how will the new Agency Workers Regulations affect suppliers
and users of agency workers?
On 21 January 2010, BIS laid the Agency Workers Regulations 2010
(the Regulations) for the implementation of the
European Agency Workers Directive (the AWD) before
Parliament. Following a consultation process which opened on
8 May 2009, and which included two separate rounds, suppliers and
users of agency workers are now able to begin to make an assessment
of the impact this legislation is likely to have (subject, of
course, to any amendments any new government makes following this
year's general election).
With the framework of the UK implementation well publicised in
advance following the CBI-TUC agreement and the long consultation
process, it was hoped that the publication of the final Regulations
would bring few surprises. However, there have, as always,
been a few more twists in the tale, including previously unheralded
anti-avoidance measures which have caused many to re-think their
proposals for limiting the impact of the Regulations.
Given the focus that has been directed at the AWD by suppliers
and users of agency workers for what seems like the majority of the
noughties, it will come as no surprise that, broadly speaking, the
final form of the Regulations provides agency workers with a right
to equal treatment with their directly recruited counterparts after
they have completed a 12 week qualifying period. Since this
and many of the other features of the legislation have not changed
since the draft Regulations were published in October 2009 and have
been discussed in detail in our previous bulletins (see our
bulletins of May and October 2009: link to AWD consultation - what do the
proposals mean bulletin and link to AWD - how can
agency workers be supplied on a low risk and cost effective basis
from 2011 bulletin), in this bulletin we aim to highlight the
key changes and additions set out in BIS's response to consultation
published on 21 January 2010 and the Regulations as laid before
Parliament on that date.
who is an agency worker for the purposes of the
Regulations?
During the consultation process, the government expressed a
clear view that umbrella workers should be included within the
definition of agency worker, but that workers who are genuinely in
business on their own account should be excluded. It was felt by
many commentators that the attempt to implement this policy
statement in the draft Regulations fell short in terms of both
clarity and content and consequently the Regulations have been
amended in this area. However, rather than provide resolution on
how these types of worker are to be distinguished for this purpose,
the Regulations (and the response to consultation seems to confirm
this approach) leave it to the Employment Tribunals to make final
decisions on whether a profession or business undertaking is being
carried on by the worker (ie decisions are to be made on a case by
case basis).
This deferral to the Tribunals will undoubtedly mean that there
is always going to be a degree of uncertainty as to whether a
limited company contractor or other self-employed contractor will
be in or out of scope. It remains to be seen how workable this will
be. HMRC is obliged to make similar judgments on status in relation
to IR35 and, to date, despite numerous Tribunal and court decisions
on status, a definitive position is no clearer.
who is liable?
The Regulations clarify the position on liability by stating
that a temporary work agency will be liable for any breach of a
right in relation to equal treatment for which the temporary work
agency is responsible and that the end user will be liable to the
extent it is responsible for any breach. The 'reasonable steps'
defence (ie the temporary work agency can argue that it took all
reasonable steps to ensure equal treatment by seeking the
appropriate information from the end user etc) remains open to
temporary work agencies and, if this defence applies, the end user
will be liable to the extent there is a breach of the
Regulations.
The end user is also obliged to put in place a large number of
"Day 1" rights, for example collective facilities and amenities
such as canteen, childcare facilities and transport services and
access to information on permanent roles with the end user. The end
user will be solely liable for failure to meet these obligations.
BIS has promised further guidance on the extent of these
obligations.
It is likely that some end users will want an indemnity from the
temporary work agency in relation to liabilities under the
Regulations. The Regulations do not afford protection for temporary
work agencies against this. BIS, whilst expressing an intention to
monitor this following the implementation of the Regulations,
concludes in its response to consultation that there is
insufficient policy justification for intervening in what would be
an unprecedented way in the freedom of commercial parties to
conclude contracts in this area. However, it would be a high risk
strategy for a temporary work agency to assume, for example,
liability for the "Day 1" obligations given that these are the end
user's responsibility and the temporary work agency has no control
over these obligations. In the absence of appropriate insurance, it
is likely that temporary work agencies will attempt to resist the
assumption of risk in these matters where possible. However, it
remains to be seen how these issues will be addressed in
practice.
