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Contracting and AWR: The history of the Agency Workers Regulations

ContractorCalculator and Parasol review the history of the Agency Workers Regulations and identifies the process by which the original European Commission directive became the legislation coming into force on 1 October 2011. This is the first in a series of articles published by ContractorCalculator in association with Parasol providing expert guidance for contractors on the Agency Workers Regulations.

Contractors worrying about the effects of the Agency Workers Regulations (AWR) may be surprised to learn that the legislation was originally intended to promote “more flexible forms of work”. The theory was that AWR would facilitate Europe’s transition towards a knowledge-based economy; the reality may prove very different.

In fact, when the Agency Workers Regulations come into force on 1 October 2011, many fear that they have the potential to have a profound and largely negative impact on the UK’s flexible labour market generally, and on contractors and contracting specifically.

But why did the UK require these new employment laws and how have they evolved into the legislation coming into force in October? We examine the history of the Agency Workers Regulations, and the Agency Workers Directive (AWD) on which the regulations are based, to help understand the impact the new rules will have on contractors and contracting.

Why Europe needed an Agency Workers Directive

Proposals to tighten up Europe-wide legislation covering temporary workers had been debated for some years before the original formal proposal for the Agency Workers Directive was published by the Commission of the European Communities in March 2002.

Up until that point, treatment of temporary workers across the European Union’s member states varied hugely. In some member states, temporary labour markets were dominated by vulnerable low paid and low skilled agency workers, who were frequently abused by hirers and agencies.

At the other end of the scale, markets like the UK include substantial numbers of highly paid and highly skilled knowledge workers, such as contractors and freelancers, who would fiercely deny any suggestion of vulnerability.

The Agency Workers Directive was created to provide European Union member states with a common approach to regulating their temporary labour markets. In some countries it would also protect temporary workers from abuses by hirers and agencies.

What the Agency Workers Directive set out to achieve

As already mentioned, the original intention was for the AWD to promote Europe’s knowledge economy and flexible working.

This has been considerably watered down. Now, the main thrust of the AWD is to ensure that temporary workers receive equal treatment from their hirers, comparable to if they’d been recruited as a permanent employee for the role. Specifically, article 5 of the directive says:

The basic working and employment conditions of temporary agency workers shall be, for the duration of their assignment at a user undertaking, at least those that would apply if they had been recruited directly by that undertaking to occupy the same job.

The idea was that unscrupulous hirers, aided by agencies, couldn’t ship in lots of low paid temps to take the place of expensive employees, as is common practice in some member states. However, and crucially, the directive did not clarify or change the employment status of agency workers.

What took the next five years to resolve was the qualification period, ie the length of time a temp would work on a given assignment before being awarded equal pay and conditions.

And, although the then Labour government did a deal, the Warwick Agreement, with unions promising to implement the directive, the UK then successfully blocked progress throughout that period. The government argued that the proposed directive was more likely to destroy jobs by making temps a much less attractive option for hirers.

Deadlock breaks in December 2007

A series of events led to the UK losing its ability to block progress on the directive in December 2007. A combination of concessions granted over the working time opt-out provisions and domestic pressure from the UK finally resulted in agreement over the qualification period.

And then what sealed the deal was a back-room agreement between the Trades Union Congress (TUC) and the Confederation of British Industry (CBI), two of the UK’s social partners working towards agreement on the directive. They finally agreed on a qualifying period of 12 weeks as the time after which temporary workers gained the same rights as their full-time counterparts.

In June 2008 the European Council agreed on a common position over the directive, and in October 2008 the European Parliament approved the directive without amendment. At long last, and after six years of wrangling, the Agency Workers Directive was passed.

How the ‘directive’ became ‘regulations’

Once the final form of the Agency Workers Directive was agreed, with the qualifying period set at 12 weeks and further amendments, such as the Swedish Derogation, negotiated by other member states, progress towards the Agency Workers Regulations was swift. Some might say too swift, and that the schedule did not allow time for proper scrutiny.

The first stage of consultation on the draft directive, plus the CBI/TUC proposals and when the regulations should come into effect all took place very quickly, between May and June 2009.

Then, during another short period in October to December 2009, the Department for Business, Innovation and Skills (then the Department for Business, Enterprise and Regulatory Reform), consulted over the draft regulations.

The AWR becomes law, but implementation is delayed

The draft Agency Workers Regulations, as the directive had now become, in turn were laid before Parliament on 21 January 2010, allowing just a few short weeks for consultation and scrutiny. However, despite the indecent haste in which the process had been rushed through up until then, it suddenly slowed down, as the then Business Secretary Lord Mandelson delayed implementation until 1 October 2011. This was to allow UK businesses to prepare for the new legislation.

Contractors will face a period of uncertainty immediately following 1 October 2011, when some of the equal rights under the AWR must be granted to agency workers

There is still considerable concern over how the Agency Workers Regulations 2010 will impact on the UK’s flexible workforce. The guidance published by BIS in May 2011 still leaves many questions unanswered, particularly over what sort of workers are in scope and what tests will be applied to determine whether a limited company contractor is considered to be covered by the AWR.

Contractors will face a period of uncertainty immediately following 1 October 2011, when some of the equal rights under the AWR must be granted to agency workers. Another crucial time will be the weeks following 31 December 2011, which represents the first 12 week period after the legislation comes into force.

From that time, the first cases will be brought to the employment tribunals, and hirers and contractors alike will start to understand the reality of the risks they face as a result of the AWR.

The second part of this series offering guidance on the Agency Workers Regulations published by ContractorCalculator in association with Parasol will detail current thinking of precisely who will be within scope of the regulations when they come into force on 1 October 2011.

Published: 13 July 2011

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