Employment Tribunal Gives Clarification on Agency Workers' "Pay Between Assignments Contracts"

New employment contracts issued to agency workers by an employment agency complied with the “Swedish derogation” in the Agency Workers Regulations (“AWR”).  It did not matter that the agency workers worked for the same hirer before and after the new contracts were issued.

Regulation 10 of the AWR provides an exception from the right of agency workers to the same pay they would have received if recruited directly by the hirer.  The exception only applies where they enter into a permanent contract of employment with the agency, under which they continue to be paid a minimum amount when they are between assignments.  These are often called “pay between assignments contracts” or “Swedish derogation contracts”.  In order for the exception to apply, the contract of employment must have been entered into “before the beginning of the first assignment under that contract.”

In Bray v Monarch Personnel Refuelling (UK) Ltd, an employment tribunal considered whether Regulation 10 applied in circumstances where agency workers who worked continuously on assignments for BP were told that any current assignments would cease on 30 November 2011.  Fresh assignments would start on 1 December 2011, provided that Swedish derogation contracts were accepted.  All of the agency workers signed and returned the contracts by the end of the November, except H who returned his on 12 December and all of them reported for work as usual with BP on 1 December 2011.

The issue before the tribunal was whether the contracts had been entered into “before the beginning of the first assignment under that contract”, in circumstances where the agency workers had worked for BP throughout.  The tribunal ruled that they had.  An assignment does not refer to the entire continuous period during which an agency worker has been hired out to a hirer, but to a particular period of time during which the agency worker is hired out to the hirer.  The fact that there had not been a gap between assignments did not change the fact that they had been engaged on separate assignments.  The assignment which started on 1 December was the first assignment under the new contract.

The tribunal also found that the contracts had been entered into before the assignment under that contract.  Those who had signed the contracts before 1 December had entered into the contracts on the date of signature and H had accepted the new contract by attending for work as normal on 1 December.  It did not matter that his acceptance of the new contract was the same day as the first assignment under it.  It was sufficient that he had been given the protection Regulation 10 requires by being given the relevant terms several days before he began the first assignment. 

The employment tribunal decision in this case provides welcome clarification on an issue which has been open to debate.  It confirms that it is possible for an employment agency to create a Swedish derogation contract where agency workers remain working for the same hirer.  It will be necessary for a new assignment to be entered into after the contract has been entered into, but the fact that the new assignment is with the same hirer and there is no gap will not be a problem.  Had the tribunal come to the opposite view, this would have resulted in employment agencies only being able to enter into Swedish derogation contracts where workers are hired out to a new hirer.

Although the decision is not binding on other tribunals hearing similar cases, it will be a comfort to employment agencies that have entered into or are contemplating entering into Swedish derogation contracts.