Wednesday, June 15, 2011

UK: The Death of the UK's Temporary Flexible Workforce?

By Suzanne Horne

On 1 October 2011, the Temporary Agency Workers Regulations 2010 (the “Regulations”) will come into force in Great Britain
[1]. The Regulations implement the Temporary Agency Workers Directive 2008/104/EC (the “Directive”)[2]. The purpose of the Directive is to ensure the harmonised protection of temporary agency workers (“TAWs”) through the application of the principle of equal treatment and to address restrictions and prohibitions on the use of agency work in the European Union (the “EU”) thereby creating “flexicurity”. The Directive follows similar earlier directives on fixed-term and part-time work[3]. Each of the 27 EU member states[4] has until 5 December 2011 to implement the Directive through local legislation. Whilst it is estimated that there are between three million FTE TAWs and ten million TAWs working across Europe on a yearly basis[5], the implementation of the Directive in many EU jurisdictions will not amount to a significant change in law[6]. However, for the estimated 1.1 million TAWs in the UK[7], the UK’s recruitment industry and the UK companies that hire TAWs (“hirers”), this new legislation will dramatically impact the rights of the TAW and the regulation of the tripartite relationship. Given the increased reliance on TAWs by organisations and companies operating in the UK coming out of the credit crisis plus the on-going scrutiny of permanent head count, international employment lawyers need to understand the Regulations and what they mean for our clients.

So What Do The Regulations Do?

The key changes and new responsibilities are as follows:

From Day 1

- Hirers must ensure that the TAW has access to all collective facilities as an actual comparable employee or worker directly employed or engaged by the hirer.
[8] Any less favourable treatment will not be unlawful if it is objectively justified. The Guidance provides that this is intended to apply to a staff canteen, workplace crèche, staff room, car parking, food and drinks machines and certain transport services.

- Hirers must ensure that the TAW has information about the organisation’s job vacancies that would be available to a comparable employee or worker. The comparator here must be based at the same establishment.

After 12 Calendar Weeks
[9] in the Same Job with the Same Hirer[10]

- The TAW is entitled to equal treatment in respect of certain pay and other basic working conditions as if they had been employed directly by the hirer. This includes certain pay and bonuses, duration of working time, night work, rest periods, rest breaks and annual leave. It does not need to be an actual comparator for this entitlement.

- Pregnant TAWs will now be allowed to take paid time off for ante-natal appointments during assignment.

The Regulations are not retrospective. Therefore, any TAWs who are already on assignment will only start to accrue the 12 week qualifying period from 1 October 2011. In order to meet the 12 week qualification requirement, the TAW only has to work for any part of any calendar week. Further, there are detailed rules in respect of circumstances in which breaks in the assignment of the TAW will not prevent him or her from qualifying for equal treatment. However, TAWs will be entitled to access facilities and information on job vacancies from day 1 of their assignment.

Other Rights & Requests For Information

- The Regulations contain greater protections for pregnant TAWs and new mothers.[11]

- In accordance with current legislation[12], certain information must already be provided by the hirer to the agency. However, as of 1 October 2011 there will now also be additional obligations on both the hirer and the agency to provide information to the TAWs within certain prescribed time limits.

Broader Information and Consultation Issues

- TAWs who are not employed must now be included in an agency’s counting to determine if it meets certain thresholds that trigger, amongst other things, certain information and consultation obligations.

- Hirers will be required to provide information about its use of TAWs as part of its obligations to provide information in respect of collective bargaining, to inform and consult in a collective redundancy situation and to provide information under the Transfer of Undertaking (Protection of Employment) Regulations 2006.

Penalties For Failing To Comply

- A fine of up to £5,000 if the hirer or the agency is held to be in breach of the anti-avoidance provisions.

- A right not to be dismissed on certain grounds such as under or in connection with rights under the Regulations. Such a dismissal will constitute an automatically unfair dismissal for which there is no service requirement and it will be dependent on the TAW being employed.

- A right not to be subjected to a detriment on prescribed grounds.

-A right to bring a claim on the grounds of the breach of one of the other entitlements.

All claims must be brought within three months of the date of the act complained of.

What Do The Regulations Not Do?

