Agency Workers Claim Compensation from Hirer, Not Agency

The London Underground Case

An agency, Trainpeople.co.uk (TP), placed the Claimants on a temporary basis to work for London Underground (LU). The Claimants were being paid less than comparable employees that were employed directly by LU, contrary to the Agency Worker Regulations (AWR). Although LU flagged this issue and readjusted the payment to TP as well as making a payment in respect of back pay to TP for them to pass on to the Claimants, TP failed to pay the Claimants any of the extra money and subsequently went into liquidation.

The Employment Appeal Tribunal (EAT) held that LU were accountable for 50% of the failure but that they did not have to pay the compensation to the Claimants as it was not "just and equitable" because they had already paid the back pay once. The Court of Appeal (CoA) overturned the second aspect, finding that given LU were liable for 50% of the failure, they should pay 50% of the compensation owed to the Claimants regardless of the payment already made to TP.

What Is the Law?

Under the AWR, once an agency worker has worked for 12 continuous weeks in the same role, they are entitled to "the same basic working and employment conditions" as they would have been entitled to, had they been recruited by the hirer directly to do the same job. This includes the right to be paid the same for the work they do as direct recruits.

Who Is Liable - Hirer or Agency?

Where there has been an infringement of the AWR, for instance where agency workers have been paid less than directly employed workers, those workers can bring a claim against whoever is "responsible for" the infringement. If a claim is brought, the tribunal must identify the responsibility of the hirer and the temporary work agency.

The temporary work agency and the hirer will be liable for their share of any infringement, attributed on a percentage basis. Once liability is decided, the tribunal must decide whether to order either the temporary work agency or the hirer to pay compensation.

Why Was the Hirer Liable?

The initial reason for the agency workers being paid less, was due to both TP and LU mistakenly relying on the exception known as the Swedish Derogation. Under this exception, agency workers forego their right to equalised pay arrangements if they are employed by their agency and receive pay from the agency in between assignments.

LU were not at fault for this original error, but LU were at fault because as a result of various errors at their end. The information that TP needed to enable them to pay the workers the increased amount was not provided until eight months after the issue had been flagged - this information should have been provided to TP within around a month.

The following factors were taken into account when deciding if LU were liable and by how much:

• It was LU's choice to use agency workers in the first place because of the savings that they would make
• It was LU's choice to contract with TP, rather than other agency
• LU was partly responsible for the original under-payment
• The Claimants were in a weaker "bargaining position" than either TP or LU

Best Practice

This decision has resulted in LU paying back pay to the agency workers twice - once to TP and once to the agency workers direct following TP's demise. This highlights the importance of carrying out proportionate checks about the financial stability of temporary work agencies before entering into contracts with them and building appropriate safeguards into the contracts themselves.

Whether the AWR apply and what rights they will confer on workers will vary depending on the status of those workers. Hirers and agencies should not rely on the word of the other party as to whether or not the AWR apply.

Although the Swedish Derogation exception is due to be abolished in 2020, establishing whether or not the AWR apply will remain a crucial and often complex exercise. Hirers and agencies should work together and ensure that any information required is provided as early as possible.

For more information, please contact Michael Delaney in our Employment Law team on 01923 919 316, or complete the form below.