2019 has seen statutory and case developments in the law relating to agency workers.
What do these changes mean for the agency worker?
The Agency Workers Regulations 2010 (AWRs): equality of pay and duration of working time Regulation 5 of the AWRs states that an agency worker (“X”) shall be entitled to the same basic working and employment conditions (after completion of a 12-week qualifying period of work) as X would be entitled to for doing the same job had X been recruited directly by the hirer, not through the employment business, whether as an employee or a worker.
For these purposes, the basic working and employment conditions that must be equalised are those that are ordinarily included in the contracts of employees or workers of the hirer (ideally an actual comparator) relating to: (a) pay; (b) the duration of working time; (c) night work; (d) rest periods; (e) rest breaks; and (f) annual leave.
Both the hirer and the employment business can be liable for failure to provide equalised terms to an agency worker, depending on the extent of their responsibility. Liability can be apportioned. Compensation is available to a claimant for such failure.
There have been two cases during 2019 relating to the application of regulation 5.
In February 2019, the Court of Appeal case of London Underground Limited v Amissah and others provided a useful example of the application of regulation 5 and its enforcement provisions. The Claimants were agency workers, placed by an employment business (“TP”), with the hirer, London Underground (“LU”). The engagements commenced in October 2011. The employment business asserted that the Claimants did not fall within the scope of regulation 5. LU initially agreed but, on further analysis, decided regulation 5 did apply. From October 2012, equality of pay was provided. LU sought to rectify a shortfall created between October 2011 and October 2012 and paid arrears to TP. TP did not pass those arrears of equalising pay to the Claimants and subsequently became insolvent.
It was held that LU were held to be 50% responsible for the failure to provide equalised terms to the Claimants between October 2011 and October 2012 and were therefore liable to pay the Claimants compensation equivalent to 50% of their losses as a result. That was despite the fact that LU had paid the full amounts due to TP and would therefore be paying 150% of the shortfall in total.
The case illustrates the burden placed on the hirer to determine whether regulation 5 applies. For its own protection, the hirer should not rely on the employment business to determine this question and should make its own enquiries. Reliance on the employment business will not prevent the hirer facing liability for failure to provide equalised terms.
In July 2019, in the case of Kocur v Angard Staffing Solutions Limited and another, the Court of Appeal provided clarity on what is meant by the duration of working time for the purposes of regulation 5 of the AWRs. The Claimant was an agency worker supplied by Angard to Royal Mail. He brought proceedings arguing that the AWRs entitled him to be allocated equivalent hours of work as Royal Mail employees, i.e. 39 hours per week. The Court of Appeal decided that “duration of working time” referred to periods of continuous work. The AWRs did not confer a right to the same number of contractual hours as a comparator employee, and that the intention was to ensure that on any working day for which the agency worker was needed, the worker’s working time should not exceed that which a comparator was required to do. In summary, an agency is entitled to the same terms in relation to the maximum duration of each daily period of work as a comparator, after completing the qualifying period, but is not entitled to work either to the maximum or every day. The AWRs requirement of equality of duration of work cannot be a requirement of precise equivalence as any such requirement would entirely remove the flexibility inherent in the agency/hirer relationship.
How will the April 2020 legislative changes affect agency workers?
- The Swedish derogation will be abolished. The Swedish derogation currently found in regulation 7 of the AWRs provides that the right to equality of pay contained in regulation 5 does not apply where the agency worker has a permanent contract of employment with the employment business and is paid between assignments. From 6 April 2020 all agency workers will have a right to equality of pay after completion of the required 12-week qualifying period of work in the relevant role as the derogation will be abolished.
- Protection from unfair dismissal and detriment. A new category of automatic unfair dismissal and new form of detriment claim are being introduced in respect of agency workers who are employees of their employment business. They will be available where their dismissal or detriment is connected with proceedings or rights asserted under the AWRs.
- Key information document. From 6 April 2020, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 will be amended to require all employment businesses to provide agency work-seekers with a written statement as follows:
(a) It must be entitled “Key Information Document”. (b) It must be given before agreeing the terms on which the work-seeker will undertake work. (c) It must include information about the type of contract the work seeker will be engaged on; the identity of the employment business; the minimum rate of pay; how they will be paid and by whom (e.g. by the employment business or an intermediary); non-monetary benefits the work-seeker will be entitled to; details of any deductions that will be made; and details of entitlement to holiday and holiday pay and an illustrative example of what their take home pay would look like. (d) It must be separate to any other documents provided, be easy to read and understand and on a maximum of two sides of A4. (e) It must include a notice stating that it contains key information relating to the work-seeker’s relationship with the employment business, identify the location of any other related information and include contact details for the person responsible for handling complaints about breach of the Conduct Regulations. (f) The employment business will need to be able to demonstrate that the document has been given to the work-seeker.
These changes are being made pursuant to the Taylor Review of Modern Working Practices to combat unfair treatment of agency workers. Further changes, such as strengthening of the powers of the Employment Agencies Standards Inspectorate, are expected in the future, to address perceived agency worker vulnerability.
How will the new tax rules affect agency workers?
A further change will be introduced on 6 April 2020 in respect of the taxation of an agency worker’s remuneration where the worker contracts with the employment business through a personal service company. These new requirements are complex, but in broad summary, if in the working relationship between the hirer and the agency worker, the worker is operating as an employee (which can be assessed using the HMRC Check Employment Status Tool), the employment business will be required to deduct PAYE tax and NICs before paying the invoice of the personal service company relating to the agency worker’s services.
Hirers and employment businesses who engage workers via personal service companies should be taking tax and legal advice now on how this will affect their business, practically and financially. The obligation is on the hirer to make the assessment of whether the worker is operating as an employee and the obligation to deal with the tax consequences of that will rest with the employment business.