Urgent update on the Agency Workers Regulations

The Association of Recruitment Consultancies (ARC) has obtained a written opinion from leading Counsel that some of the Agency Workers Regulations that implement the EU Agency Workers Directive and which were laid before the recently dissolved Parliament in January, are of questionable legality and should be challenged.

These Regulations overall provide agency workers with the right to equal treatment with regular workers working for an end user, including equal treatment in relation to pay and leave after an agency worker has worked for a hirer for at least 12 weeks. However they include new provisions that create additional administration and risk for agencies that have no contract with the individual worker, in order to help agency workers.

The ARC has been advised to launch a Judicial Review that will attempt to prove that the current additional provisions may have the opposite of its intended effect and may actually cause agency workers to lose out in an attempt to protect them. A Judicial Review must be commenced by 19 April so there is an urgent deadline to meet.

We are working in conjunction with various organisations to collate the necessary evidence to show that the measures could harm workers. Removal of these provisions would also benefit the agencies at risk. Input from the industry is essential and assistance is sought from as many people as possible who are involved in recruitment supply. Early responses are therefore critical.

ARC Chairman Adrian Marlowe is the first to admit that there is no guarantee of success in seeking a Judicial Review but strongly believes that the ARC should facilitate the action in the long-term interests of all in the industry. Counsel has advised the ARC that the Government appears to have ‘gold plated’ the Directive by including provisions that go well beyond that provided for by the Directive. This, according to Counsel, has created a situation that is of ‘significant public interest’.

We are concerned about the extent to which the Labour Government appeared to be able to create new employment regulations that were not specifically authorised by a European Directive. Regulations of this sort, in which so-called ‘fictional contracts’ are created, have never been properly tested by the Courts. In this case, according to ARC’s Counsel, the question that should be posed is whether the Government can create a ‘fictional contract’, between agencies involved in a supply chain and the individual workers so that workers can enforce rights against all in the chain.

Those caught include master and neutral vendors, and employment agencies that have cross referral arrangements and that merely introduce a worker who is then supplied by another company. Because of a lack of clarity even organisations such as factoring companies could be affected. We are now urgently seeking evidence to show that the proposed Regulations could rebound against agency workers, as costs increase and hirers no longer find agency workers a desirable option. At the same time limited company contractors may be significantly disadvantaged as agencies convert to a safer PAYE payment method and workers may find job opportunities which depend on recovery of travel expenses reduce or disappear. Agencies paying PAYE cannot allow expenses payment to be paid gross unless they employ the worker.

According to Adrian Marlowe, the only likely winners from this legislation are the unions who can argue that they have fought a battle to improve the lot of temporary workers. In reality, however, the commercial viability of recruitment supply from October 2011 (the date the new Regulations are due to apply) is being put at severe risk.

Adrian warns: “The Government has created a ‘fictional contract’ by including two new provisions in the Regulations that deem that agencies, even if they do not have a supply contract with a worker, are still defined as supply agencies for liability purposes, wherever there is a supply and the agency is in some way involved. This includes employment agencies that merely introduce a worker to another agency that then supplies the worker to work under the direction of the hirer. The result is that an agency worker can take action against every organisation involved in the supply chain, even though the worker always has enforceable rights against the hirer and the organisation that does actually supply the worker. Action can arise wherever an agency worker considers that equal treatment has not been provided and can include requests for information and claims to Employment Tribunals.”

The ARC has long argued that the only parties that know whether equal treatment is provided are the individual worker, who is exposed to conditions at the client site for 12 weeks before the entitlement to equal pay and leave arises, and the hirer. Adrian adds “It is an easy matter for the worker to make enquiries. Passing the responsibility for information and payment to agencies that have no obligation to pay the worker, can do nothing other than cause confusion, as information is passed down second and third hand with the inevitable prospect of mistakes being made and inaccuracies creeping in. At the same time there seems little advantage to a worker to be able to sue multiple defendants when the only parties responsible for payment and equal treatment are the supply company and the hirer respectively. Multi defendant claims will cause longer enquiries and increase costs for all and delays for the worker. Hirers will no doubt pass liability on through the contractual process if they are not at fault in any event.”

The ARC is not suggesting that these deeming Regulations will completely kill recruitment supply, but the likely increased payroll and administrative cost of implementing them will create a negative force at a time when it’s vital to maximise the attraction that agency workers present to hirers. This is as much for the benefit of workers as for the agencies that could avoid liability if a Judicial Review succeeds or an incoming administration is persuaded to remove these unnecessary measures.

We are seeking support in terms of both funds and evidence from any organisation that may be affected so that we can bring the Judicial Review. Time is of the essence as we must issue by no later than 19th April and both funds and evidence are urgently required.

In terms of evidence is there any information you can provide that demonstrates that instead of helping agency workers, these regulations could adversely affect them perhaps along the lines we have suggested? If so, please contact Ben Grover or Ravi Murphy at ARC on 01273 236236.