; but that the existence of the two express contracts did not automatically exclude the possibility that a contract may be implied between the worker and the end user.  They held that an Employment Tribunal should always consider that possibility. Mummery LJ put the matter thus (para 17):
“The critical point is that, although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual territory or exhaust all the contractual possibilities. In determining the true nature of the relationship (if any) between each of the respective parties, it is necessary to consider the total situation occupied by the parties. The totality of the triangular arrangements may lead to the necessary inference of a contract between such parties, when they have not actually entered into an express contract, either written or oral, with one another. Although there was no express contract between the applicant and the end-user in this case, that absence does not preclude the implication of a contract between them. That depends on the evidence, which includes, but may not be confined to, the contractual documents.”

25.	It is to be noted that Mummery LJ referred to the implication arising from a “necessary inference”. His Lordship did not suggest that the inference could readily be made. He observed that parties are entitled to seek to regulate their relationship in this tripartite way; he cautioned against Tribunals giving way to the temptation of finding a contract of employment whenever the worker was not self employed or carrying on business on his own account; and he merely observed that the formal express contracts:
 “may not tell the whole story about the legal relationships affecting the work situation. They do not as a matter of law, necessarily preclude the implication of a contract of service …” (para 52).

26.	Sedley LJ agreed with this analysis but he went further in what is manifestly a policy driven judgment. He commented that “the conclusion that Mrs Dacas was employed by nobody is simply not credible. There has to be something wrong with it.” (para 71). A powerful factor influencing his decision was the fact that the client would not be vicariously liable for the agency worker, but as the Court of Appeal recognised in the later case of  Cable and Wireless plc v Muscat [2006] IRLR 354 at para 27, vicarious liability can arise even if the agency worker is not an employee. Sedley LJ expressed the view that even although the provision of genuinely temporary work may not give rise to contracts of employment with the end user:
 “once arrangements like these had been in place for a year or more, I would have thought that the same inexorable inference (that there was a contract of employment) would have arisen.”(para.77).

27.	Munby J disagreed on this point and concluded that, save perhaps in wholly exceptional cases, there would be no room to imply any contract between the worker and the end user. He considered that the crucial point was not so much the existence of two formal express contracts - by themselves they did not necessarily preclude the possibility of a contract of service between worker and end user - but rather that the right to control and the obligation to remunerate were located in different hands.  Munby J referred to certain observations made by Elias J. in Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471, para 36 to the effect that where the obligations undertaken by the parties can be explained wholly by reference to the express contracts which make up the agency arrangement, then “it is neither necessary nor appropriate to infer that there must be some other separate independent contractual obligation between the [worker] and the [end user]”.

28.	In the Cable & Wireless case, to which we have made reference, the Court of Appeal had to give further consideration to Dacas. The facts were very different from those arising in Dacas. The employee was a telecommunications’ specialist. He was directly employed by Exodus Ltd until they told him that they would only employ him as a contractor, and they required him to provide his services through a limited company. He set up E-Nuff Ltd and that company contracted with Exodus. Exodus was taken over by C & W in 2002. This was a transfer of an undertaking. C & W thereafter directed his work. However, they also would only deal with contractors and they required him to contract with them through an agency. 

29.	Thereafter E-Nuff entered into a contract with Abraxas, an employment agency, who agreed with C & W, as the client, to supply Mr Muscat through E-Nuff. Mr Muscat was required to submit his expenses to C & W for approval before submitting them to Abraxas for payment, and in other respects his relationship with C & W continued in the same vein as it had before. The only difference was that Abraxas paid his wages.

30.	In late November 2002 C & W informed Mr Muscat that it would not require his services any further and he wished to pursue a claim for unfair dismissal arising out of the termination of that relationship. The issue was whether he had a contract of employment. 

31.	The Employment Tribunal held that he had an implied contract with C & W; the fact that E-Nuff submitted the invoices was immaterial. The employers appealed on the grounds that the contract between E-Nuff and Abraxas had fundamentally changed his status. 

32.	The EAT rejected that appeal and their decision was upheld by the Court of Appeal in a judgment given on behalf of the court (the Master of the Rolls, Sir Anthony Clarke; Lady Justice Smith; and Lord Justice Maurice Kay) by Smith LJ. 

