Today’s vote is a major step forward for Social Europe guaranteeing protection for all agency workers in Europe.” —Vladimír Špidla, EU Commissioner for Employment and Social Affairs.

After six years of legislative negotiations and several almost insurmountable stalemates, the European Parliament recently approved a new Directive extending several employment rights to so-called agency workers.

Who are they and what is their relevance?

Agency workers are individuals assigned from temporary work agencies, such as Adecco, Manpower or Randstad, to user companies in order to cover the short-term staffing needs of such companies. The work agencies act as intermediaries. Apart from some exceptional cases,1 the agency worker remains an employee of the agency, while the user company enters into a commercial agreement with the agency to reimburse the employee’s costs and pay an agreed fee.

US companies with operations in the EU tend to like this solution as they can avoid some of the existing restrictions attached to hiring fixed-term employees in EU Member States. In fact, because agency workers are not their employees, user companies do not have to offer them the same employment terms and conditions that their permanent employees enjoy. This makes them very attractive low-cost workers. This will, however, change with this new Directive.

Furthermore, when there is no such employment relationship, user companies are, in general, free to terminate the relationship whenever they see fit without having to give notice and/or severance/termination compensation to the agency worker (although they might have to give notice to the work agency and/or pay an early cancellation fee).

As a result, this atypical form of work has largely increased during the last decades. According to certain studies, during the nineties the number of agency workers multiplied by five in Denmark, Italy, Spain and Sweden,2 and at least doubled in most other EU Member States.3

Historical legislative efforts

As early as 1982, the European Commission submitted a proposal for a Directive on agency workers. This first Directive proposal was never passed. In 1995, the Commission launched a process of consultation with the European social partners— employers’ and workers’ representatives—leading to the start of negotiations between the two sides. While this process led to agreements (later formalized in EU Directives) on part-time work and fixed-term contracts, negotiations on the treatment of agency workers collapsed in May 2001.

Consequently, in March 2002 the Commission decided to break this stalemate by launching another proposal for a Directive on temporary agency work.

Since then, it has taken six years for the Directive to be approved. The main reason for this delay has been the fierce opposition by certain countries, especially the UK, but also Denmark, Germany and Ireland, due to the alleged potential negative effects for those businesses that rely, to a large extent, on this type of hiring. The UK is reported to be the EU country with the largest number of temporary agency workers, with sources estimating that there are between 1.1 and 1.4 million agency workers there.

What does the Directive do?

According to the Directive, Member States must ensure that temporary agency workers receive at least:

  • The same basic working and employment conditions from the first day of their assignment as those that would apply if they had been recruited directly by the user company. Basic employment terms and conditions include:
    • Pay4
    • Holidays
    • Work time
    • Overtime
    • Night work
    • Breaks
    • Rest periods
    • Maternity leave
  • Equal access to corporate facilities of user company, in particular to any canteens/cafeterias, child-care facilities and transport services
  • Access to training both during and in-between assignments
  • Information about permanent employment opportunities offered by their user companies

Member States shall impose “effective, proportionate and dissuasive” penalties in the event of noncompliance with these mandates by temporary work agencies or user companies.

The UK exception

According to the Directive, Member States may derogate from the general rule of “equal treatment from day one” when a national collective bargaining agreement provides otherwise. In those countries where universally applicable collective bargaining agreements cannot be declared, Member States may, after having consulted with the national social partners, establish their own arrangements on the basic working and employment conditions of agency workers. These arrangements may include a qualifying period before equal treatment applies to agency workers. In both these cases, however, there remains the general obligation to respect the overall protection of temporary agency workers.

This possible qualifying period was the key factor that led the UK government to accept the Directive after years of strong opposition. In fact, UK social partners agreed in May 2008 that UK-based agency workers will only be entitled to enjoy equal treatment after a period of 12 weeks (and not starting on day one).

Unions and employer organizations of other Member States may reach similar agreements, although the Directive makes clear that these practices should be the exception.

Implementation

EU Directives are not self-executing and need to be transposed nationally by each EU Member State by enacting laws that achieve the outcome pursued by the Directive.

The EU Members States will have three years as of the moment in which this Directive enters into force, which is expected to be in early 2009, to enact their implementing legislation. The beginning of 2012 is the likely deadline for this transposition process.

Conclusion

Many US companies have subsidiaries, branches or representative offices in EU Member States. Up until now, hiring agency workers has been an efficient and cost-effective solution to cover shortterm employment needs. With the enactment of this Directive, some of the key features that made this option attractive for employers will disappear, as these workers will become entitled to the same treatment given to their permanent colleagues.

Companies should keep in mind that some time will pass before the Directive is transposed in each Member State, and that even then agency workers will still offer several logistical advantages over permanent employees. This is especially true for US companies used to navigating in an at-will environment. For them, having to terminate the commercial relationship with a temporary work agency might be less troublesome than having to face unfamiliar national European laws on termination of employment.

It is important, however, to keep a close eye on the implementation process and review all applicable laws, as some EU jurisdictions already have specific regulations on agency workers, before deciding which type of hiring makes more sense for your company. White & Case can provide you with guidance in making agency worker employment decisions for your offices in EU jurisdictions.