How the Agency Workers Regulations affect employers

The UK has introduced new laws increasing the rights of temporary workers. Linda Goldman and Joan Lewis find out what this means for firms hiring agency staff.

There was a time when the use of temporary staff was seen as the human equivalent of the use of disposable cups: very difficult to manage without in modern society, sometimes messy to get rid of, unless the thrower aims in a perfect line towards the bin, but otherwise there to do the available job without having encroached on storage space and without continuing to use any of the resources or running costs associated with permanency.

UK law is now changing, with the new Agency Workers Regulations 2010 to implement the 2008 European Temporary Workers’ Directive, giving temporary workers who are engaged through employment businesses many of the rights enjoyed by permanent members of staff.

Many employment businesses/agencies (for simplicity’s sake, referred to as employment businesses from now on – but see later) have employed and continue to employ workers who are then sent on individual assignments of varying lengths. Because the temporary worker is the operational stock-in-trade of the agency, it waits anxiously to welcome its material back for recycling when the assignment comes to an end.

Traditionally, unless the user wanted to pay a fee to the agency, whether hefty or moderate, the contract with the user prevented them from merely offering a permanent job to the temporary worker. However, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (CEAEB Regulations) restricted this process, allowing for job offers to be made external to the employment business only under certain circumstances.

There is also a not-infrequent situation seen in employment tribunals where a temporary worker whose assignment has come to an end claims to have been employed by the user and seeks to establish the rights that accrue to regular employment. These include the right to bring a claim for unfair dismissal against the organisation for whom services have been provided, perhaps a claim for unlawful deduction from wages, holiday pay or notice pay: in short, any claim that a “regular” or permanent employee is entitled by law to bring.

Business effect

The general term of reference in this article is to an employment “business” but, as will be seen, the organisation that provides the services of temporary workers is either an employment business or employment agency. The arrangement operates by a contract, often a contract of employment, between the business and the temporary worker, or “temp”, in which the temp agrees to go on assignments offered by the business and only to be paid for work actually done. Thus, if there is a resting phase between assignments, the temp will not receive any pay, although he or she will still be entitled to the accrual of holiday pay relating to the period of time when work was actually carried out.

quotemarksThe new Agency Workers Regulations 2010 give temporary workers, in many respects, access to the rights enjoyed by permanent workers.”

The business enters into a separate contract with the client (end-user) that needs work to be carried out on an assignment of varying length, perhaps even on a day-to-day basis. Until 1 October 2011, the legal aspects of the supply of agency workers will be governed by the CEAEB Regulations.

Although we talk routinely about “employment agencies”, we are here referring principally to “employment businesses” because the term “employment agency” describes an organisation that deals with the recruitment of staff.

When a person, sent by an agency, is appointed to the job in question, the customer pays for the agency’s introduction and that is the end of the business relationship relating to that new employee. The employment business, on the other hand, is the purveyor of the disposable items that are used for varying lengths of time before being sent on to another assignment, if wanted or available.

The goal of the employment business is to retain its pool of workers. In order to do so, many businesses offer contracts of employment that identify the business as the employer. This secures, to a degree, the loyalty of the labour pool and reflects the income tax and national insurance position through which the necessary contributions must be made by whoever, at the least, is considered to be the employer, even if it is an employer that does not guarantee a place of work, hours of work and duration of assignment.

The CEAEB Regulations require the employment business to clarify in the contract with the worker whether the worker is in business on their own account (which may be the case where someone operates through their own company) or is actually the employee of the business: that depends on the specific circumstances of each contract.

Some contracts specifically exclude the creation of an employment contract between the worker and the employment business. In practice, whatever label is put on employment status in the contract, the courts will look at all the relevant factors in determining if someone is an employee, whether an employee of the employment business or of the organisation to which the worker has been assigned. The other situation that may need the court’s determination is whether the person is not employed at all but is providing services while in business on their own account.

Who is an employee?

There is no conclusive test for deciding whether a person is an employee or self-employed. As long ago as 1994, the Court of Appeal explained in the case of Hall (Inspector of Taxes) v Lorimer that consideration must be given to “all aspects of the relationship [between the parties], no single factor being in itself decisive each may vary in weight and direction the object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and evaluation of the overall effect”.

Going back to 1968, the question of whether or not a person is an employee, as well as by whom he or she is employed, was considered in Ready-Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance. The court should consider whether or not the worker agreed to provide his or her own work and skill in return for remuneration, did he or she work under the control of the alleged employer and, critically, were other provisions of the contract consistent with it being a contract of service?

quotemarksFrom October 2011, temporary workers who have been engaged for 12 weeks will be entitled to the same access to aspects of the organisation’s working pattern as its permanent, directly employed staff.”