33.	The court confirmed the approach in Dacas, emphasising that it was important to look at the whole of the arrangements between the parties and to consider the possibility of an implied contract between the worker and the end user. The court specifically rejected Munby J’s analysis in so far as it had placed emphasis on the distinction between the party controlling the employment and the party paying wages on the grounds that the mere fact that there is a division between the two does not negate the possibility of an implied contract. Various examples were given of circumstances where an employer might arrange for a third party to pay the wages of the employee (see para 35). 

34.	The Court of Appeal concluded that the Employment Tribunal was entitled to say that in all the circumstances nothing effectively had changed when the agency relationship was established, save that money was paid by the agency rather than directly from C & W itself.  For all practical purposes the relationship continued in precisely the same way.

35.	However, the Court of Appeal did emphasise, as had Mummery LJ in Dacas,  that in order to imply a contract to give business reality to what was happening the question was whether it was necessary to imply such a contract. The Court cited from the judgment of Bingham LJ, as he was, in The Aramis [1989] 1 Lloyd’s Rep 213 at 224, where he said: 
“As the question whether or not any such contract is to be implied is one of fact, its answer must depend on the circumstance of each particular case – and the different sets of facts which arise for consideration in these case are legion. However, I also agree that no such contract should be implied on the facts of any given case unless it is necessary to do so; necessary, that is to say, in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist.”
And later, he added this:
“…. It would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more than consistent with an intention to contract than with an intention not to contract. It must surely be necessary to identify conduct referable to the contract intended for, or at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract.”
The point was put even more strongly in Mitsui and Co.Ltd v Novorossiysk Shipping Co. (The Gudermis) [10993] 1 Lloyd’s Rep.311, 320 by Staughton LJ when he said this:
“It is not enough to show that the parties have done something more than, or different from, what they were already bound to do under obligations owed to others.  What they do must be consistent only with there being a new contract implied, and inconsistent with there being no such contract.”

36.	In our view, it is clear beyond doubt that in concluding that the contractual relationship between the worker and C & W continued, the Court was effectively holding that the contracts making up the agency arrangements simply did not reflect the reality of the relationship.  They were never in fact implemented. It was not a matter of indifference to the client or end user who provided the services. There were personal obligations on Mr Muscat to provide work and on the employers to accept it. The effect of the contracts was merely to make the agency the agent for the purpose of paying wages.  The logic is that they were not in fact free to remove Mr Muscat from C and W and provide someone else in his place.

37.	It has long been recognised that in this area that the courts must look at the reality of the position; and “if the obligation is a sham, it will want to say so”: per Peter Gibson LJ in Express and Echo Publications Ltd. v Tanton [1999] ICR 693, 697G.  That will be the position where the agency arrangements were never intended to reflect reality but rather to obfuscate the true nature of the relationship. But the circumstances in which a contract can be implied are not limited to situations where the arrangements were never intended to be genuine. It may be that the parties intend to regulate or alter their relationship in accordance with the agency contracts but do not in fact do so.  In such circumstances a Tribunal will be entitled to find that there is a contract between worker and end user.

The Tribunal’s decision.
38.	Ms James contended that in the light of the decision of the Court of Appeal in Dacas v Brook Street Bureau (UK) Ltd [2004] IRLR 358 the Tribunal had to consider whether there was an implied contract operating between the Council and the appellant. Mr Barton accepted that the arrangements were not a sham; there was initially a genuine agency relationship properly carried into effect and he conceded that there was not at that stage any subsisting contract between the Council and Mrs James.  

39.	His case was that after a period of time - and in particular once a year had elapsed, thereby echoing the judgment of Sedley LJ in Dacas - the arrangement as reflected in the documents was varied and a contract of employment could be implied by custom and practice. There had by then been work over an extensive period which showed that Ms James was more than just a worker with temporary status.  She was thereafter effectively in the same position as the other full time employees of the Council. It was necessary to imply a contract to give business efficacy to the relationship.

