The pay exemption for permanent agency workers

In a troubling development, the EAT has ruled that agency workers who are permanently employed by the employment agency are not protected by the AWRs. The basis for this conclusion is that they are not “temporary” workers. Regulation 3(1) of the AWRs defines an “agency worker” as someone who is “supplied by a temporary work agency to work temporarily for and under the supervision and direction of a hirer”:

A group of agency workers were employed for several years by facilities management company Ideal. They always worked for the same end user, alongside its directly employed workforce. Their employment contracts were of indefinite duration, terminable by giving statutory notice. In other words, they were permanent employees of the agency.

They claimed equal treatment rights under the AWR, but the EAT ruled that they were outside the regulations as their contracts were not “temporary”. The EAT said that the word “temporary” in the AWRs means “not permanent”. It does not mean “short-term”. In other words, a fixed-term contract of any length can be temporary, but an indefinite contract, terminable by notice, cannot (Moran v Ideal Cleaning Services Limited UKEAT/0274/13/DM).

This conclusion sits uneasily with the special exemption from the equal pay obligation in the AWRs for certain directly employed agency workers, whose contracts meet defined criteria, known as the Swedish derogation (see below).