Select Committee on European Union Forty-Ninth Report


Letter from the Chairman to Mr Alan Johnson MP Minister of State for Employment Relations and the Regions Department of Trade & Industry to the Chairman

  Thank you for your Explanatory Memorandum regarding the Directive on temporary agency workers and the detailed Regulatory Impact Assessment (RIA) which accompanied it. Sub-Committee F (Social Affairs, Education and Home Affairs) found it helpful when it examined the proposal at its meeting on 19 June.

  In the Committee's view, it is in principle highly desirable that temporary workers should be treated equally with their permanent colleagues, regardless of the nature of the employment relationship. The Directive is a welcome extension to temporary workers of the principle of non-discrimination and, as demonstrated by the impact assessment of both the Government and the Commission, could be beneficial to both workers and user enterprises.

  We note that there is no clear evidence from your RIA that the Directive would result in disproportionate costs for enterprises. Nevertheless the Explanatory Memorandum refers to a "complex equal treatment requirement". There is no explanation of why the provisions of the Directive, which seem mostly straightforward, are regarded as "complex" and for whom. We would be grateful for clarification of this point. The Government also calls for additional flexibility despite the already extensive derogations to the Directive. Bearing in mind that the scope of the Directive is already considerably limited, we would welcome your comments on what such flexibility could entail.

  An issue of major legal and political importance is the inclusion within the scope of the Directive of non-discrimination regarding pay. The Committee acknowledges the legal difficulties of extending EC competence under Article 137 TEC to include pay; and it recognises that equal pay could have an important effect on the employment of temporary workers if as a result of agency fees it made them significantly more expensive to employ than permanent staff. However, the Committee believes that its exclusion would significantly weaken the protection provided by the Directive. We would be grateful if you could inform the Committee of the progress of negotiations in this matter. If pay is not specifically included in the Directive, would the Government consider its inclusion in national implementing legislation? You mention in your EM the precedent of the fixed term and part time Directives. Has pay been covered in their implementation in the UK?

  The Committee would also be grateful for clarification of two points of detail in Directive. First, it is not clear what constitutes an "objective reason" justifying difference in treatment (Article 5(1)) and which authority is responsible for assessing whether one exists. There is a danger of interpreting the provision broadly in order to narrow the scope of the Directive. Secondly it is also unclear what is meant by clauses "preventing the conclusion of a contract of employment" between the user undertaking and the temporary worker (which should be declared null and void—Article 6(2)). It would be helpful if some examples were given—would this include for instance the prohibition of "temp-to-perm" fees?

20 June 2002

Letter from Alan Johnson

  Thank you for your letter of 20 June 2002 concerning the draft Directive on the working conditions of temporary agency workers, in which you asked for clarification of some of the points in the Explanatory Memorandum and Regulatory Impact Assessment (RIA) on the proposal.

  The Government wishes to ensure high rates of labour market participation by a diverse range of people. Temporary agency work helps individuals participate in the labour market and benefits user enterprises by providing flexible labour solutions that can help increase productivity and foster high-performance workplaces. I am concerned that the imposition of an equal treatment requirement could discourage user companies from employing temporary agency workers, in which case the directive would have the opposite effect of that intended. I accept that the RIA does not demonstrate that there shall definitely be negative effects, but neither does it conclude that there will be positive effects. It is also worth bearing in mind that the Commission failed to demonstrate in its regulatory impact assessment that this would be the case either.

  The better regulation taskforce has stated that greater emphasis should be placed on alternative approaches to blanket regulation. We shall be considering whether an alternative approach could provide for the protection of temporary agency workers while making sure that this is achieved in a way that is compatible with UK practice.

  I am not convinced that temporary agency workers should always receive equal treatment after 6 weeks. Agency workers should be protected and that is why they are specifically included in the Working Time and National Minimum Wage Regulations. It would seem appropriate that temporary agency workers are entitled to be treated the same as comparable permanent workers at a point when they more likely to be undertaking the work of a permanent worker, for example after a period of 12 months, as is the case in Germany.

