Case Law Update: Agency Workers Regulations 2010 and the Equal Pay Exemption

In the case of Twenty-Four Seven Recruitment Services Limited and others v Afonso and others, the Employment Appeal Tribunal (“EAT”) has provided some useful guidance on the level of detail that needs to be provided in an agency worker’s contract in order to invoke the equal pay (‘Swedish derogation’) exemption set out in the Agency Workers Regulations 2010 (AWR).

The AWR apply to agency workers who are appointed to do temporary work for hirers through temporary work agencies. The AWR provide that once an agency worker has undertaken the same role, on one or more assignments, with the same hirer for 12 continuous calendar weeks, the worker will be entitled to the same basic working and employment conditions, including pay, as comparable employees of the hirer.

However, the AWR provides for an exemption to the right to receive equal pay (and only pay). This applies where the agency worker has entered into a permanent contract of employment with a temporary work agency, which provides for pay between assignments and which satisfies a number of other formal requirements set out in the AWR. The two requirements relevant to this case are that the contract must set out: 1) the minimum scale or rate of remuneration or the method of calculating remuneration, and 2) the expected hours of work during any assignment. This exemption is often referred to as the ‘Swedish derogation’ because it was negotiated by the Swedish government for inclusion in the EU Directive that was implemented in Great Britain by the AWR.   

In this case, 191 agency workers (the “Claimants”) brought a multiple claim against the Respondents for equal pay to permanent workers of their hirers, alleging that their contracts did not satisfy the Swedish derogation on the basis that they did not specify the scale or rate of pay and their expected hours of work. The Claimants contracts stated that their “rates of pay will at all times be no less than the National Minimum Wage (NMW) currently in force per hour worked” and that their hours of work would be “any five days out of seven”.

The Employment Tribunal (“ET”) held that the Claimants contracts did not satisfy the requirements for the Swedish derogation. The ET stated that the Claimants contracts should have specified an actual figure in respect of pay. With regards to hours, the ET’s view was that if the contract had set out the number of hours that workers were expected to work in a day, the reference to working five days out of seven might have been sufficient. Without such information though, the ET found that there was insufficient information provided as to the hours that they would be expected to work.

The Respondents appealed to the EAT but their appeal was dismissed.

The EAT held that the ET had erred in its finding with regards to the rate of pay. The reference to NMW was acceptable given that information as to rate is readily available elsewhere.  Regarding hours of work, the EAT agreed with the ET that the reference to “five out of seven days” was insufficient and that the contract would need to refer to the expected hours of work per week or other period in order for the Swedish derogation to apply.

This case provides greater clarity as to the level of detail that needs to be set out in an agency worker’s contract in order for the Swedish derogation to be effective. Temporary work agencies will no doubt be pleased to hear that a simple reference to the NMW as a minimum rate of pay will be acceptable, but the need to refer to the expected number of hours per week or other period may not be construed as positively.

Given the outcome of this case, we would encourage temporary work agencies seeking to rely upon the Swedish derogation to review their contracts to check that they are sufficiently clear as to rate of pay and expected hours of work.

If you would like more information about the issues raised in this article or any other aspect of employment law, please contact us on 029 2034 5511 or at