The Regulations do not apply to the placement of individuals by an agency for permanent employment or the direct engagement of temporary workers by the hirer. The Regulations, like the Directive, only provide for equal treatment for certain basic terms and conditions. Therefore, the TAW will not be entitled to benefits which are designed to reward long service or loyalty for permanent staff such as private medical insurance, a company car, stock or share options or occupational pension contributions, maternity, paternity or sick pay. Further, there is an exemption from the equal treatment principle on pay only if the TAW is permanently employed by the agency and receives a certain amount of pay between assignments. Finally, neither the Regulations nor the Directive give the TAWs employment status, prevent the hirer from terminating the assignment, require the hirer to make a redundancy payment to the TAWs or give the TAWs unfair dismissal rights. Therefore, it is unlikely that the Regulations will do much to change the on-going claims of employment status by TAWs.

Further Details

On 6 May 2011, the Department of Business, Innovation and Skills (“BIS”) published its final form guidance to the Regulations[13] aimed at helping agencies and hirers to understand their obligations under the Regulations (the “Guidance”). The Guidance was developed with employment agencies, employers, trade unions and representatives through consultation workshops. It explains:

· Who is in scope and out of scope of the Regulations
· How a TAW qualifies for ‘equal treatment’ and what it means
· The tracking of the 12 week qualifying period;
· The definition and determination of the rate of pay;
· What constitutes ‘pay’; and
· Information requests, liability and remedies.

The Guidance also sets out some helpful examples.

How Does the UK Compare With Other EU Member States?

Due to the different levels of existing regulation of TAWs across Europe, EU member states are implementing the Directive in very different ways. It is reported
[16] that in Spain, the provisions of the Directive have been included as part of wider labour market reforms; whereas in the Netherlands and Poland, existing laws mean that the Directive will not have a significant impact.

Similarly, France already has extensive protections in place under existing employment legislation to protect TAWs. These protections include an entitlement for the TAW to two indemnities designed to compensate him or her for the intermittent nature of his or her employment
[17] and the principle of equal treatment compared to the salary and benefits of an equally qualified permanent employee performing the same job for the hirer. As regards hirers, French law provides that if a hirer engages staff through an agency in instances other than those permitted by law or in violation of the rules governing, inter alia, the duration of employment or the execution of a written agreement, the agreement with the TAW may be re-classified as an employment agreement for an indefinite duration. In addition, the hirer may be sanctioned by a fine of 3,750 Euros for a first offense and a fine of 7,500 Euros and imprisonment for six months for subsequent offences. Therefore, in stark contrast to the UK, the implementation of the Directive does not trigger the need for France to significantly adapt its law. However, France will need to review certain aspects of its laws as it does have restrictions on the length of certain assignments[18] and the reasons permitted for the use of TAWs[19], which are, in theory, contrary to Article 4 of the Directive.

Like France, German law already contains a principle of equal treatment for TAWs
[20]. Section 10 of paragraph 5 of AÜG obliges the temporary agency to grant the TAWs the same working conditions, including pay, which are applicable to comparable employees in the establishment of the user undertaking. This principle of equal treatment is, however, applicable only after the 12th month of posting to the same hirer. In addition, TAWs are entitled to maternity protection, parental leave, sick pay, 24 days annual leave, social insurance and statutory redundancy provisions. This month a nationally binding minimum wage for TAWs should also come into effect. However, there is still some debate about aspects of the Directive.

Whilst Ireland already has some protection for TAWs under existing employment legislation, like the UK, it does not have the equal treatment provision. As at 5 May 2011, Ireland’s Department of Enterprise, Trade and Innovation stated that drafting on the bill to transpose the Directive into law had not commenced but that the responses from key stakeholders on the consultation document issued in October 2010 were being considered. In March 2011, Ireland elected a new Government. The policy of the old Government was to seek to agree a Framework Agreement with the national social partners under Article 5.4 of the Directive which permits limited derogations from the principle of equal treatment
[21]. It remains to be seen if the new Government will continue with this approach.

At the other extreme is Bulgaria, it has no regulation of TAWs and it is reported to have taken no action to date to comply with the Directive.

Action Items for Hirers

The Regulations mean that employment lawyers need to be advising clients to take action now in preparation for 1 October 2011. In preparation for the implementation of the Regulations on 1 October 2011 and the Directive’s long-stop date of 5 December 2011, hirers need to understand their current use of TAWs across their businesses in Europe. Where there are UK TAWs, hirers need to consider how they will track and control future use of TAWs, how they provide access to facilities and job information to TAWs, how they will gather information on the employment and working conditions of its comparable employees and workers and how they will interact and contract with the agencies. Where the businesses use TAWs across various EU member states, hirers need to obtain local advice now to understand if local practices, procedures and documentation need to change.

