The issue of employment rights for temps is still in limbo following the EU's failure to adopt the Temporary (Agency) Workers Directive ("TAWD") last December and pending judgment by the UK Court of Appeal in the case of James -v- Greenwich.

Although the Portuguese EU Presidency succeeded in putting the TAWD before the Employment Council of the EU, it failed to win the necessary support from EU member states with the UK, Denmark, Ireland and Germany forming part of a blocking minority. This is despite last minute compromise suggestions (limiting the affect of the TAWD on pay and extending the grace period before rights cut in beyond six weeks) and pressure on the UK Government from the Unions.

This represented a major victory for industry lobbyists and the UK Government. The value of flexible working has long been recognised in the UK. In late June 2005, the then Minister for Equality Meg Munn said in Parliament that:

"Agency work plays a key role in achieving labour market flexibility, helping companies to deal with peaks and troughs in demand and enabling individuals who do not want a permanent job, for whatever reason, to participate in the labour market."

However, although the TAWD was not adopted on this occasion, there is a risk that the Slovenian EU Presidency in the first half of 2008 or the French EU Presidency in the second half will revive the TAWD debate, perhaps with more compromises.

If the TAWD is revived, under the current draft it is proposed that:

* temps would be entitled to the same benefits (including pay, fringe benefits and possibly pension and share option rights) as comparable permanent employees;

* temps would be entitled to redundancy and unfair dismissal protection like that enjoyed by permanent employees; and

* those entitlements would possibly cut in from day 1 (or at least from week 6) of the temp's engagement.

However, the TAWD is unlikely to have the impact that might at first sight be feared. First, European case law has put into severe doubt the workability of the "comparator" mechanisms central to the TAWD. If the TAWD is approached in the same way as the Part Time Workers Directive, for many temps (especially at smaller end users) there will be no person to whom they can be compared for the purposes of giving them expensive comparable rights. Secondly, sophisticated suppliers are likely to adopt supply models falling outside the TAWD's ambit, and the TAWD may in any event not apply to higher paid workers. In particular, contractors who supply their services via personal service companies will probably not fall within the protection of the TAWD especially where they are genuinely in business on their own account and are not "controlled" by the end user. Thirdly, the UK Government seems likely to insist on a long qualifying period of 6 or even 12 months from the start of engagement (if not longer) before rights cut in. Fourthly, if and when the TAWD is adopted, it will not come into force in the UK for 3 or 4 years. Fifthly, recruiters are likely to be able to set themselves up as consultancies to avoid the TAWD.

The battleground set by the UK Government will hopefully mean that any compromise position will go some way to ensuring the UK's flexibility is retained, but as with all these things the devil will be in the detail of any political deal struck. However, even if the Directive is adopted, there is unlikely to be cause for major panic amongst most recruiters and users, especially those whose temps and contract workers are relatively higher paid and/or able to exercise a degree of discretion in the way they perform their services.

Although the threat of the TAWD has eased for the time being, the James -v- Greenwich EAT decision of December 2006 has been appealed to the Court of Appeal and judgment will be given on 5 February.

In James -v- Greenwich the EAT set out some very useful guidelines for recruiters and end users of temps and contract staff to follow if they wanted to avoid temps and contract workers being deemed to have full employment rights. Some commentators are concerned that the Court of Appeal will be inclined to give temps and contract workers more rights in light of the failure of the EU to pass the TAWD. Also, the Court of Appeal may feel the EAT cocked a snook at its previous decisions in cases such as Dacas [2004] and Muscat [2006] in which it famously found that such workers could have employment rights against end users. 5 February will be an important day for the recruitment sector, but do not expect any entirely new solutions or very easy answers. In the meantime, end users need to engage with their suppliers to make sure that elements of personal service and end user control are minimised when temps and contractors are used, project bases of working (and payment) are adopted so far as possible and that all dealings with the temps and contractors are via the supplier such that no argument can be raised that "really" the temp's contractual relationship is with the end user rather than the staffing company.

This publication is not a substitute for detailed advice on specific transactions and problems and should not be taken as providing legal advice on any of the topics discussed.

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