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Contract workers

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Last updated 13th July 2012.

Where the company you actually do work for (known as your ‘principal’) is different from your ’employer’, these rules impose Equality Act obligations on the principal as well as the employer. This includes the obligation to make reasonable adjustments.

The contract worker rules

The Equality Act employment provisions generally cover discrimination by someone’s actual or prospective employer. However, often an individual’s employer from a legal point of view is different from the company or organisation that they actually work for, the end-user, The Equality Act calls this company or organisation the “principal”.

Under the contract worker rules, as well as the legal employer, the principal (the end-user) has obligations under the Equality Act not to discriminate or harass. That includes a duty to make reasonable adjustments.

Examples of where the rules can apply:

A person supplied is by an employment agency, but the employment agency is legally the employer (see below if the agency only acts as agent for the end-user). The company to whom the person is supplied is also liable under the Equality Act, as the ‘principal’.

A person is employed by one company in a corporate group who actually works for another group company (the principal).

An individual, such as an IT specialist, is employed by a one-man company who does work for a client (the principal). As explained under Indirect supply of staff (below), this applies even where there is an employment agency inbetween the one-man company and the client. (Hashwani and other cases may in practice somewhat limit coverage of someone who is in substance an independent contractor – see Employees, workers and beyond).

Staff of a sub-contractor working on a building site.

Legally, the test is that there must be a person (the ‘principal’) making work available for an individual who is employed by another person, and supplied by that other person in furtherance of a contract to which the principal is a party (whether or not that other person is a party to it): EqA s.41(5).

Employment Code para 11.6 says that the worker must work wholly or partly for the principal, even if they also work for their employer, but does not need to be under the managerial power or control of the principal.

Camden LBC v Pegg (bailii.org), Employment Appeal Tribunal (EAT), April 2012
The claimant worked at Camden Council as a school travel planning officer. Her contractual relationship was with an employment agency, BBT. The relevant document said that no contract existed between her and BBT between assignments, and that she was not obliged to accept any assignment which was offered to her, but if she did, she must accept the direct supervision and control of any responsible person in the client’s organisation. In practice, the claimant became fully integrated with Camden Council’s team.

A pre-condition of the contract worker rules applying was that she was ’employed’ by BBT. The tribunal held that she was indeed ’employed’ by BBT within the extended meaning of what is now s.83 EqA, on the basis she was obliged personally to do work (see Employees, workers and beyond>Employees/ workers). The Council argued this was wrong, because she was not bound to accept an assignment. The EAT agreed with the tribunal that she was obliged personally to do work, and so ’employed’. Once the claimant accepted the assignment with the Council she owed express contractual duties to BBT which required her to do the work personally. Accordingly the contract worker rules applied, so the Council had a duty not to discriminate.

Indirect supply of staff can be covered

The contract worker rules also apply where there is more than one person in the chain of supply between the individual and the principal, provided there is an unbroken line of contracts. Only the legal employer and the “end-user” (the principal) have the obligations under the Equality Act.

An individual owns X company of which he is the sole employee. He has a contract for services with an employment business whereby he has to personally do the work. The employment business supplies him to Y company. Although there is no contract between X and Y companies, the employee of X company would be a contract worker and would be protected under the Act.
Employment Code, para 11.7

Reasonable adjustments

The duty to make reasonable adjustments applies to the principal (the end-user) as well as the employer (EqA s.41(4)). However, there are special provisions saying that the employer (rather than the principal) is liable for certain types of reasonable adjustment. In very broad terms:

  • the employer, as well as being responsible for adjustments relating to its own practices and premises etc, is also responsible for adjustments to deal with issues which will arise with all or most (or in some cases all) of the principals to which the employee is or might be supplied;
  • the principal (the end-user) is liable for other adjustments, relating to its own more specific practices etc

(EqA Sch 8 para 5 and 6, explained in the Employment Code from para 11.9).

In deciding what steps it is reasonable for a principal to have to take, the length of time the employee will work there is a factor. Certain steps may not be reasonable if the period is only short. (Employment Code para 11.13)

“It would be reasonable for a principal and the employer of a contract worker to co-operate with each other with regard to any steps taken by the other to assist the contract worker. It is good practice for the principal and the employer to discuss what adjustments should be made, and who should make them.”
Employment Code para 11.14

What if the intermediary acts as an agent rather than an employer?

The contract worker provisions only apply where the intermediary is the employer of the individual. There will be other cases where the intermediary only acts as an agent or facilitator (eg a recruitment agency), so that an employment contact is formed directly between the employee and the end-user.

The employee will of course have Equality Act rights against the end-user in the normal way as his actual or prospective employer.

If the agency discriminates, the employee may have a claim against the agency under other provisions of the Equality Act such as those on employment services, or on agents or ‘helping’ to discriminate (see Who is liable under the Equality Act.).

It may be unclear in a particular case (so you may need advice on) whether legally your employer is the agency or the person you actually work for.

Employment Code

For more detail on the rules, see the Employment Code, from para 11.2.

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