United Kingdom agency worker law

United Kingdom Agency worker law refers to the law which regulates people's work through employment agencies in the United Kingdom. Though statistics are disputed, there are currently between half a million and one and a half million agency workers in the UK, and probably over 17,000 agencies. As a result of judge made law [see "O'Kelly v. Trusthouse Forte plc" [1983] per Sir John Donaldson MR and "James v. Greenwich LBC" per Mummery LJ] and absence of statutory protection, agency workers are less likely than permanent staff to be adequately paid, have reasonable notice before dismissal, and have access to important employment rights.

For most of the 20th century, employment agencies were quasi-legal entities in international law. The International Labour Organisation in many Conventions called on member states to abolish them. However the UK never signed up. The major piece of legislation which regulates agency practices is the Employment Agencies Act 1973, though it was slimmed considerably by the Deregulation and Contracting Out Act 1994. This abolished licenses, so agencies operate without oversight, except for a small inspectorate and occasional court cases. After the 2004 Morecambe Bay cockling disaster, Parliament enacted the Gangmasters (Licensing) Act 2004, requiring agencies (gangmasters) in the agricultural, shellfish and food packing sectors to be licensed.

Recently, the government has been under pressure to enact standards for equal treatment of agency workers, as has been attempted for part time and fixed time workers. An EU Directive, the Agency Workers Directive has been blocked by the British government since 2002, though in 2008 the second attempt at a private member's bill, the Temporary and Agency Workers (Equal Treatment) Bill, promises to introduce equal pay, holidays, leave for mothers and the right to not be dismissed for joining a union for agency workers. In its current form the bill would not, however, change that agency workers can be fired at will without notice, have no general unfair dismissal right, no redundancy right, no right to a written statement of their contract, no right to request flexible working time, no parental or paternity leave and more of the "employee" rights under the Employment Rights Act 1996.

History and international law

Employment agencies have had an ambiguous status on the international field since the mid nineteenth century. In the United States, during World War One a case named "Adams v. Tanner", 244 US 590 (1917) saw one of the first legal battles over their status. Washington's state government had banned all employment agencies, because of their exploitative effects on the labour market. But by a slim majority, the conservative judges on the US Supreme Court held that the ban was "unconstitutional". The liberal judges dissented in strong terms. Justice Brandeis cited documents from the US Department of Labor as to why employment agencies should be regarded with suspicion. Probably inspired by the dissenting judgments in this case, the International Labour Organization's first ever Recommendation, called for each member state to,

"take measures to prohibit the establishment of employment agencies which charge fees or which carry on their business for profit. Where such agencies already exist, it is further recommended that they be permitted to operate only under government licenses, and that all practicable measures be taken to abolish such agencies as soon as possible." (Unemployment Recommendation, 1919 (No.1), Art. 1)

This was followed up by the ILO's second ever Convention, the Unemployment Convention, 1919. Art. 2 required the alternative of,

"a system of free public employment agencies under the control of a central authority. Committees, which shall include representatives of employers and workers, shall be appointed to advise on matters concerning the carrying on of these agencies."

In 1933 the Fee-Charging Employment Agencies Convention (No.34) formally called for abolition of all profit making employment agencies. There could be temporary exception was if the agencies were licensed and a fee scale was agreed in advance, before phasing them out. In 1949 a new revised Convention (No.96) was produced. This kept the same scheme, but secured an ‘opt out’ (Art.2) for members that did not wish to sign up. Most of continental Europe had, but the English speaking world had not.

By this time, agencies were an increasingly entrenched part of the labour market. The UK government never signed up to any of the Conventions. And although the US Supreme Court later repudiated the decision in "Adams v. Tanner", the US government also failed to adhere to the Conventions. In 1991, the European Court of Justice decided "Höfner & Elser v. Macrotron GmbH", ["Höfner and Elser v. Macrotron GmbH" [1991] ECR I-1979 ( [http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!CELEXnumdoc&lg=en&numdoc=61990J0041 C-41/90] )] a case in EC competition law concerning the German public monopoly on recruitment services. This said that Germany was in breach of the European law of monopolies by not allowing the market to be open to private competitors. The ILO then acquiesced, between the United States and European Union status quo. The latest Convention, the Private Employment Agencies Convention, 1997 takes a much softer stance and calls merely for regulatory oversight of employment agencies. It is less interventionist than the UK's own legislation.

