Directive action

Following the heated reaction of some employer organisations to the proposed European Directive on agency workers, some of you may be wondering whether you need to be concerned.

If you have agency workers on site, provided there is no contract between you and the individual (and subject to any contrary agreement with the agency), ordinarily the agency will be responsible for them, regardless of whether they are workers or agency employees.

For example, if you are unhappy with an agency subcontractor, rather than disciplining them you should tell their agency and leave it up to them to deal with. By keeping the relationship with the subcontractor at arms length, you should avoid any liability under PAYE and employment legislation.

The proposed Agency Workers Directive applies the principle of equal treatment to basic working and employment conditions. If it becomes law, it will require that agency workers should have no less favourable employment conditions than permanent staff unless this is objectively justified. This could have far-reaching implications. Equal treatment would not be required for posts of under six weeks or where agency workers are covered by collective agreements or are employed on permanent contracts.

The Government has published a summary of the responses to its consultation on the potential impact in the UK. Like any proposals for a directive it is unclear whether they will become legally binding, as the European Council and Parliament must still agree them. If the proposal were to become a directive, then a transposition date will be set to give the UK a period of time (usually two years) to pass appropriate legislation.

There is nothing to worry about at the moment then, I hear you say. Arguably yes, but there may be trouble ahead, especially if agencies seek to pass the likely increased employment costs on to you.

You would also be wise to be wary of possible changes to the agency worker definition in the future. There have been quite a few cases showing that a 'worker' has a wider definition than the term 'employee' and I suspect the case of Byrne Brothers (Formwork) –v- Baird and Others (2002) may have caused particular angst.

You would be wise to be wary of possible changes to the agency worker definition

The case arose because Baird and some of his colleagues claimed payment for the Christmas/New Year closure under the Working Time Regulations' provisions on annual paid leave. They were self-employed building trade workers taken on by an employer under standard labour-only subcontracts that provided that no holiday pay would be due. No work was obligatory on either side and the subcontractors could use additional labour at their own cost or arrange for someone else to do the work if unable to do so themselves. They worked exclusively for the employer and were paid on a time basis, which the Revenue accepted as Schedule D work. These are classic indicators of self-employment and no doubt this scenario may sound familiar.

The case depended upon whether they were 'workers' and so able to rely on the Regulations. The label 'self-employed' was not important. After all, genuinely self-employed individuals are in business on their own account, with all the risks that are associated with it.

The employer lost at tribunal and subsequently pursued an ultimately unsuccessful appeal. These subcontractors undertook personally to provide work or services. In practice they were subordinate workers, dependent for work on this one employer, and so are not genuinely 'in business' on their own account.

Simply put, 'workers' are those not genuinely self-employed. Employees are therefore subsumed within this category for the purposes of legislation. The definition often catches those individuals who you may think are self-employed. For example, one of your builders may submit regular invoices (other than through a company) and provide their own safety equipment – both indicators of self-employment – but have worked for you exclusively for many years. They would be classed as a 'worker'. As such, they would be covered by discrimination legislation and be entitled to receive the national minimum wage, benefit from limits on working time, qualify for paid holiday, have protection if they whistle-blow and can bring claims for unlawful deduction from wages.

On a typical construction site there are independent contractors who have a written contract with the main or sub-contractors. The individuals supplied by the independent contractor may be their employees. Ignorance is no defence, so if you are not keeping them at arms length you could be creating a headache for the future.

You should also be careful in relation to consultants, such as engineers or architects. Often they operate through an intermediary company of which the consultant is the main or sole director. The individual is normally regarded as an employee of the intermediary. Where individuals are engaged via a limited company, the contractual relationship is with the company and therefore, technically, the individual is employed by that company. It should be the company who is liable to collect PAYE. However, an employment tribunal might be prepared to pierce the corporate veil in the case of a one-man band and determine that the individual is a worker. This could be disastrous for you, so if in doubt, investigate.