Agency Worker Regulations – the “reasonable steps defence” in practice

Case law concerning the Agency Worker Regulations (AWR) remains limited. We recently advised a recruitment business involved in a dispute with a “temp” and a hirer regarding who was liable for an alleged breach of AWR Regulation 5 (failure to pay the “temp” equal pay to that of a directly employed individual, after the 12 week qualifying period).

The client had a long standing arrangement to place temps with the hirer. All temp staff were paid according to the hirer’s internal graded pay scale. Prior to placing a temp with the hirer, the recruitment business would request confirmation from the hirer of the relevant grade for that assignment (the comparator information).

The temp was placed on assignment in January 2014 following confirmation of the relevant grade via email from the hirer. The temp was paid by the recruitment business according to their grade and received pay increases in line with directly employed staff at the same grade throughout the assignment.

In October 2014 the temp queried with the employment business whether he was being paid at the correct grade as he considered directly employed staff performing an identical role were being paid at a higher grade. The recruitment business queried this with the hirer who denied that the grade for the temp was incorrect. The temp was informed of the hirer’s response by the recruitment business.

In January 2016 the temp raised the same complaint. The recruitment business acknowledged receipt of his complaint and once again made prompt enquiries with the hirer. The hirer confirmed that they would investigate the allegations and respond to the recruitment business. Despite numerous requests, the hirer never provided the employment business with a substantive response. In the absence of any response upholding the temp’s complaint, the recruitment business was unable to increase the level of pay to the temp.

The assignment ended in September 2015. The temp issued Employment Tribunal (ET) proceedings shortly afterwards against the recruitment business for breach of regulation 5. The compensation claimed (for the difference in salary between grades throughout the whole assignment) exceeded £14,000. It is common for such claims to be issued against both the employment business and hirer with the ET deciding who was responsible for any breach. Unusually in this case, the hirer was considered to have statutory immunity from any legal action so the ET claim was only issued against the employment business.

We issued a robust defence on behalf of the recruitment business asserting that our client had taken all reasonable steps to obtain relevant comparator information and would therefore be able to rely on the “reasonable steps defence” under AWR regulation 14(3)(a). Following disclosure and discovery of documents, we considered that the temps case had poor prospects of succeeding so we issued a costs warning and on a without prejudice basis offered a drop hands settlement. The offer was accepted and the matter settled with modest costs to our client.

This case highlights the importance of employment businesses carrying out enquiries with a hirer regarding comparator information before the start of any assignment and dealing with any queries regarding pay from the temp promptly. The recruitment business had fortunately undertaken all enquires with the hirer in writing so there was a clear paper trail to demonstrate that any breach of AWR was not their fault.

This case also emphasises the value of well drafted terms of business (TOB) between a recruitment business and hirer. TOB’s can emphasise the obligations of the parties to ensure compliance with AWR by, for example, specifying a timescale for hirers to respond to requests for information. Recruitment businesses can also attempt to negotiate indemnities to cover where they are a party to litigation due to the provision of incorrect comparator information or (as in this case) the failure to provide a substantive response to pay related queries.

This case also highlights the importance of recruitment businesses carrying out due diligence on their clients and understanding where there may be issues regarding immunity. This could impact on the ability to recover outstanding fees or, as in this case, mean that litigation must be defended in isolation.