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Agency Workers Directive will be law ‘in the coming few months’, confirms PM Brown

Contractors’ hopes that the Agency Workers Directive (AWD) might receive due consideration before implementation have been dashed, with Prime Minister Gordon Brown confirming new legislation will go before the next session of Parliament.

In his speech to the 2009 Trades Union Congress in Liverpool, Brown said: “…when Parliament returns, our new legislative programme will include equal treatment for agency workers and … in the coming few months the law will be on the statute book.”

Agreed in a ‘beer and sandwiches’ deal between the Trades Union Congress, The Confederation of British Industry and the government in May 2008, the AWD has the honourable intention to protect vulnerable agency workers.

The idea behind it is to provide agency workers with the same pay, conditions and employment rights as permanent employers after 12 weeks working on a continuous assignment for the same client. But many fear that highly paid contractors, who few would class as ‘vulnerable workers’, may be swept into the AWD’s catch-all approach, particularly if it is rushed into law without all the consequences being thought-through.

Consultation ignored

Brown’s statement leaves no doubt that the responses by contractors and contracting sector organisations to the consultation held by the Department of Business, Innovation and Skills (BIS) have failed in their attempts to delay the AWD’s implementation.

When Parliament returns, our new legislative programme will include equal treatment for agency workers and in the coming few months the law will be on the statute book

Gordon Brown, Prime Minister

Industry bodies have called for the implementation process to be delayed. This would allow for a sufficient period of analysis of the likely impact of the complex new legislation on the UK labour market, and specifically the contracting sector.

Early implementation and a rushed consultation process could very well result in a situation similar to when IR35 was launched; a law that might be poorly thought through, inconsistent, ambiguous and unworkable.

And there is no need for this rush – according to European law, the AWD legislation does not actually have to be implemented until December 2011. Brown’s announcement clearly means that the AWD could become law as soon as April 2010.

In view of the TUC forum in which the Prime Minister chose to make the announcement, it seems it could be being rushed through as part of a ‘sweetener’ to the unions, to mitigate their potential backlash against inevitable public sector spending cuts.

Implications for contractors

Until the draft legislation is published for a second consultation, the exact impact on contractors is not known. However, a close reading of the BIS consultation document suggests that the effect of new laws on contractors is likely to be mixed.

Limited company contractors are thought to be excluded by the AWD, as they fall outside the definitions of ‘workers’ used by BIS in its consultation. Umbrella contractors, however, would almost certainly fall inside any new laws and qualify for equal treatment.

Following confirmation that the AWD will be considered in the next session of Parliament, it is likely that the draft legislation will have to be published, possibly as soon as October, and any consultation period will, by necessity, be very short. There is always the chance, however, that the coming general election might fall before the legislation can be enacted, which would result in the next government having to take a fresh decision on the AWD’s implementation.

The UK’s experience of implementing European directives before other member states, and thus foregoing to opportunity to learn lessons from others, has been poor. So, whatever the outcome, it is unlikely to be good news for contractors.

Published: 16 September 2009

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