40.	The employers contended that the provision of her services was explicable entirely by reference to the express contractual arrangements. It followed that there was no contract with the Council and no mutuality of obligation between Ms James and the Council.  She was not obliged to work for the Council and they were not obliged to accept her services.  She did not have to explain herself when she was ill, or notify the Council; the agency simply sent an alternative replacement worker.  Also the evidence was that she was willing to work for other clients of the agency. 

41.	The Tribunal set out the law. They referred to the judgment of MacKenna J in Ready Mixed, to which we have referred, and to the decision in Hall (Inspector of Taxes) v Lorimer [1994] ICR 218.  They expressly referred to the Dacas case, observing in terms that it required them to consider whether there could be an implied contract operating between Ms James and the Council. 

42.	The Tribunal concluded that there was no such implied contract. Their reasons for so finding are set out in paragraphs 16-19 of their decision:
“16.  In the circumstances of this case and having regard to the totality of the evidence, to the parties’ submissions and to the relevant law, the Tribunal reached the following conclusion in relation to the issue of the Claimant’s employment status.
17.  The Tribunal concluded in circumstances where there was no obligation upon the claimant to provide her services for Greenwich Council and there was no obligation on the part of Greenwich Council to provide the Claimant with work, there was an absence of what Lord Irvine of Lairg described in Carmichael v National Power PLC as the irreducible minimum of mutual obligation necessary to create a contract of service. The Tribunal noted that during the Claimant’s absence through sickness, the agency provided another worker for Greenwich Council. We considered that in circumstances where the Claimant did not have the benefit of any entitlement from Greenwich Council in the form of remuneration, and benefits such as sick pay, holiday pay, there was an absence of any obligation on the part of Greenwich Council towards the Claimant. In addition we noted that the Claimant had failed to notify Greenwich Council when she was absent through sickness and she was replaced by another agency worker. We concluded that there was the absence of the required mutuality of obligation necessary to support the existence of a contract of employment between the Claimant and Greenwich Council.
18. We did not consider that [the fact that] when the Claimant was undertaking work on behalf of Greenwich Council she was working under Greenwich Council’s control, such as working to a rota, was relevant in circumstances where there was the absence of mutuality of obligation necessary to found a contractual relationship between the Claimant and Greenwich Council. Further we did not conclude that there were any facts from which a contract of service could be implied from the nature of the arrangement which existed between the Claimant and the end user, Greenwich Council. We considered that by the time the Claimant had entered into the relationship with BS Project Services Ltd in 2003 she had already undertaken work for Greenwich Council through the agency of another employment agency and had chosen to switch to BS Project Services Ltd because of the higher hourly rates of pay from such agency. By such stage she must have been aware of at least some of the employment terms of her colleagues, who were employees of Greenwich Council, but she had chosen to continue to undertake work for Greenwich Council through the agency of the second named Respondent, because of the higher rates of pay.
19.  In circumstances where we concluded that there lacked the irreducible minimum of mutuality of obligation, it was the unanimous judgment of the Tribunal that the Claimant was not an employee of Greenwich Council and that her complaint of unfair dismissal is dismissed.”

The grounds of appeal
43.	Before considering the grounds of appeal, it is necessary to make two observations. The first is that it is well established that in a case of this kind, where the contractual relationship relied upon is not fixed by written documents alone, the question whether there is a contract and, if so, what are its terms are questions of fact: see the observations of Lord Hoffmann in the Carmichael case, paras 29-33.  As has frequently been recognised, the EAT can interfere only if the tribunal misdirected itself in some way or reached a perverse conclusion which no reasonable tribunal, properly directing itself, could reach: see, for example, the comments of Sir Christopher Slade in the Clarke case, paras.35-36.

44.	The second observation is that in this case it was, as we have said, conceded by Ms James that the agency relationship was not a sham and did initially properly reflect the true legal position; and the Council conceded that if there were a contract in existence, the nature and degree of control was such as would make it a contract of employment.

45.	There were initially two grounds of appeal. The first was that the Tribunal failed to consider whether Ms James had an implied contract at all.  That was plainly unsustainable since the tribunal in terms addressed that very question, and we say no more about it.

