Agency tanker drivers defeated in AWR Swedish derogation case

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An Employment Tribunal has dismissed claims brought by a group of agency tanker drivers under the Agency Workers Regulations 2010 (AWR), finding that the Swedish derogation provisions of the AWR were adhered to by the temporary work agency that employed them.

In Bray and others v Monarch Personnel Refuelling (UK) Limited, the Tribunal gave its interpretation of the Swedish derogation or pay between assignments provisions of the AWR. These provisions provide an exemption from the right to equal treatment in relation to pay under the AWR where agency workers are employed under pay between assignments contracts. In this case, the Tribunal found that the provisions applied even though the agency workers had an existing working relationship with the hirer and were moved from one type of contract with the temporary work agency to a pay between assignments contract.

Background

The AWR came into force on 1 October 2011. Regulation 5 gives agency workers the right, on completion of a twelve week qualifying period, to the same basic working and employment conditions as those given by the hirer to comparable direct hires. These conditions include pay, the duration of working time, night work, rest periods, rest breaks and annual leave.

Regulation 10 of the AWR provides an exemption to the equal treatment principle under Regulation 5 in relation to pay. This exemption applies where the agency worker enters into a permanent contract of employment with a temporary work agency (TWA) under which the agency worker is paid a minimum amount (broadly speaking, the greater of half basic pay or the national minimum wage) for an aggregate period of at least four weeks between assignments.

This derogation from Regulation 5, which was negotiated by the Swedish Government into the EU Directive which the AWR implements in national law, only applies where pay between assignments employment contracts have been entered into "before the beginning of the first assignment under that contract". In other words, an agency worker must understand and agree to the rights he is giving up before commencing work under the new contract.

In order to decide whether or not the drivers had the right to parity of pay under the AWR, the Tribunal had to determine whether the drivers had entered into the pay between assignments contracts before the beginning of the first assignment under each such contract in circumstances where the drivers had previously worked on assignments with the hirer via the same temporary work agency.

Facts

The claimants were agency tanker drivers employed by the temporary work agency Monarch Personnel Refuelling (UK) Limited (Monarch) to drive tankers for the hirer, BP Oil (UK) Limited (BP). Monarch employed its drivers on zero-hours contracts to make deliveries for BP to its petrol stations across the North and the Midlands.

The eight drivers who brought the claims had worked continuously under this arrangement for a number of years and the drivers Monarch assigned to BP formed a relatively settled workforce. Indeed, BP work was particularly attractive because drivers were paid around £1 an hour more than drivers on assignments with other Monarch hirers, albeit 70p an hour less than permanent BP tanker staff. Furthermore, BP had a practice of recruiting its permanent tanker drivers directly from the agency drivers it used.

In 2011, the imminent arrival of the AWR caused BP to consider its position in relation to its temporary workforce. BP was concerned that, once agency drivers achieved parity of pay under Regulation 5 of the AWR, it would face pressure from its unionised permanent tanker staff to restore the pay differential. This in turn could lead to claims from its agency drivers under Regulation 5 and BP feared it would become embroiled in a perceptual and indefinite pay increase cycle.

With that in mind, BP informed its temporary work agencies that all current assignments would terminate on 30 November 2011, with new assignments commencing on 1 December 2011 available to those agency drivers who agreed to work under Swedish derogation contracts with the temporary work agencies.

Monarch discussed this development with its BP drivers who were effectively presented with the following ultimatum: sign a new pay between assignments contract with Monarch and relinquish your right to pay parity with BP's permanent staff or refuse to sign the contract and cease working as a BP agency driver when the current assignment ends on 30 November 2011. The new contracts were issued to the eight drivers in question on 15 November 2011.

With evident reluctance, the claimants signed and returned these contracts by the end of November 2011, with the exception of Mr Hanley who returned his signed contract on 12 December 2011. All eight drivers reported for work at BP on 1 December 2011 and carried out their usual duties.

These eight drivers later brought claims in the Tribunal arguing that the new contracts were not covered by the Swedish derogation provisions and that they were entitled to parity of pay under Regulation 5 of the AWR.

