A recent Court of Appeal (CA) decision offers a timely reminder for businesses that engage staff through recruitment agencies and service companies. While the facts are rooted in the aviation sector, the principles have broader relevance for any organisation relying on complex, tri-partite workforce arrangements.
The facts of Lutz v. Ryanair DAC
Mr Lutz, a pilot, was supplied to Ryanair by a recruitment agency (MCG Aviation Ltd) via a service company. Despite a five-year fixed-term contract and documentation describing him as an “independent consultant”, Mr Lutz worked alongside Ryanair’s directly employed pilots, following the same roster, wearing the same uniform and being fully integrated into Ryanair’s operations.
When his engagement ended, Mr Lutz brought claims for paid annual leave and for equal treatment under the Agency Workers Regulations 2010 (AWR). Ryanair and MCG argued that he was
self-employed and not entitled to such rights. An employment tribunal (ET) held at a preliminary hearing that he could proceed with his claims, finding that Mr Lutz was an agency worker under the AWR and employed by MCG for the purposes of the Civil Aviation (Working Time) Regulations 2004. The Employment Appeal Tribunal (EAT) upheld the ET’s decision, and Ryanair and MCG appealed to the CA.
CA decision
The CA agreed with the ET and the EAT, focusing on the reality of the working relationship rather than the contractual labels. The CA found that, despite the use of a service company and the description of Mr Lutz as an independent consultant, in practice the agency supplied him to work under Ryanair’s direction and he was fully integrated into its workforce. The CA also confirmed that a fixed-term arrangement (even one lasting several years) could still be “temporary” for the purposes of the AWR. As a result, the CA dismissed the appeal.
Practical takeaways
- Substance over form in tri-partite arrangements
The courts will look beyond contractual labels and examine the reality of the working relationship. Even where documentation describes an individual as self-employed or an “independent consultant”, if the arrangement operates as an agency supply and the worker is integrated into the client’s workforce, agency worker protections are likely to apply.
- Fixed-term does not mean “not temporary”
A key point from the judgment is that “temporary” in the context of the AWR means “not permanent” i.e. any arrangement with a fixed end-date or condition for termination. In this case, a five-year contract was considered temporary, so long-term agency arrangements are not exempt from the AWR’s requirements.
- Who is the employer?
Where a worker is supplied via an agency and a service company, the courts will generally respect the explicit contractual arrangements, unless there is evidence of a sham. In this case, the agency (not the end-client) was held to be the employer for the purposes of the relevant regulations.
- Implications for the aviation sector
This decision is particularly significant for airlines, many of which engage pilots and crew through agencies and service companies. The judgment confirms that such workers may be entitled to the same working conditions and paid leave as directly employed staff, regardless of the contractual structure. Airlines should review their arrangements to ensure compliance and be aware of the potential for claims from agency-supplied staff.
- Wider relevance
While the facts were aviation-specific, the principles apply across sectors. Any business using agency workers, especially on long-term or integrated assignments, should review its contracts and working practices to ensure they reflect the true nature of the relationship and comply with agency worker protections.
- Employment Rights Bill
For organisations using agency workers, it is also important to stay informed about changes that are likely to come under the Employment Rights Bill. The Bill proposes new entitlements for agency workers, including the right to:
- a guaranteed number of hours following each reference period (likely 12 weeks) based on the hours they have worked;
- reasonable notice of available shifts and any changes to agreed shifts; and
- compensation for short notice shift alterations.
The Bill is likely to receive Royal Assent this autumn, but changes relating to agency workers are not scheduled to take effect until 2027.
If you have any questions relating to this judgment or engaging staff through agencies or service companies, please reach out to your usual Dentons contact.
