Employment Agencies (and employment businesses)
Key points
§ Under the Employment Agencies Act 1973 (as originally enacted), employment agencies and employment businesses could not legally operate without a licence. With the coming into force on 3 January 1995 of the relevant provisions of the Deregulation & Contracting Out Act 1994, that requirement no longer applies. However, the former licensing provisions of the 1973 Act have since been replaced by other statutory controls (as explained later in this section).
§ Under the 1973 Act, the term 'employment agency' means one thing; and 'employment business', another (see Note below). However, the distinction is of no particular relevance in the present context – the more so as most employers consider themselves to be dealing with an 'employment agency' whether seeking to recruit permanent staff or looking to hire the services of an agency 'temp'. To avoid confusion, the term 'employment agency' is used throughout this section to encompass both employment agencies and employment businesses.
| Note | An 'employment agency' is effectively a recruitment agency that is in business to find permanent employment for workers, and permanent workers for employers. A firm of 'headhunters' would usually fall within this category. When publishing advertisements, an employment agency must make it clear that it is an employment agency acting on behalf of one or more (albeit unnamed) employers. An 'employment business' (or temporary staff agency), on the other hand, usually recruits its own workers or has a number of workers on standby, hiring them out to client employers on a temporary basis. Employment businesses are commonly associated with the supply of 'temp' secretaries, clerical staff, drivers, etc. |
Penalties for infringement of the 1973 Act and its attendant Regulations
§ Before the 1973 Act was amended, any employment agency which conducted its business improperly risked forfeiting its operating licence. Nowadays, the Secretary of State may apply to an employment tribunal for an order prohibiting the owner or manager of the agency in question from carrying on (or being concerned with the carrying on of) any employment agency or any specified description of employment agency.
§ A prohibition order will either prohibit a person from engaging in an activity altogether (for a period of up to 10 years) or prohibit him (or her) from doing so otherwise than in accordance with conditions specified in the order itself. If the agency has been improperly conducted, each person carrying on (or concerned with the carrying on) of that agency at the time, will be deemed to have been responsible for its actions – unless he (or she) can show that events happened without his (or her) connivance or consent and were not attributable to any neglect on his part. A failure to comply with the terms of a prohibition order (without reasonable excuse) is an offence for which the penalty on summary conviction is a fine of up to £5,000.
If an employment agency is a company (or body corporate) the company itself may be served with a prohibition order if the employment tribunal is satisfied that:
a. any director, secretary, manager or similar officer of the company (or any person who performs the functions of a director, secretary, manager or similar officer on behalf of the body corporate); or
b. any person (other than a person giving advice in a professional capacity) in accordance with whose directions or instructions the directors of the company are accustomed to act, is unsuitable, because of his (or her) misconduct (or for any other sufficient reason) to do what the order prohibits.
§ A prohibition order may be made in relation to a partnership, if the tribunal is satisfied that any member of the partnership, or any manager employed by the partnership, is unsuitable to do what the order prohibits.
Conduct of Employment Agencies & Employment Businesses Regulations 1976
§ The activities of employment agencies are currently regulated by the Conduct of Employment Agencies & Employment Businesses Regulations 1976. However, those Regulations are soon to be revoked, and might well have been revoked and replaced by the time this book goes to press.
§ Under the 1976 Regulations, any employer who approaches an employment agency for help in recruiting permanent employees, or for the supply of temporary or casual workers, is entitled to assume that the candidates introduced or the workers supplied have the required qualifications, experience and skills. In other words, an employment agency is duty-bound to interview would-be candidates for employment on behalf of clients, and must make appropriate inquiries concerning their qualifications, experience, etc. If a client is dissatisfied with the capabilities of any job applicant or agency 'temp', he (or she) should refuse to pay any fee charged by the agency in question.
| Note | It is an offence for an employment agency or business to charge a job applicant a fee for finding or attempting to find him (or her) a job. The only exceptions (subject to limitations) relate to the finding of work for fashion or photographic models and entertainers. An employment agency may also charge a fee of up to £40 for finding an au pair work outside the UK – but only if it has used an overseas agent to find a suitable position for that au pair. Even so, the fee cannot be levied until a position has been found and the au pair has accepted that position. |
§ An employment agency must take all reasonably practicable steps to obtain as much information about the work for which a worker is to be supplied or introduced. This information must be passed on to the worker and must include particulars of the kind of work involved and the minimum rates of pay applicable to that work. An agency or business must take extra care when arranging to send a worker overseas to work for an employer who has no business premises in the UK. No such arrangement should be concluded unless the agency has received satisfactory written assurances from the employer (or elsewhere) that the work in question will not be detrimental to the worker's interests. Employment agencies are not permitted to supply temporary workers as replacements for workers who are on strike or otherwise in dispute with their employer. They must also obtain the written consent of a client before supplying any 'temp' who was directly employed by that client within the previous six months.