Employment agency regulation

The Employment Agencies Act 1973 regulates the conduct of the 17,000 odd agencies operating in the UK. It prohibits most agencies charging upfront fees, makes it an offence to put out misleading advertising for jobs which do not exist, set standards for assessing an employee's experience, and more. It was introduced after similar (though stronger) legislation was passed in France and Germany regulating agencies (for Germany, see [http://de.wikipedia.org/wiki/Arbeitnehmer%C3%BCberlassungsgesetz "Arbeitnehmerüberlassungsgesetz"] ). The 1973 Act was amended by the Conservative government through the Deregulation and Contracting Out Act 1994, ostensibly to increase efficiency. It abolished the system of agency licensing, so that agencies can operate freely, unless inspectors find violations and close them down.

Supporting the Act are [http://www.uk-legislation.hmso.gov.uk/si/si2003/20033319.htm The Conduct of Employment Agencies and Employment Businesses Regulations 2003] . These regulations restrict agencies from,

*selling other services (r.5)
*sending workers to employers as strike breakers (r.7)
*sharing the agency worker's personal details (r.28)
*advertising jobs which do not exist (r.27)
*witholding pay from workers, regardless of whether they have timesheets
*charging any fees to directly worker for their work
*require agencies to document the health and safety standards of employers they send workers to
*require agencies to give a written statement of the pay and hours they will have, and state their contractual status (see the common law section below)

In reality these requirements are not enforced, because there are minimal resources devoted to oversight. Regulation enforcement relies on individual workers bringing claims, and these claims are simply non-existent. There is no reported case of an agency worker claiming a breach of regulations. The only watchdog, the Employment Agency Standards Inspectorate, has 15 inspectors and 4 call centre staff. In a £26 billion industry with 17,000 agencies, in 2004 the Inspectorate investigated a mere 1,057 complaints, secured 8 convictions (solely in the entertainment industry, 2 agencies were banned for 10 years) and £5,735 in compensation for workers. [ HC Hansard, 5.7.05, [http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo050705/text/50705w16.htm#50705w16.html_wqn3 col. 284W] , HC Hansard, 23.6.04, [http://www.publications.parliament.uk/pa/cm200304/cmhansrd/vo040623/text/40623w15.htm#40623w15.html_sbhd7 col. 1455W] ]

The Gangmasters (Licensing) Act 2004 covers the most vulnerable workers in a more comprehensive way. It was introduced in the wake of the 2004 Morecambe Bay cockling disaster. It requires all agencies (commonly known as "gangmasters") which provide labour in the agricultural, shell fishing and food packaging sectors to operate under a license. The Gangmasters Licensing Authority issues these (currently there are 1,159 licenses) and it oversees and enforces standards requiring employees to be treated fairly.

Common law

Significant problems are encountered by agency workers because of the interpretation by the courts of the word "employee" under s.230 of the Employment Rights Act 1996. If you are considered an "employee" then all the rights (such as a written statement of contract, reasonable notice before dismissal, time off for parenting, etc) under the Employment Rights Act 1996 apply. But the courts have often held that agency workers fall outside of this definition, because they lack "mutuality of obligation" in their contracts.

