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If you use employment agencies or employment businesses to recruit new staff or temporary employees your relationships with such companies will undergo significant legal changes from 6 April. Melanie Thomas reports.
The Government has been consulting for some time on the revision of the law regulating the conduct of employment agencies, which dates back to 1976.The result is the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which come into force this month.
The object of the regulations is partly to increase the protections offered to both employers and temporary workers, but also to try to simplify the existing framework that is the cause of some confusion among employment agencies.
Employment agencies versus employment businesses
The regulations apply to both employment agencies and employment businesses, but the distinction between the two is of fundamental importance. Agencies are recruitment firms that introduce candidates to clients with the idea that the successful candidate will be employed directly by the client, rather than through the agency. Businesses are firms that hire the workers themselves (whether as employees or contractors) and then supply those workers to the client on a temporary basis.
Restrictions on the charging of transfer fees by employment businesses
The regulations restrict the circumstances in which an employment business can charge a transfer fee to a client that subsequently takes on one of the business's temporary workers. The idea is to balance the legitimate business interests of the firms (that do not want to see their temps poached) against the need to guard against fees operating as a disincentive to the creation of permanent jobs.
What are the restrictions?
There are two possible restrictions that can be imposed.
When do the restrictions apply?
Which of these restrictions applies depends on whether the worker has been supplied to the client, or only introduced to the client; and also on whether the workers' subsequent transfer is:
General obligations
The regulations impose the following obligations on agencies and businesses:
Some firms got round the prohibition against charges by making the provision of work-finding services conditional on these ancillary services being purchased.The new regulations close this loophole by prohibiting these conditional agreements and requiring the firm to provide detailed information about exactly which services are being charged for and how.
So, for example, the firm must check the suitability of the worker in terms of the individual's qualifications, training and experience, but it must equally gather information about the health and safety of the client's working environment.
There are additional vetting obligations where the position involves working with children or vulnerable adults.The firm is also obliged to pass on to the worker, in writing, information gleaned about the client, and vice versa.In the case of businesses, they must also inform the client of the basis on which they have engaged the worker (ie as an employee, an apprentice or a contractor).
What about confidentiality and data protection? Under the confidentiality provisions in the Regulations, a firm cannot disclose any information relating to a work-seeker without that person's prior consent, unless it is for the purpose of "providing work-finding services to that work-seeker". But once the person has been found work, the firm is obliged to notify the client "without delay" if it finds out that a worker is unsuitable.
These two requirements appear to be in direct conflict.We will have to wait for the courts to decide how this conflict is resolved, but in the meanwhile, firms should seek professional advice if they are faced with this Catch-22.
In addition, from a data protection perspective, it would be advisable to copy to the worker any information given to the client, so that the worker has an opportunity to challenge any inaccuracies in the information.
Advertising: all firms are obliged to indicate in their advertisements whether they are acting as agencies or as businesses and are prohibited from placing advertisements unless they have information about all the positions being advertised and the authority of the client to find work-seekers for each position advertised.
Additional obligations
In addition to the general obligations that apply to both:
What about if the work-seeker is a company? The restrictions and obligations contained in the Regulations apply equally if the work-seeker is incorporated. In other words, individuals supplying their labour to an agency or business through service companies will still be entitled to the protections contained in the Regulations.
An agency will, however, be able to charge the incorporated work-seeker a fee instead of the hirer.It is possible for the service company to opt out of the Regulations (as long as the individual consents), but the agency or business cannot make the provision of services conditional on the company signing an opt-out.These provisions are only in force from 6 July 2004.
Note that there are special rules applicable to artists' agents (ie firms acting for actors, film directors, models, professional sportspeople and so on).
Penalties for failure to comply with the regulations
If an agency or business has not complied with the regulations:
This is in addition to the DTI's power to apply to an employment tribunal to have someone declared unsuitable to carry on, or be concerned with, an employment agency or business.
See Agent work for more.