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Do the Agency Workers Regulations have any value?

15 January 2014

Prior to the introduction of the Agency Workers Regulations 2010, the wide-spread view was that the Regulations would have a significant impact on the way recruitment agencies and their customers operated. 

There was a serious concern that the Regulations would greatly increase costs and therefore prove to be a barrier to efficient business operations. These fears led to the UK's desire to include a 12 week qualifying period before agency workers become entitled to parity of terms and its support of the so-called "Swedish derogation", which removes equal pay rights where a worker is genuinely employed by an agency on the prescribed terms, which includes pay between assignments.

However, the Regulations have been in place for a couple of years now and the number of cases coming before the courts has been rather limited. The most recent case in this area was Moran v Ideal Cleaning Services and others, which suggested that the Regulations may actually be avoidable, without too much trouble, by most businesses. 

The claimants in this case were employed by Ideal Cleaning and assigned to provide services  to a client. They each worked at the client for a long time (6 to 25 years) before being made redundant. They brought claims arguing that the Regulations applied to them and they were entitled to the same basic working and employment conditions as if they had been employed by the client directly. 

The Employment Tribunal rejected their claims; a decision which was subsequently upheld by the Employment Appeals Tribunal (EAT). 

The Tribunal and EAT each considered that the Regulations only apply to workers who are supplied to work "temporarily" for a client. Although "temporary" is not defined in the Regulations, it must mean something other or less than permanent (or, in the employment context, indefinite). 

In this case, there was no designated 'end date' for the claimants' performance of services for the client.  Therefore, their services for the client were indefinite rather than temporary and the Regulations did not apply.

In arriving at this decision, the EAT also considered the European Directive on which the Regulations are based. The Directive's wording deliberately included the concept of "temporary" performance of services and therefore reinforced the EAT's view of the Regulations. The EAT found that there were no public policy grounds to over-ride the clear meaning of the words used in both the Regulations and Directive.

The case therefore suggests that a huge loophole has been discovered in the level of protection provided to workers who were previously understood by many to be covered by the Regulations. 

It is unclear whether it is necessary for both the individual's assignment and the agency's contract with the client to both be open-ended. However, it does appear that when both are simply terminable on notice, rather than having a fixed end date, the Regulations will not apply. 

With skilful drafting and short notice periods it therefore appears that most businesses should be able to avoid the operation of the Regulations altogether.

This point was noted by the Judge at the Tribunal, who commented:

"I am well aware from my experience as a long serving Employment Judge that there are arrangements operating in the United Kingdom whereby significant numbers of workers may be placed by an agency with an end user, working to all intents and purposes on a permanent assignment but employed by the supplier ie the agency, who work alongside employees of the hirer but on less attractive terms and conditions and in particular lower wage rates and which is, of course, at the heart of the claim…. It is unfortunate that the agency regulations, clearly intended as they were to provide some equality of treatment, appear to have ignored such long term arrangements. Whether or not that was the intention of the draughtsman is not for me to second guess."

Commentators on this case also consider that the decision gives rise to other uncertainties. For example, in this case it was clear that the workers' engagement with the client was indefinite.  However, other cases may not be so clear.  When would a series of short-term assignments (such as those renewed weekly or monthly) become permanent? 

Further uncertainty is also caused by the tendency for employment law to focus on the practical reality of any situation rather than taking contractual wording at face value.

The significant impact of this case on our understanding of protections available to agency workers does mean that the case is ripe for appeal and caution should be exercised in relying on the case in the meantime. 

However, the EAT's reasoning did consider both the European perspective and public policy arguments, which suggests that the scope for over-turning the decision may be narrow. It therefore does appear that it may be up to Parliament to change the wording of the Regulations, if it ultimately chooses to do so. 

Given the current desire to move away from "gold-plating" European employment protections, this seems unlikely, at least for the time being.

For more information, please contact Kirsti Laird, Senior Associate (qualified in New Zealand)

+44 (0)20 7427 6411