Richard Arthur, a solicitor in Thompsons’ Employment Rights Unit, looks at the fraught history leading up to the adoption of the Temporary Agency Workers directive

It’s been a long time coming, but the member states of the European Union have finally agreed the text of the Temporary Agency Workers Directive. If agreed by the European Parliament, it will give Europe’s estimated eight million agency workers some rights to be treated equally to other workers hired directly by an employer.

Back history

The story goes back beyond March 2002 when the European Commission published proposals for a directive to “liberalise the agency sector” while at the same time giving agency workers the same basic working and employment conditions as other workers. During six years of talks, a number of member states, encouraged by the UK, blocked the directive’s progress and it was effectively put on hold.

Agreement was finally reached largely as a result of a hard fought campaign by unions in the UK. Once a deal had been reached between the CBI, TUC and UK government, Britain stopped blocking the draft directive. Andrew Miller MP was also encouraged to withdraw his private members Bill seeking rights for temporary and agency workers.

A major bone of contention (particularly for the UK government) was the qualifying period before which “equal pay” rights could apply. At the behest of business, it insisted on more than six weeks, while trade unions and some member states argued there was no need for any qualifying period. In reality, it seemed like the UK didn’t want an agreement at all.

The breakthrough came in May this year when the government finally agreed a deal with its social partners (unions and employers), giving agency workers in the UK a right to claim the same pay and holidays as those they work alongside after twelve weeks on the job. Elsewhere in the EU, the rights will kick in on day one.

Limited coverage

While the deal and the directive cover basic working and employment conditions such as pay, overtime and holidays, they do not cover rights such as occupational pensions and sick pay. Temporary staff will also have to work the same length of time as full-time workers to enjoy paid maternity leave.

This allowed the government to play ball on the stalled European proposals, and paved the way about a month later for an agreement among the EU member states themselves on both temporary workers and the working time regulations.

Among other things, EU member states have agreed that agency workers should be treated equally as of day one in terms of pay, maternity leave and holidays. The directive allows member states to “derogate” or modify their terms through collective agreements or agreements between social partners at national level, as has happened in the UK.

Without that agreement, the UK government would have continued to block the directive as it did last December. The pressure on the UK in Europe was such that the CBI was convinced that 12 weeks without rights was the best it could achieve for business.

The directive will also give temporary agency workers the right to be informed about permanent employment opportunities in the “user enterprise” and equal access to collective facilities. It requires member states to improve the access that temporary agency workers have to training and child care facilities in the periods between their assignments so as to increase their employability, and ensure penalties for non-compliance by temporary agencies and enterprises.

Criticism of the deal

Some bodies, however, have criticised the deal saying that the price – allowing the UK government to retain its 48-hour opt out from the Working Time Directive – is far too high.

The European Council justified the deal on the Working Time Directive by saying that both deals were reached as part of an overall social policy “flexicurity” package. A package that it claims has “created more security and better conditions for workers and temporary agency workers while maintaining the flexibility that industry needs and workers want when reconciling family life and working life.”

The UK agreement has also been criticised on the ground that 12 weeks is too long before agency workers are treated equally, as about half of all assignments last less than 12 weeks. So was the horsetrading worth it and is the directive really needed? Yes and yes.

A much needed directive

A directive means that a Conservative government cannot reverse the situation if they take power, as they would have done if Andrew Miller’s Bill became law.

A report by the TUC in 2005 (“The EU Temp Trade”) cites various studies that show that, compared with other staff, temporary agency workers have less control over the type of work they do and how they do it; receive less training and have fewer career development opportunities; have a higher rate of workplace accidents and are less well-informed about safety; do more shift work and have less job security.

It also says that they lose out in terms of pay ­– typically agency workers receive lower wages for similar work and are excluded from bonuses and benefits awarded to other employees.

This finding is confirmed by a survey published in the July 2008 edition of the Chartered Institute of Personnel and Development’s online magazine. It found that agency workers earn, on average, £7.80 per hour in the UK, compared with £11.47 for permanent workers, a difference of 32 per cent. Allowing for different variations in characteristics, this fell to 10 per cent, but the size of the gap varied across the wage distribution. For example, among the bottom tenth of wage earners, the “penalty” for agency working was 17 per cent.

The study also pointed to lower levels of job quality. Compared with both other temporary and permanent workers, agency staff were less satisfied in their jobs, had less variety and discretion over their work, were less likely to learn new things and more likely to be under-using their skills.

So there can be little doubt that agency workers covered by the deal stand to gain from it. In overall terms, a Government Regulatory Impact Assessment estimated that non-discrimination in pay would benefit agency workers by £366 million per year and increase holiday pay and annual leave by £118 million.

Not all over yet

But there is still a lot left to play for. There is the issue of the definition of an agency worker and the problem that some businesses will seek to remove workers before the 12 weeks is up.

And the trouble is, however welcome, the UK agreement does not deal with one of the most fraught issues for agency workers – their employment status. This is important because it dictates the employment rights available to them with the result that, for example, only employees have the right to claim unfair dismissal and statutory redundancy payments.

According to the TUC, most EU member states (but not the UK) make clear that agency workers are, in law, employees of the temporary work agency and enjoy the same or similar protections and rights as any other employee. The UK, by contrast, does not require agency workers to be employed either by the agency or by the client company.

And the courts have not helped much either. Indeed, they seemed to be in disarray with a recent crop of conflicting decisions. But earlier this year in James -v -Greenwich Council and Consistent Group Ltd -v -Kalwak, they seem to have finally decided that, generally, temps and agency workers are not employees of an employment agency or the end user.

Judges have recognised the gross injustices but Lord Justice Mummery recently said in James that workers and unions would be better off trying to change things through parliament than wasting their time in his court. There is nothing in the Employment Bill currently before Parliament to remedy this injustice, but the unions are looking for amendments to deal with that gap.

And, in relation to the limited equal treatment directive, there is a final hurdle that still has to be overcome – the European Parliament has to approve the proposals later this year. And that is by no means a foregone conclusion. When the members last voted in May 2005 on the issue of the UK opt out, they overwhelmingly agreed it should be phased out.

If, on the other hand, they decide to go along with the overall deal, the government anticipates that the regulations governing temporary agency workers will come into force in the UK either in April or October 2010.