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The Swedish derogation
[ch 2: pages 58-59]Under regulation 10 of the AWRs, there is an exemption from the right to equal pay only (not the right to equal treatment on holidays and working time) for arrangements that meet certain qualifying requirements. The arrangements are known as “Swedish derogation” contracts because regulation 10 was introduced to accommodate working patterns peculiar to Sweden.
For the Swedish derogation exemption to apply:
• the individual must have a contract of employment with the agency which is not fixed-term and which includes terms governing minimum pay rates, location, hours, maximum hours expected on an assignment, minimum guaranteed hours (which must be at least one hour), and type of work;
• the individual must be paid between assignments, at least 50% of the pay received on the last assignment or the National Minimum Wage for the hours worked on the last assignment, whichever is greater;
• the agency must try to find suitable assignments when between assignments; and
• the contract cannot be terminated until there has been an aggregate of at least four calendar weeks between assignments when the individual was not working but was being paid by the agency.
In 2013, an employment tribunal ruled that agencies and hirers can freely choose between paying equal pay under the AWRs or offering contracts based on the Swedish derogation model. Hirers that insist on “Swedish derogation-style” contracts as a condition of providing agency work do not breach the AWRs, according to this ruling, even if, as in this example, established agency workers are forced to switch over onto Swedish derogation model contracts:
The claimants were a group of agency drivers who had driven tankers for BP for several years. When the AWRs became law, BP told its agencies it would only hire agency workers who had signed contracts based on the Swedish derogation model. BP did not want to have to pay the agency drivers the higher wages it paid to directly employed drivers. The claimants were given the “choice” between signing new contracts or losing the BP driving work. The tribunal judge said that the AWRs allow agencies and hirers a free choice as to which contract model to adopt. It made no difference that these drivers already had an established relationship driving for BP.
Monarch Personnel Refuelling (UK) Limited v Bray & Others Case Nos: 1801581/2012 and others (unreported, 2013)
The above ruling is not binding but in the years that followed, Swedish derogation-style contracts have become widespread. Almost a third of employers surveyed by the Resolution Foundation in a report published in February 2018, Choices Choices, confirmed that they use agency workers because they are cheaper than direct hires. Evidence commissioned by the Department for Business, Energy and Industrial Strategy (BEIS) points to widespread abuse of the Swedish derogation and shows that these contracts are rarely entered into at the worker’s request.
The TUC has complained formally to the European Commission about the UK’s failure to implement the Agency Workers Directive as a result of abuse of the Swedish derogation opt-out, and the Taylor review (see page 33) has recommended its abolition. The government has agreed to consult on abolition and on strengthening the powers of the enforcement body, the Employment Agency Standards Inspectorate. It is also consulting on giving agency workers a “right to request” “more predictable and secure working conditions” (which, as the TUC says, is no right at all).