The importance of the difference between employed and self-employed status relates to the employer’s responsibility for implementing the terms of the contract of employment and to ensure that statutory rights, such as holiday pay, are credited to the employee. When it comes to whether or not a person is employed by the business supplying that person to the user of the services, tribunal cases arise when a person who has provided services for a long period of time to a particular organisation believes that they have become an employee.

Under those circumstances, the court will give careful consideration to whether or not there was a contract between the using organisation and the person supplying the services. If there is a written contract between the parties setting out that the employment business is the employer bearing responsibility to paying the worker for work done, for holiday pay and for offering the assignment, albeit that it becomes long term, it is unlikely that a contract of employment will be construed between the worker and the user of his or her services.

Changing times

The new Agency Workers Regulations 2010 give temporary workers, in many respects, access to the rights enjoyed by permanent workers. At this point, the word “agency” now has the connotation of “business”, hitherto used.

From October 2011, temporary workers who have been engaged for 12 weeks will be entitled to the same access to aspects of the organisation’s working pattern as its permanent, directly employed staff. That includes overtime (if that is how the organisation works), ordinary work breaks, rest periods and night work.

Temps will receive the same holiday as permanent employees, but any holiday that exceeds the statutory minimum can be paid in lieu. Temps are also entitled to have access to the same facilities offered to permanent employees, such as canteens, childcare and any transport arrangements. This may cause problems for organisations that have, hitherto, not been put to the additional expense of providing such facilities and, indeed, may have used temporary workers because, in these respects, they are less expensive than permanent staff. However, the employer should not worry about transient increases in the expense of using temporary workers: they are now obliged to notify their temps of vacancies in the permanent workforce.

Many of the rights accruing to permanent staff will now accrue to temporary workers. It is appropriate to provide access to the employee handbook to any incoming worker supplied by an agency (but not self-employed workers), regardless of whether or not they have employment status within the organisation. This will facilitate access to, for example, the rights of pregnant women and nursing mothers, to which reference is made in the new Regulations that simply mirror rights already established.

Although the main benefit for temporary workers is the balancing of some of their terms and conditions of employment with those of permanent staff directly employed by the organisation, the Regulations exclude certain pay- and cash-related benefits such as pensions, contractual sick pay, maternity pay, redundancy pay, long-term schemes or profit-related pay, and bonuses for organisational performance.

quotemarks The Regulations exclude certain pay- and cash-related benefits such as pensions, contractual sick pay, maternity pay, redundancy pay, long-term schemes or profit-related pay, and bonuses for organisational performance.”

There are also differences in the treatment of temps who have worked for shorter and longer periods. From the end-user’s perspective, it may be that there are some organisations that find it more expensive to use temporary workers as the Regulations require temps to have the same salary as an equivalent permanent employee.

Where pay rises are contingent on performance, it could be an indicator of employment status within the using organisation, were that organisation to carry out any relevant appraisal. This is a matter that will have to be covered in the contract between the employment business and the using organisation, so as to avoid a flurry of cases where temporary workers claim that the fact of an appraisal is an indicator of control by the user.

Cost benefit

On paper, the aim of the Directive is now enshrined in UK law. Temporary workers supplied by an employment business will, after 12 weeks on an assignment, acquire the right to similar pay and employment conditions as would have applied had they been recruited directly for the job that they are doing as a temporary worker.

The question of employment status, where there is uncertainty, will still be subject to the scrutiny of the courts: temporary workers will remain subject to the disposability treatment to which they have hitherto been subjected.

They are not going to be eligible for notice pay, they will have some access to bonuses, but not where performance-related. They will still not have the right to claim unfair dismissal, nor will they be eligible for redundancy pay when their services are terminated.

Maternity pay and company sick pay are just some of the benefits that temporary workers will not have unless they get a permanent job or undertake the next assignment of 12 or more weeks.

The TUC believes that the new Regulations will end “casualisation” in the workplace. Only time and the conflict between disposability and permanence will tell.

For now, however, you can familiarise yourself with the Government’s guidance on the Agency Workers Regulations, which was issued in May 2011.

Linda Goldman, BDS, LLB, is a barrister at Henderson Chambers, Temple, London EC4Y 9DB. Joan Lewis, MCIPD, MA (Law & Employment Relations) is an independent employment law consultant, licensed by the General Council of the Bar under BarDirect. Any enquiry about this article may be made to Joan Lewis.

XpertHR takes a look at some frequently asked questions on the Agency Workers Regulations 2010 and provides an example case study.

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