46.	 The second ground is that the decision it reached, namely that there was no contract of employment in this case, involved a mis-direction because there was a misunderstanding a crucial aspect of the evidence, and was perverse.  Mr Barton was reluctant to describe the ground as perversity, but in essence that is what it was.  He submitted that the only proper inference here was that there was a contract of employment in place.

47.	Mr Barton says that the misunderstanding of fact which affected the Tribunal’s decision was the implied suggestion, in paragraph 18 of the decision that she had chosen to remain an agency worker rather than become employed by the Council.  Mr Barton points out that the option of having an express contract with the Council was never given to her.  That is no doubt correct, but it does not assist her case even if the Tribunal was under a misunderstanding of the position.  

48.	Whether there was no express contract because both parties did not want it or because only the Council did not want it does not alter the fact that there was no such contract. Ms James’ desire to create such a contract did not support the argument that a contract could be implied.  Indeed, the Tribunal was entitled to find that the fact that Ms James had changed agencies was consistent with her recognising, however reluctantly, that she was an agency worker and had no direct contractual relationship with the Council.

49.	In relation to the perversity argument, Mr Barton largely repeated the submissions he made to the Tribunal, referring to certain features of the relationship which he submitted clearly demonstrated an implied contract. He said that Ms James had virtually no contact with the agency at all. She had only worked for the one employer. She acted at all times under the directions of the Council without any intervention from the agency; she was treated in all respects as a full time member of staff and was on the permanent rota. He reminded us of the judgment of Lord Justice Sedley in the Dacas case and suggested that in the light of his Lordship’s observations, a contract would be likely to be implied once employment had continued for the same end user for a year, and here the period was significantly longer. He noted that Ms James was paid precisely in connection with the hours of work that she did and he contended that the case was akin to that in Muscat UKEAT/0661/04/LA, namely the agency acting simply as an intermediary paying the wages.

50.	Mr Cohen, counsel for the Greenwich Council, contended that nothing in Dacas or Muscat obliges a Tribunal to find that there was a contract of employment in place. The mere passage of time does not do so and he submitted that Lord Justice Sedley’s observations on that point were not only obiter but wrong. He contended that the Tribunal were fully entitled to conclude that there was no relevant mutuality of obligation. That was a question of fact. The end user did not have to accept this worker from the agency and the agency could at any time cease to provide her.
 
51.	Furthermore, the Tribunal was entitled to put weight on the fact that she changed agencies, and that she was simply replaced with different agency staff when ill.  The conclusion it reached was one it was fully entitled to reach in the light of the evidence before it. Perversity is a very high hurdle - there must be an “overwhelming case” - per Mummery LJ in Yeboah v Crofton [2002] IRLR 634, para 93 - and Ms James was nowhere near establishing it here.

Conclusions.
52.	In our judgment the perversity argument cannot succeed. We do not accept that the only proper conclusion that could be reached in the circumstances of this case was that Ms James was employed by Greenwich. Dacas indicates that circumstances may exist which could justify the inference of an implied contract in an appropriate case, but the Tribunal was fully entitled to find that it did not do so here. It did so by focussing on mutuality of obligations, although it might more pertinently have said simply that there was no necessity to imply a contract in this case.  In our view, the mere passage of time is not sufficient to require any such implication, for reasons we give below.  No error of law has been identified in the Tribunal’s approach.

Observations. 
53.	Neither Dacas nor Muscat seek to indicate to Tribunals how they might approach the question of implying a contract with the end user, save for saying that the possibility must be considered. We make certain observations in the hope that they may assist Tribunals in this task.

54.	In the casual worker cases, where the issue is whether there is an umbrella or global  contract in the non-work periods, the relevant question for the Tribunal to pose is whether the irreducible minimum of mutual obligations exists.  It is not particularly helpful to focus on the same question when the issue is whether a contract can be implied between the worker and end user.  The issue then is whether the way in which the contract is in fact performed is consistent with the agency arrangements or whether it is only consistent with an implied contract between the worker and the end user and would be inconsistent with there being no such contract.  Of course, if there is no contract then there will be no mutuality of obligation.  But whereas in the casual worker cases the quest for mutual obligations determines whether or not there is a contract, in the agency cases the quest for a contract determines whether there are mutual obligations.

