Does recent case spell trouble ahead for agency workers?

The Employment Appeal Tribunal’s recent decision in Kocur v Angard Staffing Solutions Ltd means that an agency worker’s statutory rights to certain equal terms cannot be bought out by paying the worker a higher rate of pay than its permanent staff. Agency workers have traditionally been used by businesses for their flexibility – does this decision mean that agency workers have lost their flexibility and therefore their appeal to businesses?

The Agency Workers Regulations 2010 (the Regulations) protect agency workers who have worked in a job for at least 12 weeks by entitling them to the same terms and conditions as permanent employees in respect of pay, duration of working time, night work, rest periods, rest breaks and annual leave. However, it was not clear from the Regulations whether each of these terms must be looked at individually or together as a package when assessing equality of terms against those of permanent employees. The Employment Appeal Tribunal (“EAT”) has now confirmed that each term must be looked at individually.

In this case, Angard Staffing Solutions Ltd employed Mr Kocur and supplied his services to Royal Mail Group Limited under an agency arrangement. Once he had worked there for 12 weeks, in accordance with the Regulations, Mr Kocur was entitled to equal treatment with the permanent employees of Royal Mail Group. However, he brought claims against both the agency and the hirer for breach of the Regulations because, whilst he received a higher rate of pay than permanent employees, he was only paid for half an hour of the one hour daily break, unlike permanent employees who were paid for the entire hour, and he only received 28 days’ holiday, as compared to 30.5 days for permanent staff. The Employment Tribunal rejected his claim, holding that his more favourable pay compensated him for his less favourable terms.

On appeal, the EAT disagreed and upheld his claim. Its key findings were as follows:

• The EAT held that there is nothing in the legislation that allows an agency or hirer to offset less favourable terms with more generous pay.
• However, the EAT held that the mechanism for payment to achieve equality of terms can potentially be different for agency workers as compared to permanent employees. For example, an agency worker could be paid a lump sum or rolled-up amount to ensure that they are no worse off overall as compared to a permanent employee. However, the payment mechanism used must be transparent and it must be clear to the agency worker precisely what aspect of his pay relates to annual leave and/or rest breaks. In this case, it was not clear from the payslips how Mr Kocur’s enhanced hourly rate compensated him for the 2.5 days’ deficit in holiday and the unpaid rest break, meaning the Regulations had been breached.
• Further, the EAT held that agency workers are not entitled to the same number of weekly hours as a permanent employee. The EAT held that the Regulations seek to achieve a balance between flexibility for businesses and security for agency workers, and therefore any requirement that there is to be a precise equivalence between an agency worker’s hours and those of the permanent employees would entirely remove the flexibility inherent in the agency/hirer relationship.

Can businesses still afford to use agency workers in light of this decision?

Both recruitment companies and hirers will no doubt be relieved that this case does not mean agency workers must be entitled to the same number of weekly hours as permanent employees as this would surely mean the death knell for agency workers, whose appeal to businesses typically lies in them being a “turn on, turn off” resource. However, the terms and conditions of agency workers who have worked in a job for at least 12 weeks should be carefully reviewed following this decision to ensure that their pay, duration of working time, night work, rest periods, rest breaks and annual leave are, at least, equal to that of permanent employees, regardless of whether (as is often the case) they receive a higher basic rate of pay to compensate for the unstable and irregular nature of such work. Alternatively if staffing agencies or businesses do want to compensate agency workers for less favourable rights to time off, they will need to be transparent as to precisely what elements of overall pay are attributable to the time off, including on pay slips (from the agency). Failing to do so could lead to expensive claims against both the recruitment agency and the hirer. The hirer may well need to negotiate with the agency in this regard.

Key points

• Businesses using agency workers should review their pay, working time, night work, rest time and holiday to ensure they are no less favourable than permanent employees.
• Payslips from the agency should be amended if necessary to demonstrate that agency workers are on no less favourable terms.
• Both agencies and hirers should review their respective contracts to deal with the risks of these potential types of claims being brought.