§ If an employment agency has received a fee for introducing a worker to a client, it must not approach that worker at a later date with an offer to find him (or her) work elsewhere.
§ An employment agency must pay all of its temporary or casual staff on time. The fact that a client employer is late in settling his account is of no relevance, and may not be used as an excuse for delaying payments of wages or salary to any employee hired-out to that employer (ibid. regulation 9(10)).
For advice, call the
Employment Agencies Standards Office
local-rate helpline on
0845 9 555 105
Information for client employers
§ Not later than 24 hours after the first 'temp' has started work with a client, an employment agency must supply the client with particulars of its terms of business – including information about the procedure to be followed if any worker proves to be unsatisfactory. Those particulars must also include information about any fee payable if a client wishes to take a 'temp' into his or her direct employment. It is important to note that employment businesses have no legal right to restrict or prohibit any of their 'temps' in any way from entering the direct employment of a client. Clients must also be told which of the 'temps' supplied are employed by the agency itself, and which of them are self- employed.
Discrimination on grounds of sex or race
§ Employment agencies which discriminate against job applicants on grounds of sex, marital status, race, colour, nationality, national or ethnic origins (whether at the direction of a client employer or otherwise) can be 'brought to book' by an employment tribunal and will be ordered to pay compensation to any job applicant held to have been unlawfully discriminated against in this way. Furthermore, there is a risk that the Secretary of State may apply to an employment tribunal for a prohibition order (the effect of which is discussed earlier in this section).
§ An employment agency, which has allegedly discriminated against (or denied its services to) any person on grounds of sex or race, may justify its actions if it can satisfy an employment tribunal that its actions were based on an assurance by the client employer that being of a particular gender, colour, race or nationality was a 'genuine occupational qualification' for the vacancy or position in question.
§ These provisions are to be found in sections 15 and 14, respectively, of the Sex Discrimination Act 1975 and the Race Relations Act 1976.
Discrimination on grounds of disability
§ Under section 4 of the Disability Discrimination Act 1995 it is unlawful for an employer (or would-be employer) to discriminate against a disabled person:
a. in the arrangements he makes for determining to whom he should offer employment;
b. in the terms on which he offers that person employment; or
c. by refusing to offer, or deliberately not offering, him (or her) employment.
An employer (or would-be employer) discriminates against a disabled person if, for a reason which relates to the disabled person's disability, he treats him (or her) less favourably than he treats or would treat others to whom that reason does not or would not apply; and he cannot show that the treatment in question is justified.
§ Under Part III of the 1995 Act, it is likewise unlawful for a provider of services (such as an employment agency) to discriminate against a disabled person by refusing to provide (or deliberately not providing) to the disabled person any service which he provides, or is prepared to provide, to members of the public. A claim by a disabled person that another person (such as an employment agency) has discriminated against him, contrary to Part III of the 1995 Act, may be made the subject of proceedings before a county court (or, in Scotland, a sheriff court). Damages awarded by the court in such cases may include compensation for injury to feelings whether or not they include compensation under any other head (ibid. section 25).
| Note | The Disability Rights Discrimination has published a code of practice titled Disability Discrimination Act 1995 Code of Practice: Rights of Access, Goods, Facilities, Services & Premises, copies of which may be obtained from the Stationery Office (Tel: 0870 600 5522) or by email from books.orders@tso.co.uk. A free text version of the code may be downloaded from website www.drc.gov.uk/drc/informationandlegislation/page312.asp. |
Discrimination on grounds of trade union membership or non-membership
§ Section 138 of the Trade Union & Labour Relations (Consolidation) Act 1992 cautions that it is unlawful for an employment agency to deny its services to any job applicant (whether at the request of a client employer or otherwise):
a. because the applicant in question is, or is not, a member of a trade union; or
b. because he (or she) is unwilling to accept a requirement to take steps to become or cease to be (or remain or not to become) a member of a trade union.
Advertisements couched in similar terms are likewise unlawful. Any person who responds to such an advertisement, but is turned away because he (or she) does not satisfy the conditions laid down in the advertisement, will be conclusively presumed to have been refused employment on grounds of his trade union membership (or non-membership) (ibid. section 137(3)).
Any person who is discriminated against in this way may complain to an employment tribunal. If his (or her) complaint is upheld, the offending agency will be ordered to pay the complainant compensation of up to £50,000. Complaints of unlawful discrimination on grounds of a person's membership or non-membership of a trade union must be presented within three months of the date on which the conduct complained of occurred (ibid. section 139).
