Many businesses in the IT sector are heavily reliant on the supply of temporary workers engaged by employment businesses for financial services projects, including MiFID related projects. The supply of staff to hospitals, social care, and nursing homes in particular, has attracted press coverage because of the difficulties of obtaining staff. Notwithstanding this, there is evidence that contracting brings greater flexibility to the labour market, and greater job satisfaction and motivation. The lower protection for temporary workers is compensated for by higher remuneration. In the article, we ask if the protections of current legislation are adequate, and outline the steps that can be taken by hirers to improve contractual protections and mitigate risk to their business.
Employment businesses (bureaux who employ or engage temporary workers as limited company contractors or in their own capacity and supply these workers) usually supply temporary workers on assignments on the employment business’s own terms and conditions. Typically, these terms and conditions are variants on the Recruitment and Employment Confederation (REC) terms. The REC terms or variants are generally favourable to the employment business.
Employment bureaux are regulated by the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (
Conduct
Regulations). These regulations provide a general framework and protection of hirers and temporary workers or candidates supplied to hirers or employers, including a requirement for the employment bureau to keep adequate records, obtain minimum information about the skills, competence and qualifications of the candidate, and to set out charges payable by hirers, in adequate detail.
Regulation 17 of the Conduct Regulations requires that before first providing services to a hirer, an agency or employment business must agree with the hirer the terms which will apply. Minimum terms required by the Conduct Regulations include, confirmation of the capacity in which the employment bureau will act (employment agency or employment business), payment and details of the procedure to be followed if the temporary worker supplied is unsatisfactory. However, beyond these minimum terms, the parties are free to agree their own procedures.
Although the market is currently favourable to employment bureaux, hirers with a regular requirement for temporary workers from selected agencies should consider negotiating the employment business’ terms and conditions or preparing their own framework terms and conditions for the engagement of temporary staff. Hirers may also be able to negotiate changes on a candidate-by-candidate basis. Particular changes to consider when contracting with employment bureaux include:
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Quality of service to be provided by the employment business. Under the Conduct Regulations, the only obligation for the employment bureau is for it to use reasonable skill and care in the selection of staff. Employment bureaux will generally have no responsibility for the actual performance of the temporary worker. Many employment businesses require, as a condition of a refund for an unsatisfactory temporary worker, that the hirer has paid the full hire fee; this may not be practical where a temporary worker has been supplied at short notice. Additional requirements such as the taking up of further references or requiring a longer period to assure the competence of a temporary worker supplied should be considered.
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Fees. Certainty over increases in the temporary worker’s hourly rate can be obtained. Employment businesses usually remain free to increase the charges at their own discretion, leaving the hirer with its only remedy to seek alternative staff elsewhere. In a market where staff shortages are frequent, this often leaves the hirer with little alternative but to accept the price increases.
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Framework for screening of candidates. Many recruitment businesses will offer to supply candidates who are often not suitable for the position required by the hirer. Negotiated terms and conditions prevent recruitment businesses from supplying candidates on a speculative basis, and can be used to restrict the terms of CVs that may be put forward for a potential position.
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Transfer fees. The Conduct Regulations restrict the circumstances in which the employment businesses can charge fees for the transfer of temporary staff whether:
(i) temporary to permanent
(ii) temporary to third party
(iii) temporary to temporary engagement with third party
In these circumstances, transfer fees can be charged, although in certain circumstances, the hirer can opt for a limited period of hire instead of paying the transfer fee. The periods for the hire option are often prohibitive (up to a year) and transfer fees typically are still around one quarter to a third of starting year salary. These transfer fees and the extended period of hire option can be substantially curtailed with sufficient bargaining power.
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Certainty on employment status. Temporary workers supplied by employment businesses to the same hirer for a significant, uninterrupted period can become the employee of the hirer, notwithstanding the terms of business between the parties. In 2004, the Court of Appeal delivered a landmark judgment in the case of
Dacas v Brook Street Bureau. This case required the Court to decide whether an agency worker was the employee of the agency, the hirer, or neither. In Dacas, the Court of Appeal concluded that Mrs Dacas was not an employee of the agency. By the time the case got to the Court of Appeal, the hirer was no longer a party to the litigation but the Court went on to say that, had the hirer still been a party it would have held that there was an implied contract of employment between the worker and the hirer. This would have entitled Mrs Dacas to employment rights including unfair dismissal qualification, minimum notice of termination, sick and holiday pay. The case was followed in subsequent decisions.
However, the law in this area not fully settled following a recent decision in the Employment Appeals Tribunal (
EAT) (
James v Greenwich Council). Ms James was an employee of the Council until 1997, and was subsequently engaged to do the same work through an agency until 2004. When Ms James sought to return to work after a period of sick leave, the agency had supplied a substitute, and she was told that her services were no longer required. The EAT concluded that in this case, Ms James was not an employee of the Council. The Court upheld the contractual terms which stated that Ms James was
not an employee of the Council and stated that this employment relationship should only be inferred where necessary to give effect to the arrangements in place. Whilst giving greater certainty or comfort to hirers, it is likely that the apparent contradictions in recent case law will have to be resolved by further litigation. It is also worth pointing out that this is a very dynamic area of law. There is currently a Private Member's BIll going through the House of Commons which deals with the status of Temporary and Agency Workers, and the DTI has commenced consultation on new measures to protect agency workers. For more information on these developments, see the February issue of Inform: Employment.
The matter can be put beyond doubt (in economic terms at least) by obtaining suitable indemnities from the employment business in case there is any allegation or finding of an employment relationship between the temporary worker and the employment business.
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Intellectual Property (IP) Rights. IP
rights typically do not vest in an employer where a temporary worker is supplied on a contract for services, rather than being employed. For businesses where ownership of intellectual property developed by temporary workers is important, it is fundamental for the hirer to obtain an effective assignment of intellectual property rights from the temporary worker. Where intellectual property rights are important to a hirer, the employer should be required to agree to minimum IP terms in the underlying contract between the temporary worker and the employment business transferring the intellectual property rights in the work product to the hirer. A full and effective waiver of moral rights can also be obtained in necessary cases before the temporary worker starts work, together with a “further assurance” clause requiring the temporary worker to cooperate further to execute any additional required documents to assist with patent applications, or to confirm the assignment of the necessary IP rights.
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Non-solicitation. It is common for recruitment bureaux to impose non-solicitation covenants on hirers, but hirers concerned about the solicitation of their own staff by the recruitment bureau can also obtain satisfactory non-solicitation covenants from hirers.
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Quality of staff. Given the limited duties of employment bureaux in relation to the selection and supply of temporary workers, the importance of background checks by employment bureaux has been brought sharply into focus.
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K
ey performance indicators (KPI). KPIs regulating the overall performance of service may be desirable, for example, to limit the number of fully briefed candidate’s CVs submitted for any single vacancy, to measure the success rate in filling assignments from candidate’s CVs provided, or the success rate in staff retention or quality of performance. KPIs can be regulated for information only, or have necessary performance indicators, including service credits or free provision of replacement candidates for unsatisfactory services.
Conclusion
For those hirers who have regular requirements for temporary workers, negotiation of standard terms with employment bureaux may be highly desirable. This can result in greater legal certainty, improved quality of candidates and cost savings.
For further information, contact mark.bailey@speechlys.com