Industry Perspective & Conclusion

The Chair of the UK’s Recruitment & Employment Confederation
[22] is reported to have met both the UK’s Business Secretary[23] and Employment Relations Minister[24] last month to raise concerns about the Regulations. He commented[25], “We will continue to keep pressure on this Government to do the right thing by protecting one of the UK’s few international competitive advantages which is its dynamic and flexible labour market”. Whilst he acknowledges that “implementation will create some challenges” he states that “the Regulations do not fundamentally impact on the crucial flexibility that agency work provides”[26]. However, it is evident from the impressive public relations campaigns by global temporary worker agencies such as Adecco that the UK recruitment industry is concerned about the impact of the Regulations on its industry.

Whilst the total cost of using TAWs across the UK and the broader EU may well increase, it is unlikely that companies will be able or willing to cease using TAWs given that they are a vital tool for companies to stay competitive, ride out the peaks and troughs in demand and fill staffing gaps due to absence and vacancies. As a result of this business need, the UK’s temporary workforce and the recruitment industry will survive 1 October 2011 but they will, perhaps, be perceived as less flexible. Therefore, it remains to be seen if the principle of ‘flexicurity’ actually works for UK hirers.

Suzanne Horne, Paul, Hastings, Janofsky & Walker (Europe) LLP (with thanks also to colleagues Stephane Henry and Eleni Konstantinou)

[1] A copy of the Regulations can be found at Separate legislation will implement the new laws in Northern Ireland in December 2011.
[2] A copy of the Directive can be found at
[3] 99/70/EC and 97/81/EC.
[4] Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden and the UK.
[5] See Europa Memorandum 08/646 dated 22/10/08 and Eurociett’s, the European Confederation of Private Employment Agencies’, Position Paper dated 20 September 2010.
[6] Eurociett’s paper ‘The implementation of the Directive on temporary agency work’ identifies only Bulgaria, Cyprus, Estonia, Lithuania and Latvia as having no specific regulation of TAWs and the UK and Ireland as the only member states with no equal treatment provision.
[7] Ciett’s, the International Confederation of Private Employment Agencies, Economic Report ‘The Agency Work Industry Around the World’ 2011 Edition (based on figures available for 2009).
[8] The comparison must be with an actual comparable worker doing the same or broadly similar work, working at the same location or another location owned by the hirer. If there is no comparator, there is no entitlement to equal treatment.
[9] Article 5.4 of the Directive affords the social partners at national level the ability to derogate from the principle of equal treatment if they negotiate and conclude an appropriate Framework Agreement, such as, in relation to the operation of a qualifying period before equal treatment applies. On 20 May 2008, the UK’s Confederation of British Industry (the “CBI”) and the Trades Union Congress (the “TUC”) reached agreement on a variety of issues including that after 12 weeks in a given job a TAW would qualify for equal treatment as described above. The UK Government had announced that it hoped to revise the Regulations but in October 2010 it stated it would not make any changes to the Regulations.
[10] The Regulations and the Guidance contains additional provisions and explanation as to what is and will be deemed to be the ‘same’ job for the ‘same’ hirer and the rules in respect of circumstances in which breaks in the assignment of the TAW will not prevent him or her from qualifying for equal treatment.
[11] The protections are triggered where there are health & safety issues in the work being carried out, the extent of the duty to look for suitable alternative work and the obligation on the agency to pay the TAW if no work can be found.
[12] See the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (as amended).
[13] A copy of the guidance can be found at BIS issued draft guidance on 1 April 2011 for consultation.
[14] The Guidance makes it clear that those in business on their own account, working through a managed service contract that is properly supervised by the service provider, those working as part of an internal temporary staffing bank, on secondment or loan will be out of scope of the Regulations.
[15] There are detailed rules in respect of the ‘qualifying clock’.
[16] See Eurociett’s external newsletter Dispatch, Spring ’11.
[17] An indemnité de fin de mission and an indemnité compensatrice de congés payés.
[18] The restriction on the length of the assignment varies from nine to twenty four months depending upon the nature of vacancy.
[19] An employer may hire an employee on a temporary basis for the performance of a specific non-permanent task, as long as the purpose or effect of the employment contract is not to permanently fill a position related to the usual and permanent activity of the enterprise.
[20] The provision of TAWs is regulated under the 1972 Arbeitnehmerüberlassungsgesetz (“AÜG” - Act on Temporary Employment Business).
[21] See footnote 8 and the UK agreement between the CBI and the TUC.
[22] Neil Smith, the Managing Director of Kinetic plc.
[23] Dr. Vince Cable.
[24] Ed Davey.
[25] The Recruitment & Employment Confederation’s (the “REC”) press release at
[26] See REC press release at: