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AGENCY WORKERS (Page 1)

Updated: 02 April 2008

Where to find the law:
the private-sector employment recruitment industry, the purpose of which is to supply work-seekers for temporary or permanent employment, is regulated by the -

Employment Agencies Act 1973 (EAA 1973) and the statutory regulations made under this Act, the main one being the -

Conduct of Employment Agencies and Employment Businesses Regulations 2003, SI 2003/3319 that came into force on 06 April 2004, except for Regulations 26(7) and 32 which apply to work-seekers who have set up their own limited companies through which they offer their services to agencies and employment businesses, the operative date is 06 July 2004.

Guidance: the Department for Business, Enterprise and Regulatory Reform (DBERR) has published a guidance document to assist those who require advice and help in implementing the new Regulations - 'Guidance on the Conduct of Employment Businesses Regulations 2003.' The guidance refers to the general duty that employment agencies and businesses must comply with as regard other legislation governing such things as equal opportunities, equal pay, health and safety, immigration, national minimum wage, working time regulations as well as trade union membership rights. This guidance is available on the DBERR website - www.berr.gov.uk or www.berr.gov.uk/employment-agencies/index.html
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For background information: see the consultative document commissioned by the Government - 'Regulation in the Private Recruitment Industry' (URN 99/774) published in May 1999.

Interesting facts about agency work: see at the end of these web pages.

Note: the private-sector recruitment industry was previously regulated by the Conduct of Employment Agencies and Employment Businesses Regulations 1976, SI 1976/715 (the CEAEB Regulations) which were revoked as of 06 April 2004. The growth in third-party recruiters and employers, particularly in the UK, has come about - in part - as a result of primary employers seeking to minimise or avoid their statutory employment obligations to workers and employees in response to an increase of protective employment rights awarded to them, mainly by legislation originating from the European Union, in recent years. As rights have been awarded to employees, some employers have responded by seeking to side-step the obligations imposed on them and they have done this by distancing themselves - by using employment businesses and agencies - from the workers they employ, particularly those who they employ in secondary or tertiary jobs. Initially, this business model has been successful but only until the legislators (and sometimes the courts) enforce or change the laws to re-establish the legal protection to which they believe employees and workers in general need and are intended for the benefit of the whole community. However, some industrial sectors do legitimately require temporary workers and some workers legitimately require temporary work.

Legal definition of an agency worker: an agency worker is a work-seeker who works for an employment business or is recruited by an employment agency for a specific or indefinite period. A potential employee or worker who seeks employment through an employment business or agency is called a 'work-seeker' rather than a 'job-seeker:' Reg.2. The person or organisation to whom a work-seeker is assigned or supplied is a 'hirer:' Reg.2.

Legal definition of 'employment agencies' and 'employment businesses:'
the legal definitions of these are different from how people ordinarily describe them. Employment agencies supply permanent employees to hirers (employers) whereas employment businesses provide temporary workers to hirers/clients. For example, a company might use an employment agency to recruit a permanent sales manager but use an employment business when seeking a temporary secretary.

'Employment agency' is defined as a business that engages in 'providing services (whether by the provision of information or otherwise) for the purpose of finding persons employment with employers or of supplying employers with persons for employment by them:' s.13(2) EAA 1973.

'Employment business' is defined as a business that engages in 'supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity:' s.13(3) EAA 1973.

An 'employment business' engages work-seekers directly and supplies them on a temporary basis 'to act for and under the control of' the hirer:' s.13(3) EEA 1973. The most common arrangement is that the hirer pays the employment business that then subtracts its fee and pays the worker the wages due to her or him. This kind of business is colloquially known to many as a 'temp agency' but, as mentioned above, the term 'agency' under the Regulations is used to describe private-sector recruitment agencies which recruit and supply permanent employees to hirers.

Recruitment businesses termed 'employment agencies' are in business to find employment for work-seekers with hirers or to supply hirers who need work-seekers who are looking for employment: s.13(2) EAA 1973. The term 'employment agency' includes recruitment agencies and so-called 'head-hunters.' The hirer (i.e. the employer) pays the work-seeker (who may be employed as either an employee or worker on a permanent or open-ended contract) her or his wages directly as agencies are, in general under the Regulations, prohibited from paying or administering the payment of remuneration: Reg.8.

Note: a recruitment/employment firm can operate as both an employment business and an employment agency but it may not, in respect of the same assignment, hold itself out to the hirer as an employment business and to the work-seeker as an agency or vice-versa: Reg.9. The purpose of this Regulation is to ensure that all parties are clear as to the basis of the arrangement and that the agency or employment business is not trying to negate its obligations under the Regulations.

Note: the NHS operates an in-house agency that is exempt from the statutory Regulations which govern the private-sector recruitment/employment agencies and businesses. The same applies to nursing agencies which have their own regulatory scheme as do certain other types of organisations - for the full list see s.13(7) EAA 1973.

What do the 2003 Regulations do?
The new 2003 Regulations impose greater control over employment agencies and employment businesses. The Regulations also restrict the circumstances in which transfer fees can be demanded by employment businesses from employers when they, the employers, employ temporary work-seekers on a permanent basis. Although no limit is set on the amount of transfer fee payable, none is payable in the following circumstances: -

(1) where an employment business does not include the option of an extended hire
period in its contract with the hirer;

(2) after eight weeks from the end of the assignment or;

(3) 14 weeks from the beginning of the first assignment, whichever ends later.

What employment agencies and employment businesses must do under the Regulations:
agencies and businesses are now required to obtain 'sufficient information' when selecting a 'suitable work-seeker.' This includes getting details about the work, pay, benefits and notice period. They must also check that the work-seeker has the necessary experience, qualifications and training to do the work as well as obtain confirmation from the work-seeker that he or she is suitable. If an employment business discovers something that suggests a work-seeker may be unsuitable then it has an ongoing duty to pass that information on to the hirer. Likewise, an agency has a similar responsibility during the three-month period after it introduced the new employee. Whether the work-seeker is unsuitable may be revealed by enquiries made by the agencies and businesses during the recruitment process - see also negligence (negligent mis-statements and misrepresentation).

Written contracts are required:
employment agencies and employment businesses must give hirers and work-seekers written contracts. These written terms of business must be agreed in advance, either between itself and a work-seeker or between itself and a hirer. Specifically, the terms agreed must state whether the recruitment/employment firm is acting in an employment business or employment agency capacity: Regs. 14 and 17. The written contracts must give details of entitlement to holidays and whether a work-seeker will be working under a contract of service or for services. If the latter, before providing services to a work-seeker, terms must be agreed and recorded in a single document given to the work-seeker or, alternatively, in a number of documents given at the same time: Reg.14(2). This requirement will clarify the employment status of work-seekers. But a work-seeker's stated employment status may not necessarily be her or his true employment status. It may, instead, be a mere 'label.' If so, it may be voidable.

Two Court of Appeal decisions have shown that it is possible for an implied contract of employment to arise between a work-seeker and the hirer (instead of between the work-seeker and the employment business). The Court held that, in certain circumstances, an implied contract could arise between a work-seeker and the hirer when the temporary worker has more than one year's service with the hirer even though there was an express employment contract between the work-seeker and the employment business: Franks v Reuters Ltd (2003) IRLR 423; Brook Street Bureau (UK) Ltd v Dacas (2004) EWCA Civ 217. See below for case authorities. (But note that in a number of cases so far (September 2007), the Employment Appeal Tribunal has not followed the obiter judgment of the Court of Appeal in Dacas (2004)).

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