Agency 'temps' and the national minimum wage
§ Persons working for, or employed by, an employment agency (including persons hired out as 'temps' to client employers) must be paid the appropriate national minimum wage for all hours worked. If, as is usually the case, the agency pays a 'temp's' wages or salary, it is the agency also which must pay the national minimum wage (per section 34(1), National Minimum Wage Act 1998). In March 2002, the Commission of the European Communities published a proposal for a directive 'on working conditions for temporary workers'. Adoption of the directive (fiercely resisted by the UK Government) will mean that agency 'temps' will be entitled to the same pay and benefits as those enjoyed by workers doing the same or an identical job in the client organisation. The draft directive may be accessed and downloaded from website europa.eu.int/eur-lex/en/com/pdf/2002/en_502PC0149.pdf.
Agency 'temps' and the Working Time Regulations 1998
§ Under the Working Time Regulations 1998, as amended, the term 'worker' applies to an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment or under any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of client or customer of any profession or business undertaking carried on by the individual.
§ It follows that the majority of agency 'temps' and freelancers (unless genuinely self-employed) are workers for the purposes of the 1998 Regulations, whether employed under a contract of employment or a contract sui generis (of its own kind), so long as it is the agency which provides them with work, and deducts tax and national insurance contributions from their pay.
§ Section 37 and Schedule 7 to the Employment Relations Act 1999 amends section 5(1) and 6(1) of the Employment Agencies Act 1973 by further empowering the Secretary of State to make regulations restricting the services which may be provided by employment agencies (and businesses), regulating the way in which (and the terms on which) those services are provided, and restricting or regulating the charges of fees by persons carrying on such agencies (and businesses).
§ In May 1999, the Department of Trade & Industry (DTI) published a consultation document titled Regulation of the Private Recruitment Industry in which it sought the views of interested parties on an overhaul of regulations to be made under the amended sections 5(1) and 6(1) of the 1973 Act. On 23 July 2002, following lengthy consultations with interested parties, notably bodies representing the interests of employment agencies, the DTI launched a second consultative document accompanied by draft new Conduct of Employment Agencies & Employment Businesses Regulations 2002.
§ Under those regulations, employment agencies, involved in placing temporary workers with client employers, must not only ascertain the nature of the work which those workers will be required to do, but must also ascertain the desired levels of experience, training and qualifications, and obtain details of any associated health and safety risks. They must also consider the suitability of individual workers for the work in question. The agency must relay this information in writing both to the 'temps' it intends to supply and to the relevant client employers. Furthermore, the agency must inform the client employer whether the 'temps' it supplies are employed by the agency itself under contracts of service (or employment) or whether they are self- employed. The latter measure is intended to resolve the long-standing confusion over the contractual status of agency 'temps'.
§ The Regulations are also designed to resolve the issue of 'temp to perm' fees. Under existing legislation, it is unlawful for an employment agency to impose any restriction or prohibition designed to deter any of its workers from taking up permanent employment with a client employer. However, there is nothing in those Regulations that makes it unlawful for an agency to charge a so-called 'temp to perm' fee when this happens. What this means is that employment agencies are currently free not only to impose 'temp to perm' charges but also to set those charges at any level they choose. This practice, said the Government, not only acts as a restriction on the labour market and a deterrent to client employers (many of whom simply cannot afford to pay such a fee or are disinclined to do so), but also undermines the effectiveness of regulation 9(9) of the 1976 Regulations.
§ To resolve this problem, the draft 2002 Regulations state that client employers seeking to take agency temps into their direct employment have one of two options. They may either agree to pay a reasonable 'temp to perm' fee to the agency in question or serve notice on the agency that they propose to extend the hiring arrangement for an agreed further period. At the end of that agreed further period, they can take the 'temp' into their direct employment without having to pay any fee for doing so. Indeed, any term in a contract between an employment agency and a client employer for the hire of a temporary worker will be unenforceable if it does not include a provision to that effect. However, to avoid possible abuse of this arrangement, the draft Regulations propose that a client employer need not pay a 'temp to perm' fee to an employment agency (regardless of any contractual term to the contrary) so long as the employer does not take a 'temp' into his or her direct employment before the end of what the Regulations refer to as 'the relevant period'. For these purposes, the relevant period will be either the period of eight weeks commencing on the day after the day on which the contract between the employer and the agency for the supply of the 'temp' in question came to an end or the period of 14 weeks commencing on the first day on which the 'temp' first started work with the client employer under that contract, whichever of those periods ends later – discounting any break of more than six weeks between the end of one hire contract and the beginning of the next. The new Regulations (once approved) are expected to come into force in mid-2003.
§ Copies of the consultation document and the accompanying draft Regulations may be accessed and downloaded from website www.dti.uk/er/agency/newregs.htm.
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