A court has overturned an Employment Appeal Tribunal (EAT) decision that effectively ruled that temps were employed by recruitment agencies.

The EAT had ruled that agency worker Patricia Dacas was an employee of the recruitment company Brook Street, which found her cleaning work at Wandsworth borough council over a five-year period between 1996 and 2001.

But Brook Street referred the EAT’s decision to the Court of Appeal, which has now ruled that Dacas was not an agency employee.

However, the issue of whether she was an employee of Wandsworth council remains unresolved. Two out of the three judges at the Royal Courts of Justice on the Strand ruled that Dacas could have been considered an employee of the council – but it cannot now be referred back to the EAT.

Adrian Marlowe, managing director of recruitment legal firm Lawspeed, warned the ruling could mean that temps could be considered employees of the end user. Recruitment agencies’ clients could impose further demands on agencies to cover costs of claims by agency workers for employment rights, he added. Clients could also be liable for discrimination claims, for example on the grounds of sex, race, religion or disability.

He said: “It should be remembered that unfair dismissal cases can be brought by an employee at any time where statutory rights are infringed and the normal 12-month qualifying period may not apply.”

Marcia Roberts, deputy chief executive of trade body the Recruitment and Employment Confederation, which partially funded the appeal, said: “There is no doubt this ruling is better than the one before. But the longer a temp works for a company, the more blurred the relationship becomes.”