Many organisations at some time have relied upon employment agencies to supply them with temporary workers. Not only do such arrangements offer much-needed flexibility, but generally speaking using agency workers avoids the obligations associated with employing individuals directly.

However the benefits for the agency workers are not so clear cut. In particular their employment status has long been in issue. On the one hand employment agencies have denied that they employ the workers which they supply. On the other hand clients using agency workers view their arrangements in terms of a commercial solution, rather than an employment relationship. This denial of responsibility can leave agency workers in limbo: if the relationship breaks down is the worker deprived from claiming basic employment rights and, if not, against whom should they bring a claim?

The Court of Appeal's ruling in Brook Street Bureau (UK) Ltd v Dacas has re-examined the question of an agency worker's status and looks set to have a significant impact - particularly for those organisations who regularly uses agency workers on long-term, rather than short-term, ad hoc assignments.

Mrs Dacas registered for employment with Brook Street employment agency and was then supplied by the agency to Wandsworth Council to work as a cleaner. She continued to work for the council for almost five years until the council requested that she be withdrawn because of an issue of alleged rudeness. The agency complied with the council's request and informed Mrs Dacas that no further work would be found for her. Mrs Dacas subsequently claimed unfair dismissal against both the agency and the council.

The case was fought through the Employment Tribunal, Employment Appeals Tribunal and all the way to the Court of Appeal. Here the court made plain that it intended to set a point of reference for future cases concerning the status of agency workers.

Firstly the court found that the contract which existed between Brook Street and Mrs Dacas did not amount to a contract of service. The agency was not under an obligation to provide Mrs Dacas with work and she was not under an obligation to accept work offered to her. Secondly, the agency did not exercise any relevant day-to-day control over the tasks which she carried out, such control being exercised by the council. The court found that merely administering some of the tasks of a employer, such as paying wages etc, is insufficient to imply an employment relationship.

The court emphasised that in circumstances where a triangular relationship agreement is in place between an individual, an employment agency and an end-user (the agency's client) then a tribunal must consider whether, as a result, an implied contract of employment has come into being between the individual and the end-user. This can arise regardless of any express documentation which seeks to suggest otherwise. Applying the same approach to the case in question the court found that there were clear indications that the Council exercised control over Mrs Dacas and that there was mutuality of obligations between them. But it was therefore with some regret that the court found themselves in a position where it was unable to overturn the tribunal's original finding that the council was not Mrs Dacas' employer because this part of the tribunal's ruling had not been appealed.

Lord Justice Sedley went on to suggest that where an individual has worked for the end-user for a period of one year or more - essentially time to accrue the right to claim unfair dismissal - this was sufficient to mean that an implied contract of employment had come into effect. This part of the judgment is of particular importance to any organisation which might supplement its main workforce with agency workers who are engaged on a long-term and/or indefinite basis.

The employment protection available to employees, such as the statutory right not to be dismissed, far exceed the protections available to casual workers/self-employed. As the Court of Appeal noted, there is nothing unlawful or wrongful in an employment agency and their client seeking to achieve, for their mutual benefit, that an individual work, but not under a contract of service with either of them. However, it is also open to a court, despite the content of any contractual documentation seeking to achieve the contrary, to find that a contract of employment is, in reality, in place.

As a result of the court's willingness to look beyond contractual documentation to imply that a contract of employment has come into being it is now imperative - particularly where an organisation engages temporary workers on assignments which may continue for 12 months or more - to ensure that any written arrangements between an agency and end-user expressly state who will bear the risk arising out of the relationship with the worker.

Kate Hodgkiss is a solicitor in the employment department of law firm DLA.