UK: Agency Worker Regulations: Where Are We Now

The use of agency workers has become increasingly prevalent in the workplace. Statistics from a recent ONS Labour Force Survey suggest that there are currently around 865,000 agency workers in the UK. This figure is expected to increase to one million by 2020. Although the Agency Worker Regulations (AWR) have been in force since 2011 there have to date been very few appellate cases concerning its provisions. The recent decision of London Underground v Amissah therefore provides welcome guidance. At the same time further legislative changes are afoot. This article takes the opportunity to consider the current landscape in this area.

Who is covered by the AWR?

An agency worker will work temporarily under the supervision and direction of a hirer (often also referred to as the end-user or client). However, the agency worker's contract of employment or engagement will be with the temporary work agency (also referred as the recruitment agency or simply the agency). Generally, an agency worker will be engaged by a hirer for specific pieces of work or for a fixed period. 

The definition of agency worker under the AWR does not extend to those who are genuinely self-employed or individuals who are on permanent assignments. In the case or Moran and others v Ideal Cleaning Services Ltd, the Employment Appeal Tribunal (EAT) held that the AWR did not apply to a group of cleaners who had been assigned to one hirer for periods ranging from six to 25 years as their working arrangements were not temporary. 

Rights of agency workers

The AWR derive from EU law, and are intended to prevent the exploitation of workers who may be perceived as "just a temp" and treated as a second-tier workforce. Under the AWR, agency workers are entitled to specific rights and protections which can be split into two categories: rights that arise on "day one" of the agency worker's engagement with the hirer and rights that do not apply until a 12 week qualifying period is satisfied. 

Day one rights: 

  • The right to be treated no less favourably than a comparable employee or worker of the hirer in relation to access to collective facilities and amenities. Facilities can include canteens, childcare facilities, car parking, and transport services. Less favourable treatment can be objectively justified in certain circumstances, however, cost alone is generally not a sufficient reason.  
  • The right to be informed of any relevant vacancies in order to be given the same opportunity as a comparable worker to find permanent employment with the hirer. 

The hirer is solely responsible and bears full liability for any breach of these "day one" rights. 

Rights after 12 weeks 

  • The right to the same basic working and employment conditions as direct recruits of the hirer. This includes pay, rest periods and breaks, annual leave and paid time-off for antenatal appointments. In Kocur v Angard Staffing Solutions Ltd, the EAT confirmed that a term-by-term approach rather than a package approach should be adopted when comparing terms and conditions. This means that less favourable terms cannot usually be offset by a higher rate of pay. 

Both the hirer and the agency are liable for breach of these rights. London Underground v Amissah provides helpful guidance as to how compensation will be calculated and apportioned, as discussed below. 

There is no justification defence for breach of these rights. However, the AWR do provide an exemption in relation to pay (including holiday pay), which is commonly known as the "Swedish derogation". The exemption applies where an agency worker has a permanent contract (that must include certain specified provisions) with the temporary work agency, entitling the worker to pay between assignments. It is important for businesses to note that the existence of such a contract does not affect the agency worker's entitlement to equal treatment in relation to other rights such as rest periods and unpaid annual leave after the 12 week qualifying period.

Compensation and liability

In London Underground v Amissah, a number of agency workers claimed that their right to equalised conditions under the AWR had been breached on the basis they had been paid less than comparable London Underground staff. Although London Underground had previously paid the agency sums to ensure that any underpayments were covered, this money had not in fact been passed on to the workers by the agency. By the time of the hearing the agency had gone into liquidation. 

After applying the "just and equitable" test set out in the AWR, the Employment Tribunal decided that no compensation was payable by London Underground as this would mean that it would ultimately have paid for the underpayments twice. 

The workers appealed. The EAT overturned the original decision and determined that compensation should be paid by London Underground to the extent that it was 50% responsible for the breach of the workers right to equalised conditions. Despite the fact that London Underground had paid the correct arrears to the agency, and it was the agency that had failed to pass this on to the relevant workers, the EAT found that it would not be just and equitable for the workers themselves to be deprived of compensation. London Underground had chosen to engage the particular agency and therefore should bear the burden of the agent's dishonesty, not the claimants. 

The case is an important reminder that both the hirer and temporary work agency are responsible for ensuring compliance with the rights afforded to agency workers in relation to equalised conditions (after the 12 week qualifying period). Appropriate indemnities and cost sharing provisions should be considered in any agreements between hirers and agencies. Albeit that would not have assisted London Underground in this case as the agency had been liquidated. Hirers would therefore be well advised to undertake appropriate due diligence on counter-parties including where practicable as to their financial position.

The future of the AWR

The Swedish derogation has always been unpopular with worker rights groups in the UK and has come under increased scrutiny in recent years. The 2017 Taylor Review included evidence to suggest that agency workers were not reaping the intended benefits of this derogation in the current work environment as they are engaged on long contracts and therefore do not actually have gaps in assignments. Concerns continue to be raised that the derogation is used exploitatively. 

Following the Taylor Review recommendations, the Government published a number of proposals in its Good Work Plan. These proposals include several legislative reforms which aim to benefit agency workers, such as the abolition of the Swedish derogation. Draft regulations have now been put before Parliament for its abolishment from 6 April 2020. Once passed into law, this will mean that all agency workers have a right to pay parity after 12 weeks with no exceptions. The draft regulations also include an obligation on agencies that have previously relied on the exemption to provide a written statement to all affected agency workers explaining the change. 

The Good Work plan outlined several other proposals relating specifically to agency workers, such as the right to a key facts page and state enforcement protections in certain circumstances where deductions are made by umbrella companies. If implemented, the proposals are designed to ensure that there is greater transparency and clarity about which entity pays an agency worker and their pay arrangements. 

Agency workers and their rights are caught up in the drive for change that is currently part of the wider debate concerning the UK's casual workforce. Businesses that use agency workers, and other casual workers, should keep their practices and agreements under review as the landscape continues to shift.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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