Decision

The Tribunal dismissed the claims, stating that the new contracts were compliant with Regulation 10(1)(a) of the AWR because the new contracts were entered into before the beginning of the first assignment under those contracts. In reaching its decision, the Tribunal considered these two key points:

1. The meaning of "before the beginning of the first assignment"

Assignment is defined under Regulation 2 of the AWR as a period of time during which an agency worker is supplied by one or more temporary work agencies to a hirer to work temporarily for and under the supervision and direction of the hirer.

The Tribunal found, contrary to the drivers' suggestions, that this did not refer to the entire continuous period of time during which the agency workers were supplied to the hirer. Rather, it referred simply to a period of time during which they were supplied to the hirer. In other words, assignment referred to each particular assignment the drivers were supplied to work on for BP from time to time. Crucially, this meant that the first assignment was the first under the pay between assignments contract and the date of the first assignment was 1 December 2011 and not the first date that each driver had ever worked on an assignment for BP via Monarch.

2. The date on which the contract of employment was entered into

In order for the Tribunal to accept that the drivers had commenced an assignment that complied with Regulation 10, Monarch had to prove that the new contracts were entered into before 1 December 2011.

The Tribunal found that all bar one of the drivers had entered into their contracts on the date that they signed them, which, with the exception of Mr Hanley, was before 1 December 2011.

Although Mr Hanley did not return his signed contract until 12 December 2011, which on a strict reading of Regulation 10 placed him outside the scope of the Swedish derogation, the Tribunal concluded that he had accepted the new contract on 1 December 2011 by attending for work and carrying out his allocated duties on that day.

Mr Hanley had received the protection required by Regulation 10 when he was supplied with the written terms and conditions of his new contract several days before 1 December 2011. In any case, his acceptance of the contract was likely to have been demonstrated at the very moment he crossed the threshold of the depot; an action that necessarily preceded the beginning of his first assignment.

The Tribunal concluded that the new contracts of all eight drivers had been entered into before the first assignment under those contracts and therefore fell within the scope of the Swedish derogation provisions of Regulation 10 of the AWR, meaning that the pay parity provisions of Regulation 5 of the AWR did not apply.

Alternative arguments

The Tribunal also rejected the drivers' second argument that the changes introduced by Monarch amounted to no more than a variation of their existing contracts. The Tribunal determined that the change from a zero hours contract to a pay between assignments contract was so fundamental as to have the effect of terminating the old contract and substituting it with the new one.

This meant that the pay between assignments contract was a new contract that, pursuant to Regulation 10 of the AWR, had been entered into before the commencement of the first assignment.

Finally, the Tribunal rejected the drivers' third argument that the Swedish derogation should be limited to situations where agency workers employed by the same temporary work agency move between different hirers. The drivers had argued that the Swedish derogation was not intended to apply to existing employment relationships between a temporary work agency and an agency worker who is continuously working for one hirer.

The Tribunal stated that, although the argument had some force on the facts of this case, the AWR had to be applied consistently across the whole of the agency workforce. Regulation 5 of the AWR provided agency workers with access to parity of pay and, alternatively, Regulation 10 of the AWR provided them with some security of income where no work was available. One model rather than the other might benefit particular workers or particular temporary work agencies in any given situation and therefore the flexibility provided by the ability to change between models should remain.

Comment

The decision by the Tribunal confirms, subject to any appeal by the drivers, that the Swedish derogation applies even where agency workers have an existing relationship with and continue to work for the same hirer. This aspect of the AWR had previously caused considerable confusion and the clarity provided by the Tribunal on this point is a welcome relief for all those in the recruitment supply chain.

The Tribunal's decision is also noteworthy for its treatment of the AWR Guidance issued by the Department for Business Innovation & Skills (BIS) upon which the drivers relied heavily.

In response to the drivers' numerous references to the Guidance, the Tribunal noted that Parliament had not given it any statutory backing and it should therefore be afforded no more weight than "observations from any other informed commentator".

In any event, the Tribunal was satisfied that adopting one of the AWR's pay provisions rather than the other did not constitute avoidance or evasion in this case.

The drivers invited the Tribunal to make a reference to the Court of Justice of the European Union (CJEU) if it was unsure as to the precise scope of the Swedish derogation. While the Tribunal politely declined this offer, this is a situation that will surely be monitored closely as new cases emerge on the use of Regulation 10 contracts.