[UK] UK Agency Worker Regulations: Saying goodbye to the Swedish Derogation

When the Agency Workers Regulations 2018 (AWR) came into force in the UK on 1 October 2011 to implement a European Directive, it was unclear what effect they would have. This meant it was necessary for those affected – agency workers, temporary work agencies and organisations hiring temporary workers – to wait and see how local Employment Tribunals would interpret them. 

Since that time though, there have been few legal cases and various suggestions that the Regulations may be abolished. So what is the future likely to hold?

Although the full and precise effects of the AWR are quite complicated, in a nutshell, the legislation’s main provisions entitle qualifying agency workers to:

  • Access the same job vacancies and collective facilities that are provided to permanent workers from day one of a temporary assignment; and
  • The same basic employment conditions after 12 weeks of working for a hirer as would have applied had they been recruited directly by the hirer.

But the AWR do not entitle temporary workers to all of the same rights as permanent employees, not least due to the presence of the ‘Swedish Derogation’. Under the terms of the Derogation, if agencies employ agency workers on contracts that comply with certain statutory requirements, including pay between assignments, those workers are no longer entitled to pay that is comparable with the hirer’s permanent employees.

In other words, it is a partial exemption for agencies and hirers. As a result, many hirers that take on high volumes of temporary workers insist that their supplying agencies operate the Swedish Derogation.

Seven years of case law later

The AWR may now have now been in force for seven years, but anecdotally, it appears that many businesses have simply ignored it. In addition, agency workers as a discrete sector of the workforce have little appetite and/or means to undertake litigation.

This means there have been relatively few reported AWR-related cases, although recent decisions include:

  • Brooknight Guarding Limited v Matei:  In this case from earlier this year, a security guard had been employed under a zero hours contract for about 21 months. He mainly, but not exclusively, was supplied to one particular client of the security company he worked for, providing cover as and when required. Therefore, Matei was held to be an agency worker for the purposes of the AWR. The security company that employed him appealed, but the Employment Appeals Tribunal (EAT) upheld the finding. It confirmed that the case rested on whether the security guard was supplied by Brooknight to work temporarily for the client rather than on a permanent basis.
  • Kocur v Angard Staffing Ltd:  In another case earlier this year, the EAT held that:
    • The AWR do not prevent higher payments being made to agency workers than permanent employees. The EAT recognised that market forces sometimes mean a higher hourly rate is required to compensate for the unstable and insecure nature of agency work;
    • Even if an agency worker receives a higher rate of pay, they should also receive the same holiday entitlement as a permanent employee. Put another way, parity of terms must be assessed on a ‘term-by-term’ basis rather than by looking at an individual’s overall package.

The AWR and the European Union 

The AWR implemented the European Union’s (EU) Temporary Workers Directive (2008/104/EC) in the UK.  The Directive itself was many years in the making after being subject to much negotiation and disagreement, with the UK in particular voicing objections. In comparison with other EU member states, the country’s use of agency workers is high.  

What does the future hold for the AWR?

Since the referendum in 2016, commentators have suggested that in a post-Brexit world, some employment laws may be more vulnerable to change than others. Due to the strength of the UK’s initial opposition to the Directive, the AWR’s current unpopularity with UK business, and the fact that, comparatively-speaking, it has not been in force for long means it is top of many peoples’ list of predictions for change - or even total eradication. 

At the time of writing, Brexit is looming, with no exit deal having been agreed. The official line on employment law post-Brexit is that there will be no erosion of workers’ rights,  so at this stage there is no suggestion that the abolition of the AWR is pending.

Indeed, the UK Government’s ‘Good Work Plan’ legislation, which was introduced on 17 December, should mean that agency employees as well as gig economy and zero hour contract workers are actually better protected. The new laws oblige employers to inform individuals of their rights from their first day at work, which includes eligibility for paid and sick leave. Workers also have the right to request predictable hours.

These legislative changes are based on many of the recommendations made in the Taylor Review of Modern Working Practices, which includes scrapping the Swedish Derogation through an amendment to the AWR. The UK Government hopes the move will “ensure workers can access fair and decent work” and provide employers with “greater clarity on their obligations”.

It should certainly ensure the UK’s version is more favourable to agency workers than the underlying European Directive anyway, which the UK was so reluctant to implement in the first place. So ironically, it appears we will be seeing changes to the AWR - just perhaps not in the direction predicted in the aftermath of the Brexit referendum. 

 Anne-Marie Balfour

Anne-Marie Balfour is a solicitor and legal director in the employment, pensions and immigration team at Charles Russell Speechlys LLP.  She advises employers and senior executives on all aspects of employment law. Anne-Marie has particular expertise in employment law with an immigration angle and her articles are frequently published in the national and trade press.