Agency Workers' Directive: what employers need to know

Rarely has a single piece of legislation been as keenly debated as the regulations to implement the Agency Workers Directive (AWD) in the UK. Against a background of increasingly politicised and opposing views, the draft Agency Workers Regulations 2010 (AWR/Regulations) have now been published by the government. They are set to increase employment rights for up to 1.3 million agency workers, and employer costs by up to £1.4bn per year.

Currently, most agency workers fall outside much of the legal protection afforded to employees. It is this disparity that lies at the heart of the AWD and its principal aim, which is to ensure agency workers receive no less favourable basic working and employment conditions than would apply had they been recruited as an employee.

The draft Agency Workers Regulations 2010

The draft regulations cover agency workers supplied by a temporary work agency to a hirer, including those commonly referred to as temps. It also includes agency workers supplied via intermediaries to reduce the scope for sham avoidance arrangements.

However, the intention is to exclude the genuinely self-employed, those working through their own limited liability company, and those working on managed service contracts.

From day one of an assignment, an agency worker will be entitled to the same access to canteen and similar facilities, childcare and transport services as a comparable employee of the hirer, unless there is objective justification to deny such access. The agency worker will also have the right to be informed about job vacancies.

After a 12-week qualifying period, an agency worker will be entitled to the same basic working and employment conditions as if he/she had been directly employed by the hirer on day one of the assignment. This includes pay as defined (see box, left) and working time rights enhanced by the hirer – for example, more generous holiday entitlement. The government had stated that it will be possible to “pay in lieu” regarding holidays above the working time minimum.

Equal treatment – compared to whom?

The test is what would the agency worker have received by way of basic terms and conditions if recruited direct to that particular job? This means the hirer/agency can take account of the agency worker’s own qualifications, skills and experience, as well as the terms and conditions of comparable employees.

Importantly, the draft regulations make it clear that the agency worker will be deemed to be receiving equal treatment if he or she is engaged on the same relevant terms and conditions as a “comparable employee”.

The 12-week qualifying period

The right to equal treatment in basic terms and conditions will only be triggered when the worker has accrued 12 calendar weeks’ service in the same role. Any break between assignments in the same job must last more than six weeks if the 12-week qualifying period is to be reset.

There are, however, exceptions for sickness absence lasting 28 weeks or less, absence related to maternity, and various other types of statutory leave. In some cases these absences will ‘pause’ the clock, in others the clock will continue to tick.

Where the agency worker starts a new assignment comprising, says the regulations, “substantively different work or duties”, the qualifying period will be reset to zero. The government plans to issue separate guidance on the meaning of ‘substantive’.

Other changes

Among other changes proposed by the draft regulations, the government intends to add to the list of information that must be given during collective redundancy and TUPE consultation. Specifically, employers will be required to state the total number of agency workers employed, the areas of the business in which they are employed and the type of work they are contracted to undertake.

In addition, the draft regulations introduce a right to paid time off for ante-natal appointments and consolidate other health and safety duties in relation to pregnant and new mothers.

Who will be liable?

Agencies will be primarily responsible in the event of non-compliance. However, they would have a defence where they acted reasonably and have taken “reasonable steps” to obtain from the hirer the information required to ensure equal treatment of an agency worker. Liability would switch to the hirer where it is responsible for the infringement, or liability may be apportioned between agency and hirer.

In practice, claims are likely to be made against both hirer and agency for tactical reasons. Liability in relation to access to canteen, childcare facilities and transport services will be the sole responsibility of the hirer.

In the event of a breach of the AWD regulations, agency workers will be able to claim less favourable treatment and that they have been subjected to a detriment for asserting their rights under the regulations. If upheld, remedies include an order of unlimited compensation.

Comment

The draft regulations do not provide for employment status for agency workers, nor do they give redundancy pay rights. The key change will be that after 12 weeks, an agency worker will be entitled to the same pay, and some benefits, as comparable direct employees. This 12-week rule will dramatically change the economics of using agency workers on a long-term basis.

Employers that benefit from the flexibility of agency workers should start planning their response to the AWD regulations and consider the following:

Assessment

Assessing to what extent they rely on temporary workers, how many of those stay longer than 12 weeks (taking into account the need for a minimum six-week break to reset the qualifying period), the fees paid to agencies, the gap in basic terms and conditions between agency and comparable direct employees, and the cost of complying with the day-one rights of access to canteen and other facilities.

Evaluation

Evaluating this information to consider whether dependence on agency workers should or could be reduced. This might include evaluating the following:

moving to direct recruitment or an arrangement whereby a third party employs workers directly
easing the administration associated with the AWD regulations by negotiating exclusivity with one or a handful of suppliers
setting up or adjusting systems to disclose information to agencies on pay and holidays for comparator employees
renegotiating with agencies if the employer has purchasing leverage to reduce risks and costs arising directly from the regulations
ensuring that agency workers are only used for less than 12 weeks or are moved into a substantially different role
contracting with workers who are genuinely self-employed and thus fall outside the scope of the AWD regulations.

Summary

Employers need to analyse their use of agency workers, assess how compliance will impact upon costs and practices, and decide whether there are more cost-effective ways of meeting their flexible labour needs.

Mark Hammerton, partner, Eversheds

Rights of agency workers in relation to basic terms and conditions

After a 12-week qualifying period, an agency worker will be entitled to the same basic working and employment conditions, including pay, as if he/she had been directly employed by the hirer on day one of the assignment.

The definition of pay includes any fee, bonus, commission, holiday pay or other emolument referable to the assignment (contractual or otherwise), but is subject to a number of exclusions.

For example, it does not include some bonus payments payable through share option schemes or profit-share, and those awarded in the context of a performance appraisal pay system aimed at “the long-term management, motivation and retention of staff”. Other exclusions include redundancy pay, contractual sick pay, and maternity, paternity or adoption pay.

Timetable to Implementation

The Agency Worker Directive must be implemented by 5 December 2011
The UK government published the draft Agency Workers Regulations 2010 for consultation on 15 October, with a closing date of 11 December 2009
It is expected that these regulations will be finalised in the first half of 2010, before the next general election
The government intends to delay the implementation until 1 October 2011
Such a delay opens up the possibility of further change, should the Conservatives win the next general election.

However, it is unlikely that the final legislation will differ greatly from that now proposed. Although a Conservative government is unlikely to favour this legislation, given that the key terms of the directive are “non-negotiable”, there is little flexibility to change materially the current proposals.