This development in the common law is uniquely linked to the key figures of "New labour". Tony Blair, before entering politics and becoming Prime Minister, was an employment law barrister, who usually acted for employers. His pupil master was Alexander (Derry) Irvine, who was later appointed Lord Chancellor by Blair. In 1983, Margaret Thatcher had just appointed Sir John Donaldson MR to replace Lord Denning MR as the Master of the Rolls. To Donaldson's court came the case of "O'Kelly v. Trusthouse Forte plc". ["O'Kelly v. Trusthouse Forte plc" [1983] ICR 728] Some waiters worked through an agency at various dinner functions. They tried to form a union. They were dismissed. They claimed that this was unfair, and to do that, they had to show they were "employees" within the meaning of the unfair dismissal legislation. The word "employee" had hitherto always been taken to mean someone who is obviously not in business on his own account [per Cooke J. in the "Market Investigations case" [1969] 2 A.C. 173, "Is the person who was engaged himself to perform these services performing them as a person in business on his own account?" See also, per Lord Denning MR, "Massey's case" [1978] I.C.R. 590, at p. 596B; Also, "Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance"] (i.e. not "self employed"), but recognised as subordinate labour, economically dependent on the employer. However, Alexander Irvine QC argued that the waiters had no "mutuality of obligation" with the employer: they were not bound to accept work engagements when they were called up, and the employer was under no obligation to call them up. They could leave, or be fired, at will. Sir John Donaldson accepted this argument, and so for the first time, vulnerable workers like the waiters were excluded from the scope of protective employment legislation. Not all judges took the same view. In "Nethermere (St. Neots) Ltd. v. Gardiner" ["Nethermere (St. Neots) Ltd. v. Gardiner" [1984] ICR 612] similarly vulnerable workers, this time home working ladies stitching flaps onto trousers were held to be employees within the meaning of the Act. The leading judge, Stephenson LJ, held that "mutuality of obligation" was nothing to do with the promise of future work, but simply the exchange of work for a wage, and control over one's job by the employer in the employment contract. Before the case got to the Court of Appeal, young Tony Blair had been arguing the exact opposite in the Employment Appeals Tribunal, that "O'Kelly's case" should be followed. But so far as the position of agency workers went, the damage was already done. Agency workers were presumed to fall outside the scope of protective employment legislation. In 1997, when Tony Blair stood at the head of New labour's election victory, the approach to employment policy he brought was one of upholding "labour market flexibility". The position of agency workers was reaffirmed when Derry Irvine was appointed Lord Chancellor, and he sat in on and gave the leading judgment in "Carmichael v. National Power plc". He reasserted his view of "mutuality of obligation", in the way that continues to keep workers without secure employment outside the scope of employment protection. It is notable that the Constitutional Reform Act 2005 removed the power of the Lord Chancellor to decide on cases in this manner, for being an incursion on the separation of powers within government.

As it stands, current authority is still ambivalent. On the one hand, the recent case of "Dacas v. Brook Street Bureau (UK) Ltd" [2004] IRLR 358 held that an agency worker would be the "employee" of the end-employer. But then a slightly differently constituted Court of Appeal in "James v. Greenwich LBC" [2008] EWCA Civ 35 has held that a contract of employment only exists with the agency itself. A curious feature of this ongoing debate is that employment agencies themselves have been completely impervious to the law. Despite the fact that court cases for the last five years have always found an agency worker to be an "employee" of at least someone, neither end-employers nor employment agencies regard themselves as the employers who are bound by any of the Employment Rights Act 1996 rights.

Curiously in UK law a contractor can be found caught by the tax initiative IR35, that is to say there is a virtual ("deemed") employment because that would be the case had the contract between worker and hirer been direct and the worker is then subject to extra taxes to compensate the government in that regard, yet they still have no apparent employment rights. This is partly because the Tax Commissioners and the Employment Tribunals and Tax and Employment Law respectively allow for different treatments, much to the annoyance of the UK workers concerned.

ecuring equal pay and hours

Even if agency workers had any of the existing rights under the Employment Rights Act 1996, what none of them guarantee is equal pay for agency workers for work of equal value by a comparable permanent employer. An agency worker can be treated less favourably in his or her pay and conditions than someone doing exactly the same job, simply because they come through an agency. The proposed Temporary and Agency Workers (Equal Treatment) Bill seeks to adjust this position, joining another ten pieces of employment discrimination law in the UK (on gender, race, disability, religion, sexuality, age, part time work, fixed time work and trade union membership). It is understood that the law will be passed, but with a 12 week wait before agency workers will be eligible for equal pay and hours.


