Agency workers have a number of rights set out in the Agency Workers Regulations 2010. After twelve weeks there are entitled to the same basic working and employment conditions as those enjoyed by staff directly employed by the hirer. This includes pay.

The only way to avoid having to pay an agency worker the same rate is to use a Swedish Derogation agreement which is a contract of employment between the agency and the worker. These are subject to important safeguards. To find out what these are click here.

In London Underground v Amissah and others, the Court of Appeal considered how liability is apportioned between the agency and hirer where agency staff had been underpaid - here, in part, due to the dishonestly of the agency.

Its decision may surprise you.

Facts

London Underground used an agency to find temporary staff. The staff supplied had entered into Swedish Derogation contracts and London Underground therefore believed that the rules regarding pay did not apply.

Sometime later, for reasons that are not explained, London Underground decided to check whether the rules regarding pay applied. They decided that they did and that it would have to increase the rates it paid to the agency to reflect those paid to its own staff which were substantially higher. Despite this, it took London Underground nearly ten months to supply the correct information to the agency and start increasing their payments.

London Underground also paid the agency arrears of pay due to underpaid staff. However, the agency kept these and later went into liquidation. This left the underpaid agency workers out of pocket and they issued claims against both the agency and London Underground.

The Employment Tribunal found that the workers had been underpaid and apportioned liability equally between the agency and London Underground. Despite the agency's dishonesty, it criticised London Underground for its delay in paying the correct amount which increased the arrears. However, the Judge said that London Underground did not have to pay compensation to the workers because it had already paid the arrears (albeit to the agency) and should not have to "pay twice".

The workers appealed.

Decision

The case eventually made its way to the Court of Appeal which reversed the decision and decided that London Underground should pay 50% of the total arrears due to the workers because:

  1. The original Judge had decided that each party was equally to blame for the underpayments (this part of the original decision was not appealed).
  2. Workers were entitled to be compensated, pound for pound, for not receiving the correct pay unless it was just and equitable to reduce this.
  3. It was not just and equitable to deprive the workers of compensation here. They had done nothing wrong. London Underground had chosen to deal with the agency and the workers shouldn't be penalised for its dishonesty.

Lessons

If you are using temporary staff who have signed Swedish Derogation contracts, check that these comply with the regulations.

Remember that agencies won't be able to employ staff on Swedish Derogation contracts from April next year. This means you will have to pay the same rate to temporary staff you engage for 12 weeks or more. Factor this into your considerations of which agency to use - particularly if your selection is based on price.

Use a reputable agency. Reading between the lines, the agency here either didn't understand the Swedish Derogation or deliberately disregarded it - presumably to be able to undercut its rivals.