1. Summary: In Lutz, the Court of Appeal addressed whether in a tri-partite agency relationship an employment relationship exists between the individual and the intermediary agency, notwithstanding that the hirer is responsible for direction and control on a day-to-day basis. In finding that Mr Lutz was a worker employed under a contract with the agency, the Court confirmed the wide and inclusive scope of the protective concept of worker status, as recognised in cases such as Uber. The Court also held that a fixed-term supply of an agency worker for a period of 5 years meant that they were assigned to work “temporarily” for the hirer under reg. 3 of the Agency Workers Regulations 2010 (“AWR”) and so protected under those regulations. In so doing, the Court endorsed the reasoning of Singh J (as he was) in Moran v Ideal Cleaning Services Ltd [2014] ICR 442 and the trilogy of subsequent EAT decisions, all deciding that “temporary” in this context means non-permanent.
2. The Facts: This was test litigation brought by BALPA (the pilots’ union) who supported one of its members, Jason Lutz (“JL”). In response to an advert, JL applied to Ryanair for employment as a pilot. He passed the preliminary assessment conducted by Ryanair following which he was contacted by an agency, SGL, who informed him that he was to be offered a place as a “contracted pilot”. At SGL’s instruction, he was “installed” into a personal service company set up for him called Dishford. JL had little to do with Dishford and the arrangements were managed by a firm of accountants on a panel suggested by SGL. The ET found that the interposition of a service company was a “fiction”, presumably intended to camouflage the existence of an employment relationship between SGL and JL. The Court of Appeal referred to the “distinctly unsatisfactory nature” of these arrangements (at [16]).
3. JL was required to enter into a services agreement between three parties: himself as the “Company Representative” of Dishford, Dishford, and SGL. The agreement defined Ryanair as the hirer and described the services to be provided as carrying out the duties of a pilot. JL was stated to be an “independent consultant”, and SGL was named as the “Contractor”. The express terms stipulated that the assignment was for a fixed-term of 5 years. Exemplifying the sort of drafting by “armies of lawyers” to which Elias LJ referred in Kalwak [2007] IRLR 560, the agreement repeatedly denied any worker status and included a substitution clause which the ET found was a sham. JL was required to be personally available to perform flying duties for Ryanair for 11 months of the year. He did not receive any holiday pay.
4. Legal Claims: JL brought three claims (1) against SGL for four weeks’ paid annual leave under the Civil Aviation Working Time Regulations 2004 (“CAWTR”); (2) an alternative claim for annual leave under the horizontally effective provisions of the EU Charter; and (3) a claim against both Ryanair and SGL for entitlement to the same basic working and employment conditions as if he had been directly employed by Ryanair under reg. 5 of the AWR.
5. The ET found that JL was a “crew member” employed by SGL for the purposes of reg. 3 CAWTR and entitled to paid annual leave under those Regulations and the Charter. It further found that he was an agency worker within the meaning of reg. 3(1)(a) AWR. The EAT (Heather Williams J with members) rejected the appeals brought by both SGL and Ryanair. Only two issues were still live on SGL’s and Ryanair’s appeal to the Court of Appeal: first, whether JL was employed under a contract with SGL for the purpose of CAWTR, which turned on whether he was a “worker”; and second, whether he had been supplied to work “temporarily” for Ryanair for the purpose of AWR.
6. Court of Appeal – employment relationship: On the first issue, the Court of Appeal rejected SGL’s appeal. In a judgment given by the Vice President of the Court of Appeal, Underhill LJ (with whom Males and Laing LLJ agreed), the Court confirmed the wide and inclusive scope of the concept of worker status – as recognised in cases such as Autoclenz and Uber – in the context of a tri-partite agency relationship and upheld the ET’s conclusion that JL was “employed by” SGL for the purpose of CATWR.
7. In terms of key highlights, Underhill LJ endorsed JL’s submission that he was in an employment relationship with SGL, applying James v London Borough of Greenwich [2008] ICR 545 CA. In James Mummery LJ considered that it was unnecessary to imply a contractual relationship between the housing support worker whose services were supplied by two successive employment agencies and the local authority as end user, notwithstanding that the local authority controlled her activities and she was an integral part of its social services team. Underhill LJ accepted that the reasoning in James equally applied to the question of whether there is a contract, or employment relationship of any character between a worker and the principal/end-user (at [46], [60]). Contrary to SGL’s arguments, it was not necessary to imply a contractual relationship between JL and Ryanair on these facts.
8. The finding of the ET and EAT that JL was in an employment relationship with SGL was buttressed by a series of decisions of the CJEU including Allonby v Accrington & Rosedale College [2004] ICR 1328 and Betriebsrat der Ruhrlandklinik Gmbh v Ruhrlandklinik Gmbh [2017] IRLR 194, where in each case, the individual was employed by an intermediary to provide services to a hirer under their direction and supervision. In each case, the CJEU recognised the existence of an employment relationship between the individual and the intermediary/agency, rather than the end-user.
