From October 1, 2011, new regulations will come into force in the UK providing parity for agency workers with directly-engaged workers of the hirer regarding pay, working time, vacation and overtime. For those hirers to whom the Agency Workers Regulations 2010 (the Regulations) apply, this could mean considerably increased costs, as well as the administrative burden of monitoring agency workers’ service and of considering whether their work is comparable to work of individuals the hirer directly engages.   

When Do the Regulations Apply?

The Regulations apply when one organization supplies labor to another organization in return for a fee based on the work performed by the agency worker for the “hirer.” A typical example is an agency that supplies individuals to retailers during the holiday period to cope with seasonal shopping surges. The Regulations do not apply to organizations such as recruitment agents who provide an introductory service by matching job applicants to job vacancies.

The Regulations apply if:

  • The agency is engaged in the economic activity of supplying workers for temporary assignments (whether or not for profit), i.e., the agency supplies labor rather than an end product; The Regulations would not apply, for example, to an architect who sub-contracts the task of building a wall to a building company. In this example, the supply is the wall, not the labor of the brick layers.
  • The workers supplied are under the supervision and direction of the end user; and The Regulations do not apply where, for example, a consultancy firm introduces a firm of IT specialists to a business to audit the business’s IT systems. In this case, the individuals performing the services will have a large degree of expert knowledge and independence in conducting that audit, and so will not be under the supervision and direction of the business being audited.
  • The workers must have a contract of employment with, or a contract to perform work and services personally for, the agency. The Regulations do not apply where the agency is in fact a client of the individual worker.

The Regulations are not intended to apply to genuine secondment arrangements, or to managed service contracts where the hirer does not supervise those working on the services. However, the Regulations include wide anti-avoidance provisions. UK employment tribunals are likely to scrutinize any such arrangements carefully and issue penalties for anti-avoidance when they consider it appropriate to do so (these anti-avoidance provisions are described in more detail below).

Equal Rights

The Regulations afford agency workers two categories of equal treatment rights:

  • Those that apply from the first day they are placed with the hirer (Day 1 Rights)
  • Those that apply after they have accrued 12 weeks’ continuous service with the hirer (Week 12 Rights)  

Day 1 Rights

From the first day of an agency worker’s assignment to the hirer, the hirer must provide the worker with (i) access to on-site collective facilities and amenities and (ii) information about all relevant vacancies in the hirer’s organization.

In the example of an office with a discounted on-site staff canteen, agency workers are entitled to access the canteen and to purchase meals, but the Regulations do not entitle such workers to the discount provided to office employees. Similarly, if a company has an on-site gym, agency workers must be given access to it. If the company pays for its employees to use the gym next door, there is no obligation on it to do likewise for its agency workers as the gym is not an on-site amenity.

Week 12 Rights

If an agency worker has worked for the same hirer for 12 calendar weeks, the agency worker qualifies for equal treatment with the individuals directly hired by the hirer with regard to pay, duration of working time, vacation and overtime. Some breaks within the 12-week period restart the clock for the accrual of these rights. For example, the 12-week period will restart if the worker moves to a substantively different role within the hirer’s organization, or the worker is supplied to a different hirer. Other breaks merely suspend the clock, including any break shorter than six weeks and any planned shutdowns of the hirer’s workplace such as over the holiday season. The clock will continue to run during breaks for maternity, adoption or paternity leave.

An agency worker who accrues the requisite 12 weeks’ service may claim equal pay with a comparable individual who was directly hired by the hirer. For example, a retail assistant supplied by an agency for 14 continuous weeks may claim the same hourly rate of pay as a retail assistant employed by the hirer, but that right to equal pay only applies once that 12-week threshold has been passed. The definition of “pay” in the Regulations is wide, and includes bonuses that relate to performance or quality of work. These Week 12 Rights are enforceable by workers against the agency, not the hirer, and so agencies are likely to contractually oblige hirers to monitor the periods for which individuals are placed within their organizations, regardless of whether those individuals were supplied by that particular agency for the whole period of their work for the hirer. This also means that fees charged by agencies may increase to cover the risks to them of claims under the Regulations.

In order to aid agency workers in enforcing these rights, the Regulations impose obligations on both the agency and the hirer to supply information to the agency worker regarding pay, working time and certain other information regarding directly-hired workers in the hirer’s organization whose work is comparable to that performed by the agency worker. The agency or the hirer are only required to supply this information if the agency worker requests it.

Anti-avoidance

The Regulations contain considerable anti-avoidance provisions to dissuade hirers from structuring assignments in ways designed to deprive agency workers of their rights, e.g., by artificially rotating them between jobs. If an agency worker is hired for 11 weeks by the hirer, hired again after a seven-week break and then, after another seven-week pause, hired for a third time, this could be regarded as an attempt to avoid equal treatment. Additional awards of compensation of up to £5,000 can be awarded where there has been an orchestrated avoidance of Week 12 Rights.

Liability

The hirer is liable for breaches of Day 1 Rights, and it has a defense if it can show that the difference in treatment was objectively justified. The agency is liable for breaches of Week 12 Rights, and it may defend this by challenging whether the comparator identified by the worker is appropriate, or showing that it took “reasonable steps” to obtain relevant information from the hirer about employment terms ordinarily included for the hirer’s comparable, directly-engaged workers. In the latter case, the liability would then shift to the hirer.

Where Week 12 Rights have been breached, agency workers can choose to bring claims for damages in the employment tribunal against either their agency or the hirer, because they will not know whether the liability for these Week 12 Rights has shifted. In determining any award, the tribunal will consider matters such as the seriousness of the breach and any financial loss caused to the worker. Besides awarding compensation, the tribunal may also make declarations or recommendations for action to be taken.

Conclusion

The Regulations are likely to have a significant impact on certain UK employers such as retailers, manufacturers and others who engage agency workers on a regular basis. The key considerations for hirers and agencies will be the contractual provisions between them for (i) allocating the risk and cost of claims, (ii) designating responsibility for monitoring the periods of work and (iii) sharing information about the rights of comparable directly-hired employees.