The Temporary and Agency Workers (Equal Treatment) Bill is a private member's bill, introduced by Andrew Miller MP in February 2008, and has currently passed its Second Reading in the House of Commons. This obliges employers to treat agency workers and permanent staff equally in their contract terms on (cl.1 read with cl.5),

*Hours and holiday time
*Pay, including sick pay
*Time off for parenting (for women only)
*Discrimination law (though this is unnecessary because agency workers are already explicitly covered in existing laws [Sex Discrimination Act 1975 s.9; Race Relations Act 1976 s.7; Disability Discrimination Act 1995 s.12; Equality in Employment (Religion or Belief) Regulations 2003 r.8; Equality in Employment (Sexual Orientation) Regulations 2003 r.8.] )

While representing significant change, the Bill does not change agency workers' vulnerability to being fired at the will of the employer. The courts are in two minds about whether agency workers should be considered "employees" (under s.230 ERA) and importantly who they should be considered "employees" of. Confusion in the courts has encouraged more claims, and has prevented the enforcement of clear rights. Agency workers have almost none of the main rights under the Employment Rights Act 1996. None of this is covered in the Bill. That means agency workers will still have no,

*Right to reasonable notice before dismissal (s.86 ERA)
*Right to written statement of contract (s.1 ERA, these two rights form the bedrock of individual labour law, since they were the first national minimum standards to be introduced in the Contracts of Employment Act 1963)
*Right to request flexible working time (s.80F)
*Right to parental and paternity leave (in Part VIII)
*Right to redundancy payments (s.135)
*Compensation from the government for lost earnings when an employer goes insolvent (s.182)

In cl.4(1) the Bill does create a right to have access to an Employment Tribunal under s.111 ERA 1996. This gives any person the right to bring an unfair dismissal claim against an "employer", and the Bill expressly provides in cl.4(2) that for this purpose both the agency and the end-user are employers. However, in an action for unfair dismissal, the claimant would need to should that an employer had (unsurprisingly) in some way acted "unfairly" (s.98 ERA 1996). The way people demonstrate "unfairness" is to show that some pre-existing right has been breached. If an agency worker is not considered an "employee" then he will probably not be able to rely on the ERA 1996 rights which require it. So while the rights in the proposed TAW(ET) Bill would be effective, those in the ERA remain ineffective.


The Bill is modelled, more or less directly, on the proposals put forward by the European Commission for a draft Temporary and Agency Worker Directive ( [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52002PC0149:EN:HTML COD 2002/0149] ). This proposal was itself shelved, because of the UK government's consistent opposition to agency regulation, in the interests of labour market flexibility. According to newspaper reports, [see, Carl Mortished, ‘UK turns against EU merger law in deal with Germany,’ "The Times", 19 May 2003. According to the report, "The Commission is hoping to have the Takeover Directive passed with Mediterranean support but Germany wants a compromise to strip the law of key articles that prevent management using takeover defences and poison pills without prior authorisation. The UK Cabinet is believed to have abandoned support for the free market principle and, instead, formed an alliance with Germany in return for its support in wrecking the Temporary Agency Workers Directive. "The Brits have sold the City down the river," a source close to the talks said. Britain has been fighting a desperate battle to prevent the introduction of rules that give temps the same employment rights as full-time workers."] the UK got the backing of Germany to torpedo the draft Directive in return for the UK to help sink the Takeover Directive (Germany has comprehensive agency work regulation under its [http://de.wikipedia.org/wiki/Arbeitnehmer%C3%BCberlassungsgesetz "Arbeitnehmerüberlassungsgesetz"] and its Civil Code, esp §622, and the UK has strong Takeover Regulation, especially Rule 21 of the City Code [for interesting discussion, see David Kershaw, [http://journals.cambridge.org/production/action/cjoGetFulltext?fulltextid=1535604 'The Illusion of Importance'] (2007) 56 "ICLQ" 267] ). The significant difference between the proposed Directive and the Bill is that the former UK government managed to insert a 6 week qualification period in the Directive before the equal treatment rights click in (Art. 5(4)). The Bill has no proposed qualification period, though voices in the City have been calling for this to be one year. The latest reports suggest a 12 week qualifying period has been agreed between the private MP backers and the government, meaning a significant step back from the protection the Directive would offer. The Directive included equal treatment only for pay, hours, parental rights and anti-discrimination (Art. 3(1)(d)). A significant omission therefore was any regulation on reasonable notice before dismissal (in the UK, ERA s.86).