9. The analysis in Allonby and Ruhrlandklinik was reinforced by the recent CJEU decision in LM v Omnitel Communications SL [2025] ICR 688 involving a sales and marketing consultant who was supplied by a series of independent companies to provide services for Microsoft. The CJEU restated the familiar test of worker status, as being one where the “… essential feature of an employment relationship is that, for a certain period of time, a person performs services for and under the direction of another person, in return for which he or she receives remuneration” (at [55]). However, it observed that the identification of the existence of an employment relationship in the context of the assignment of temporary agency workers “… is a complex situation which is specific to labour law, involving a twofold employment relationship between, on the one hand, the temporary-work agency and the temporary agency worker and, on the other the temporary agency worker and the user undertaking…” (at [56]). The CJEU concluded that in the context of such a tripartite relationship, the temporary work agency “… retains an employment relationship with that worker, but transfers the responsibility for supervision and direction which generally lies with all employers to the user undertaking…” (at [57]).
10. Applying the guidance in Omnitel, Underhill LJ observed that the fact that JL provided his services under Ryanair’s “exclusive direction and control” made no difference to the analysis as to whether there was an employment relationship with SGL: “that is typically the case in any tripartite arrangement of the kind with which we are here concerned…” (at [60]). The effect of the authorities is that there can be an employment relationship between an individual and the intermediary/agency where the necessary element of direction and control is exercised by the end-user rather than the agency (at [61]). The alternative claim advanced under Article 31 of the Charter would have led to an identical result (at [66]).
11. Agency worker – meaning of “temporarily”: The second issue was whether JL was an “agency worker” for the purposes of reg. 3(1)(a) AWR, meaning an individual who “is supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer…”. JL had to satisfy this gateway definition in order to pursue a claim for parity in respect of the same basic working and employment conditions under reg. 5.
12. The Court of Appeal endorsed the reasoning of Singh J in Moran v Ideal Cleaning Services Ltd [2014] ICR 442 (later followed in Brooknight Guarding Ltd v Matei UKEAT 0309/17/2604 (per HHJ Eady QC – as was); Angard Staffing Solutions Ltd v Kocur [2020 ICR 1541 (per HHJ Auerbach); and by the EAT in Lutz In Moran, Singh J reasoned (at [41]):
“The word ‘temporary’ can mean something that is not permanent or it can mean something that is short term, fleeting etc. The two are not necessarily the same: for example a contract of employment may be of a fixed duration of many months or perhaps even years. It can properly be regarded as temporary because it is not permanent but it would not ordinarily be regarded as short term. I should add that by permanent I do not mean a contract that lasts forever, since every contract of employment is terminable upon proper notice being given. What is meant is that it is indefinite, in other words open-ended in duration, whereas a temporary contract will be terminable upon some other condition being satisfied, for example the expiry of a fixed period or the completion of a specific project.”
13. Singh J’s prescient distinction between temporary and permanent was later effectively endorsed by both the Advocate General and CJEU in JH v KG (C-681/18). A-G Sharpston juxtaposed what she described as the “general form of employment relationship” as being a contract of “indefinite duration”, with temporary agency work which is something of finite duration (at [40]). She observed (at [51]; emphasis added):
“The very title of Directive 2008/104 makes clear that the employment relationships it covers are (and are by definition supposed to be) temporary. That term is used, inter alia, in the provisions defining the scope of the Directive (Article 1), its purpose (Article 2) as well as in the definitions of its key terms in Article 3(1)(b), (c), (d) and (e). The word temporary means ‘lasting for only a limited period of time’; ‘not permanent’. The Directive states, moreover, that ‘employment contracts of an indefinite duration’ (thus, permanent employment relationships) are the general form of employment relationships and that temporary agency workers must be informed of vacant posts in the user undertaking so that they have the same chances as other workers to find permanent employment (see recital 15 and Article 6(1) and (2)).”
14. The same analysis was adopted by the CJEU (at [62]).
15. This binary distinction between contracts of indefinite duration and those which are “… temporary, transitional or limited in time, and not permanent employment relationships” was subsequently applied by the CJEU in LD v ALB FILS Kliniken GmbH (C-427/21) (at [50]).
16. Applying this conception of “temporarily”, the Court of Appeal agreed that JL satisfied the definition of being an agency worker. According to Underhill LJ, “… the cardinal distinction in this field is between employment which is permanent, in the sense of “indefinite” and employment which is finite (or fixed term)…” (at [100]).
17. Disposing of the grounds advanced by SGL and Ryanair that a contract of 5-years’ duration was not “short-term”, Underhill LJ observed that applying this cardinal distinction, there was no warrant “for smudging or qualifying that straightforward and principled distinction by introducing a reference to the length of the period” (at [100]). To do so would leave a gap in protection afforded to agency workers who were employed neither permanently nor short-term (whatever was meant by that concept): [101].
18. Neither was it relevant to consider the purpose and nature of the work in the sense of asking whether JL was supplied as “cover”. The relevant question is whether the purpose and nature of the assignment is temporary or open-ended (at [123]).
Conclusion
19. The Court of Appeal judgment provides a clear steer that the concept of worker status is wide and inclusive in the context of a tri-partite relationship, and the fact that the end-user exercises direction and control on a day-to-day basis is not inconsistent with an individual being a worker of the agency. It also provides clarity as to the protective purpose of the AWR and AWD, and identifies that in deciding whether an individual is assigned to work “temporarily”, the correct focus is on the negative question, of whether the assignment is not indefinite or permanent.
You can read the full judgment here.
Michael Ford KC and Stuart Brittenden KC (Old Square) appeared for Mr Lutz, instructed by Alice Yandle (Partner) and Caitlin Farrar, Farrer & Co. LLP.
