Agency contract

Consistent Group Ltd v Kalwak

When considering the status of agency workers, tribunals have to look at how their contracts operate in reality. In Consistent Group Ltd v Kalwak (2008, IRLR 505), the Court of Appeal said that before deciding that a particular term is a sham, tribunals have to show that both parties intended to paint a false picture of their obligations.

Basic facts

Mrs Kalwak and the other claimants were all Polish nationals who signed contracts with Consistent Group Ltd to provide them with work in the UK. They started work a few days after their arrival with Welsh Country Foods. The agency provided them with accommodation and transport to their work, and made deductions from their wages accordingly.

The contracts - “self-employed sub-contractor's contract for services” - stated that the claimants were not employees of the agency, and that there was no obligation on the agency to find work for them, nor on the claimants to accept (known as “mutuality of obligation”).

Although the contracts required the claimants to do the work themselves or, if they could not, to ensure that it was done by a “competent, suitable and sufficiently experienced” substitute. The claimants could also work for anyone else, as long as it did not “conflict with … the sub-contractor's ability to provide services for Consistent.”

When Mrs Kalwak and her colleagues tried to join a trade union, but they were discouraged from doing so and subsequently dismissed by the agency. They claimed they had been dismissed for trade union membership or activities; that they had been denied notice pay in breach of contract; and that the agency had made unlawful deductions from their wages.

Tribunal and EAT decisions

The tribunal judge decided they were all employed by the agency because it had an implied obligation to find work for them and they had an implied obligation to do the work. This was particularly so in the case of the claimants who, having just arrived in England, spoke no English and needed to work. The judge said that the term in the contract to the contrary was a sham.

And the EAT agreed. It concluded that although the contract was worded so that the claimants could “use a competent substitute”, the primary obligation to do the work rested with them if they could do it. And as the agency could prevent the claimants from working elsewhere, they were, in effect compelled to take the work offered by the agency. It was under a corresponding duty to provide work for those for whom it provided transport and, particularly, accommodation.

Court of Appeal decision

But the Court of Appeal disagreed. It criticised the tribunal chair for not providing adequate reasons for his decision that the term in the contract about offering and accepting work (the “obligations” term) was a sham.

The appeal turned on this point. For a term to be rejected as a sham, the Court of Appeal held that there must be a finding that , at the time the contract was entered into, both parties intended it to misrepresent their true contractual relationship.

But the tribunal judge made no such finding. Instead he got to his conclusion simply by regarding one worker’s account of how the contract operated in practice as justification for a finding that the “obligations” term was a sham from the outset.

Even if the evidence had entitled the judge to make that finding, the Court of Appeal said he owed it to the parties to show that he had understood the different evidence presented and to make clear not just what factual findings he was making but why. He had not done that.

The judgment would therefore be set aside to be reheard by a different employment tribunal.