Agency Workers Directive - Radical changes in the temp market
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| Article written for GB by http://wwww.lawyers-direct.biz |
Lawyers Direct explain the implications of the Agency Workers directive. If you plan to take on temporary staff or already employ temporary workers then you should read this article. As the changes could have far reaching consequences. In December 2004 the European Council of Ministers meet to take another look at the Draft Directive on Agency Workers1. At the previous meeting in June 2003 the Council failed to reach agreement, mainly on the qualifying period to apply to temps. The Directive has potentially wide-reaching implications for employment markets, especially in the UK, where agency workers are heavily relied upon to provide flexibility for employers. Around 600,000 people work as temporary agency workers at any particular time in the UK (UK Gov Regulatory Impact Assessment, 2002).
The Draft Directive looks likely to be approved in much the same terms as it is currently drafted once the arguments over the qualifying period are settled, which may not happen this month. At present the measure looks like becoming law in around 2 years time and the UK Government would propose implementing regulations to give the Directive effect in UK law.
The main thrust of the Directive is to give temporary agency workers the same basic working conditions as those on permanent contracts of employment. So once the qualifying period has been served, temps will be entitled to receive the same treatment as permanent staff on
· Pay
· Holiday and sick pay
· Benefits such as use of (or discounts for) gym or sports facilities, staff canteen
· travel allowances, season ticket loans and taxi fares home
· flexitime, lunch and coffee breaks
· medical and dental insurance and care
· child care, crèches, paid time off
Most importantly temps must be given equal pay to their equivalent permanent colleagues. Although, according to a survey by Manpower, 68% of agency workers receive higher pay than permanent staff, this will still impact heavily on employers since most agency worker contracts are priced to take account of the few extra benefits. The CBI’s view is that the changes would lead to a much decreased use of temps. The qualifying period would also introduce incentives for employers to terminate agency workers’ contracts just short of the arbitrary qualifying period.
“Pay” is not defined in the draft Directive and so it is unclear whether pensions are covered. Leading pressure groups including the REC, the recruitment industry body has argued strongly that pensions should be excluded from the Directive. It remains to be seen what the final position will be.
The legal status of temps is currently unclear in UK law and each case has to be judged on its own facts. In some cases a temp will be an “employee” of the agency in others the contract with the agency will define him/her as self-employed.
In practice this means that the temp is outside most of the employment law measures which apply to permanent staff, such as unfair dismissal claims and redundancy payments. It also means that some agency staff fall outside the Working Time Directive, which gives workers a right to 4 weeks paid annual leave. The Draft Directive on Agency Workers gives a right to equivalent conditions to all temps irrespective of their legal status, including rights to paid leave and sick pay.
As currently drafted the Directive appears not to apply to workers who operate through the increasingly popular limited company route. This mechanism is especially common among IT contractors. The worker is “employed” by his own limited company, usually incorporated for this purpose. The limited company contracts with the temp agency to supply the services of the worker via the agency to the end user client. 
This arrangement means there is no direct formal contract between the worker himself and the agency or end user. In a case concerning a Hewlett Packard contractor2 the Employment Appeal Tribunal confirmed this view of the series of legal relationships, deciding that there was no employment contractual relationship between the worker and the end user. However, a decision3 by the Court of Appeal in 2004 shows that the courts are increasingly willing to ignore the formality of agency contracts and hold that a de facto employment contract exists between the worker and the end user. In that case a temporary cleaner who worked for four years for Wandsworth Council through a temp agency was in principle found to have a de facto contract with the Council.
1 COM(2002) 701 Final.
2 Hewlett Packard Ltd v O’Murphy [2002] IRLR 4 EAT.
3 Dacas v Brook Street Bureau (UK) Ltd [2004] EWCA Civ 217, [2004] IRLR 358.
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