Before the United Kingdom general election, 2005, the trade unions and the government made the so called Warwick Agreement (after its signing place, the University of Warwick). This included a promise on the government's part to reverse its opposition to the European Directive. But by 2007, the government was yet to deliver, and Paul Farrelly MP introduced the Temporary and Agency Worker (Prevention of Less Favourable Treatment) Bill. It mirrored the Directive in all respects, save that there would be no 6 week qualifying period. In that period's climate, the Bill did not gain enough attention and was talked out of time. In the Court of Appeal case "James v. Greenwich LBC" ["James v. Greenwich LBC" [2008] [http://www.bailii.org/ew/cases/EWCA/Civ/2008/35.html EWCA Civ 35] ; See the judgment by Elias J in the EAT, "James v. Greenwich LBC" [2006] [http://www.bailii.org/uk/cases/UKEAT/2006/0006_06_1812.html UKEAT/0006/06] ] which further entrenched the subordinate position of agency workers, [see especially, this summary from Counsel for the employer who won the case, Jonathan Cohen at Littleton Chambers, [http://www.littletonchambers.com/Judgement-Details.aspx?judgementID=358 Judgement details] (19.02.08)] Mummery LJ pronounced it "doomed to failure for lack of support from the Government". But no sooner as that had been said, almost exactly the same Bill was reintroduced by Andrew Miller MP, with a small title change to emphasise "Equal Treatment" rather than "Prevention of Less Favourable Treatment". Identical in every way, save a tighter definition of employment agency and more provision for regulatory enforcement, it won the support of almost the whole Labour bench in the House of Commons. It was being heard in Committee each Wednesday morning as from May 7th. As of May 21st, the government has signalled that it will allow something similar to the Bill, but not the Bill itself, to be passed. It will incorporate a 12 week waiting period before the right to equal pay and time off begins, or 6 weeks less protection than the original 2002 Directive. [Patrick Wintour, [http://www.guardian.co.uk/politics/2008/may/21/tradeunions.gordonbrown 'Agency and temporary workers win rights deal'] , "The Guardian", (21.5.2008)]

ee also

*UK labour law
*Employment Agencies Act 1973
*Gangmasters (Licensing) Act 2004
*Employment Agency Standards Inspectorate
*Agency Workers Directive


External links

*Proposed Agency Workers Directive [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52002PC0149:EN:HTML COD 2002/0149]
** [http://www.publications.parliament.uk/pa/cm200708/cmbills/027/08027.i-i.html Temporary and Agency Workers (Equal Treatment) Bill 2007] , a proposal which has currently (13/3/2008) passed its second reading. Here is the Bill in a [http://www.publications.parliament.uk/pa/cm200708/cmbills/027/2008027.pdf pdf file]

*Directive [http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:31997L0081:EN:HTML 97/81/EC] on Part time workers
**Implemented under Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, [http://www.opsi.gov.uk/si/si2000/20001551.htm SI 2000/1551]

*Directive [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0070:EN:HTML 99/70/EC] on Fixed term workers
**Implemented under Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, [http://www.opsi.gov.uk/si/si2002/20022034.htm SI 2002/2034]

* [http://www.atsco.org/files/ATSCoPresentation020507-DenisPennel.ppt Powerpoint presentation] on the state of the EU market from the European Confederation of Private Recruitment Agencies.

*Directive [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31991L0383:EN:HTML 91/383/EEC] of 25 June 1991 supplementing the measures to encourage improvements in the safety and health at work of workers with a fixed- duration employment relationship or a temporary employment relationship.

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