A further question to resolve on liability is which temporary
work agency is liable if there is a chain of supplying entities? In
circumstances where a staffing company is placing an umbrella
worker with an end user, is the umbrella company or the staffing
company the temporary work agency for the purposes of liability
under the Regulations?
The Regulations state that the liability lies with each
temporary work agency to the extent that they were responsible for
the determination, or application, of any of the agency worker's
basic working and employment conditions. It is up to the contract
between the staffing company and the umbrella company to determine
the extent of the staffing company's and the umbrella company's
responsibilities in each case. It will therefore be even more
important that, in the absence of a chain of indemnity for breaches
of the Regulations, staffing companies operate under contracts that
properly attribute responsibilities.
what about anti-avoidance measures?
The Regulations have introduced a new provision aimed at
preventing obvious avoidance, ie if a structure of assignments
develops, the most likely explanation for which is to deprive
agency workers of their equal treatment rights under the
Regulations. These might include avoidance measures such as
rotating agency workers between "substantively different"
assignments of less than 12 weeks with the same end user or
engaging agency workers on a series of 11 week assignments with
breaks of more than six weeks with the same or connected end
users in order to prevent the agency workers attaining the 12 week
qualifying period required for the equal treatment rights.
These anti-avoidance provisions are complex and potentially
subjective. Again, BIS is to issue guidance on these provisions,
including on what constitutes a "substantively different" role.
However, with the risk of being found in breach and having to pay
each relevant agency worker a general award to compensate the
agency worker for his or her loss which must be a minimum of
two weeks' pay plus an additional award of up to £5,000, it is
likely that these most obvious work-arounds will be considered too
risky.
By implementing these new provisions BIS has probably closed
down the most obvious approaches to limiting the application of the
Regulations and we expect that, despite the subjectivity of the
drafting, such strategies are now unlikely to get off the starting
blocks come 1 October 2011.
what about temp-to-perm fees?
Much has been made of BIS's abandonment of its proposal to amend
the Conduct of Employment Agencies and Employment Businesses
Regulations 2003 in order to limit temp-to-perm fees to a
reasonable amount and limit the alternative of an extended hire
period to a reasonable duration. We welcome the decision not to
implement further regulation in this area, but would make the point
that this does not mean that temp-to-perm fees and extended hire
periods which are 'unreasonable' will be enforceable. BIS's
decision not to go ahead with this change simply reflects the fact
that BIS considers that implementation of the Directive does not
require amendment of the Conduct Regulations in this respect. In
addition, if such fees and periods are not reasonable, they will be
unenforceable under the general law on unlawful restraint of
trade.
what do you do next?
BIS has confirmed its decision to delay the implementation of
the Regulations until 1 October 2011. This is to give everyone
affected time to prepare and acknowledges the important role the
recruitment sector will play in the economic recovery. The
recruitment sector therefore has some time to consider how the
Regulations will apply to it as a whole and to individual business
models.
We continue to take the view that the Regulations in their
current form should not provide an insurmountable obstacle to the
use of agency workers, but that is not to say that it will be
straightforward. Guidance from BIS is expected on all aspects of
the Regulations. Hopefully this will be instructive on, for
example, how company contractors fall outside scope and how the
detail of the protection afforded to pregnant women, the "Day 1"
rights etc will work. Until this guidance is issued, and subject to
any impact a change of government may have on the form of the
Regulations, there is still scope for the impact of the legislation
to change. We therefore do not recommend that staffing companies
take definitive action at this stage beyond clarifying where the
current form of the Regulations will impact their businesses.
If you would like more information on the new Regulations and
their potential impact on your business, please do not
hesitate to contact us.
See this link for more information on the services provided by
our Recruitment sector group: Blake Lapthorn recruitment
sector.