55.	If there were no agency relationship regulating the position of these parties then the implication of a contract between the worker and the end user would be inevitable. Work is being carried out for payment received, but the agency relationship alters matters in a fundamental way. There is no longer a simple wage-work bargain between worker and end user. 

56.	In Dacas,  Munby J was surely right when he observed that in a tripartite relationship of this kind the end user is not paying directly for the work done by the worker, but rather for the services supplied by the agency in accordance with its specification and the other contractual documents. Similarly, the money paid by the end user to the agency is not merely the payment of wages, but also includes the other elements, such as expenses and profit. Indeed, the end user frequently has no idea what sums the worker is receiving. 

57.	The key feature is not just the fact that the end user is not paying the wages, but that he cannot insist on the agency providing the particular worker at all.  Provided the arrangements are genuine and the actual relationship is consistent with them, it is not then necessary to explain the provision of the worker’s services or the fact of payment to the worker by some contract between the end user and the worker, even if such a contract would also not be inconsistent with the relationship. The express contracts themselves both explain and are consistent with the nature of the relationship and no further implied contract is justified.

58.	When the arrangements are genuine and when implemented accurately represented the actual relationship between the parties - as is likely to be the case where there was no pre-existing contract between worker and end user - then we suspect that it will be a rare case where there will be evidence entitling the Tribunal to imply a contract between the worker and the end user.  If any such a contract is to be inferred, there must subsequent to the relationship commencing be some words or conduct which entitle the Tribunal to conclude that the agency arrangements no longer dictate or adequately reflect how the work is actually being performed, and that the reality of the relationship is only consistent with the implication of the contract.  It will be necessary to show that the worker is working not pursuant to the agency arrangements but because of mutual obligations binding worker and end user which are incompatible with those arrangements.

59.	Typically the mere passage of time does not justify any such implication to be made as a matter of necessity, and we respectfully disagree with Sedley LJ’s analysis in Dacas on this point.  It will no doubt frequently be convenient for the agency to send the same worker to the end user, who in turn would prefer someone who has proved to be able and understands and has experience of the systems in operation.  Many workers would also find it advantageous to work in the same environment regularly, at least if they have found it convivial.  So the mere fact that the arrangements carry on for a long time may be wholly explicable by considerations of convenience for all parties; it is not necessary to imply a contract to explain the fact that the relationship has continued perhaps for a very extensive period of time.  Effluxion of time does not of itself establish any mutual undertaking of legal obligations between the worker and end user.  This is so even where the arrangement was initially expected to be temporary only but has in fact continued longer than expected.  Something more is required to establish that the tripartite agency analysis no longer holds good.

60.	It will, we suspect, be more readily open to a Tribunal to infer a contact in a case like Muscat where the agency arrangements were super-imposed on an existing contractual relationship. It may be appropriate, depending on the circumstances, to conclude that arrangements were a sham and that the worker and end user have simply remained in the same contractual relationship with one another, or that even if the intention was to alter the relationship that has not in fact been achieved.   That may be legitimate, for example, where the only perceptible change is in who pays the wages. In such a case the only effect of the agency arrangements may be to make the agency an agent of the employer for the purpose of paying wages. However, in these cases the Tribunal is not strictly implying a contract as such but is rather concluding that the agency arrangements have never brought the original contract to an end.

61.	We should not leave this case without repeating the observations made by many courts in the past that many agency workers are highly vulnerable and need to be protected from the abuse of economic power by the end users.  The common law can only tinker with the problem on the margins.  That is not to say that all agency relationships simply have as their objective to defeat the rights of the workers.  There are obvious benefits in flexibility for employers in hiring agency staff, and many employees, particularly those with specialist skills, may also benefit from the flexibility as well as giving tax and fiscal advantages. A careful analysis of both the problems and the solutions, with legislative protection where necessary, is urgently required.

Disposal.
62.	For reasons given, this appeal fails. The Tribunal was entitled to find that there was no basis for implying a contract of employment between the appellant and Greenwich Council in this case.