The Agency Workers’ Regulations and the Swedish Derogation

13 Feb 2013

The Agency Workers' Regulations require that after a twelve week qualifying period, agency workers are entitled to the same basic employment conditions as permanent employees.  However, the Regulations also recognise the Swedish derogation (an exception from the EU Regulations negotiated by the Swedish Government).  The derogation provides an exception from the principle of equal treatment where there is a permanent contract with the agency under which the worker is paid a retainer between assignments. 

The Regulations require that the contract be entered into before the first assignment under that contract.  At first glance that is straightforward but where does it leave agency workers and the employers to which they were assigned when the Regulations came into force on 1st October 2011?  BIS guidance suggests the derogation does not apply so workers in this transitional period are entitled to parity. 

This issue came before an employment tribunal in Bray and Others v Monarch Personnel Refuelling (UK) Ltd.  The case concerned agency tanker drivers assigned to BP which paid its own drivers £0.70 per hour more than the agency drivers.  If the Swedish derogation applied, BP faced a significant increase in its costs as the assignments were generally long term.  BP was also concerned that trade unions would put it under pressure to maintain differentials, dragging it into a costly cycle of pay rises.  

BP told the agency that current assignments would be terminated on 30th November 2011 and would be followed by new assignments starting on 1st December.  It would only accept drivers on new assignments if they worked under contracts covered by the Swedish derogation.  The agency issued contracts under the derogation on 15th November. The drivers were not happy and brought claims in which they argued that the derogation did not apply because they were already assigned to BP when the new contracts were issued.

The Employment Tribunal found the new contract compliant with the derogation because it was entered into before the beginning of the first assignment under that contract.

Our view:

There is a certain logic in the Tribunal's decision, which will come as a relief to BP and other employers who took steps to avoid the risk of being required to give parity to existing agency workers.  Nevertheless, it seems less than satisfactory that the workers were forced to surrender parity on a choice of working under the Swedish derogation or having their relationship with BP terminated completely.  It also seems that the BIS guidance is unreliable.

This is the first reported decision we have seen on the application of the Agency Workers' Regulations so it is very unlikely to be the last word on the subject.