Swedish derogation contracts put under the spotlight

Legislation protecting temporary agency workers came into force in 2010. After 12 weeks in the job, an agency worker qualifies for the same rights as someone employed directly, including the right to receive the same basic rate of pay as a permanent colleague doing the same job.

Job agencies can opt out of the equal pay provisions by directly employing the agency worker under a permanent contract of employment and paying them between assignments. These types of contracts are known as "Swedish derogation" contracts and must comply with strict regulations set down in the Agency Worker Regulations 2010.

The temporary worker has to enter into such a contract with the agency before their first assignment starts and it must set out:

• The minimum scale or rate of pay or the method of calculating it
• The location/s the agency worker is expected to work
• How many hours they are expected to work each assignment
• The maximum number of hours they may have to work each week
• The minimum hours they will work each week (this can't be less than one hour)
• The type of work they will be offered

In Twenty-Four Seven Recruitment Services Ltd v Alfonso & 190 others, the Employment Appeals Tribunal found that the contracts used by the agency were inadequate.

Facts

The contracts said that workers would be paid at least the National Minimum Wage for their work. They would be offered at least 336 hours work over 12 months and the expected hours of work during each assignment were "any 5 days out of 7".   

Mr Afonso and 190 other agency workers argued that these terms were inadequate because it was impossible to work out, in advance, how much they would be paid per week when working. 

Decision

Recruiters can take comfort from the fact the EAT confirmed that is okay to reference pay to NMW rates rather than to a specific figure - as this is something included in most contracts. 

But, advising a worker that their hours during any assignment would be "any 5 days out of 7" did not comply with the Regulations because it didn't give the worker a figure for the expected number of hours to be worked per week (or any other period). The EAT said it was "not for the agency workers to divine what the information meant in terms of expected hours per week, nor was it possible to do so with any degree of confidence".

This meant that the Swedish Derogation contracts did not comply with the Regulations and were invalid.  The 191 workers were therefore entitled to receive pay parity with comparable workers. No details were provided in the judgment, but I would expect this to be a considerable amount of money.

Tips for recruiters

Make sure:

1. Your contract and assignment forms are given to (and preferably also signed) by your agency staff before they start an assignment.
2. Your contracts set out a minimum rate of pay. Referencing the "relevant" NMW in force is okay.
3. The terms of individual assignments are expressly incorporated in the contractual terms (as these will usually set out details of the hours expected to be worked during the assignment).
4. The details provided  in respect of  individual assignments clearly sets out how many hours the worker will usually expect to work per week.

Need more information?

Contact our expert Padma Tadi by email: padma.tadi@irwinmitchell.com or by phone: 0113 220 6239.

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