  It is true that on paper applying the equal treatment principle appears straightforward, however due to the triangular employment relationship we are concerned that it could pose real practical difficulties. This type of comparison is unprecedented in UK law, as it would provide for a comparison of workers whose pay and conditions could not be attributed to the same source. Where the non-discrimination principle exists in other member states, employers appear to ensure that agency workers receive equal treatment by comparing their agency workers' conditions against those set out for a hypothetical worker in the sector's collective agreement. The UK however, does not have extensive collective bargaining agreements, so we believe it would not be easy for agencies to obtain details of the employment terms its clients' workers have and apply them to their own workers. The comparison could be complicated further as individual workers' terms and conditions may be confidential and some workers may not want their employment particulars disclosed to outside parties. We are consulting on the proposal and will be looking carefully at practitioners' comments on the comparison.

  When the Part-Time and Fixed Term Work Directives were implemented, we decided for domestic policy reasons to cover pay by way of primary legislation, although the UK view was that the directives could not extend to pay, because of the wording of Article 137(6). The part-time directive was implemented under the power in section 19 of the Employment Rights Act. The Employment Bill currently before Parliament contains a similar power in respect of fixed term work. We shall keep you informed on the progress of our discussions with the Commission over pay.

  In your letter you queried the use of the term "objective reason" justifying different treatment in Article 5(1) of the proposal. The text does not give examples of what might constitute objective justification for giving a temporary agency worker less favourable treatment than a comparable permanent worker, though we believe that it is most likely that this term means the same as it does in other pieces of Community legislation. It would provide for less favourable treatment to be objectively justified if that treatment was in order to achieve a legitimate aim, it was necessary to achieve that aim and it was an appropriate way to achieve it. Both the Part-Time and Fixed Term Directives contain similar wording and make specific provision for less favourable treatment where objectively justified.

  We are still examining what the likely effect of Article 6(2) would be on UK practice. However, we believe that the intention of the provision is to limit situations where it is possible for agencies to charge "temp to perm" fees. We shall seek clarification in negotiations on how this particular part of the proposal will work, as currently it is possible for agencies to charge user enterprises "temp to perm" fees. We are currently modernising the legislation governing employment agencies and employment businesses, in order to restrict the use of these fees.

8 July 2002

Letter from the Chairman to Mr Alan Johnson

  Thank you for your letter of 8 July, which Sub-Committee F (Social Affairs, Education and Home Affairs) considered at its meeting on 24 July.

  The Committee was grateful for the additional information that you provided. It accepts that it is important that measures to safeguard temporary workers should not have the opposite effect of that intended by discouraging companies from employing them. It is, I think, common ground that the regulatory impact assessment is inconclusive on this point.

  The Committee also accepts that there is room for argument about the period after which temporary agency workers should receive equal treatment. Six weeks may be too short a period, but the Committee is clear that twelve months, which you say is the practice in Germany, is far too long, and it would undermine the purpose of the Directive.

  You suggest that it would be particularly difficult for the UK to establish the comparison required by the Directive because of its lack of extensive collective bargaining agreements and the confidentiality of workers' terms and conditions. The Committee finds it difficult to believe that the UK is unique in these respects. If the principle of equal treatment was agreed, it would not be acceptable for it to be frustrated by an inability to overcome the practical difficulties of establishing appropriate comparisons. The Committee looks forward to receiving the results of the Department's consultation on this point.

  The Committee was pleased to note that the Employment Bill contains provisions covering pay in respect of fixed-term work and is grateful for your undertaking to keep informed of progress.

  Needless to say, in view of the importance of this proposal, the Committee would like to be kept informed promptly of further developments, and will keep the document under scrutiny in the meantime.

25 July 2002

Letter from the Chairman to Alan Johnson

  Thank you for your Explanatory Memorandum regarding this proposal, and the accompanying documents (summary of the Consultation responses and the detailed Regulatory Impact Assessment (RIA)). They were most helpful to Sub-Committee F (Social Affairs, Education and Home Affairs) in examination of the proposal on 12 February, when the Sub-Committee also considered a submission from the Engineering Employers' Federation.

  The Government continue to have concerns that the Directive risks decreasing the attractiveness of agency workers to user companies, which might reduce the number of jobs available. We note, however that, like the earlier version, the updated RIA is inconclusive on the effects of the Directive on labour markets, and we remain of the view that in principle the draft provides a sound basis for establishing equal treatment for temporary workers.

  The text itself has been improved, both on the method of comparison and the scope of the derogations. However, you say that you would like to clarify how new Article 5 would work in practice. What exactly are your concerns?

  Also on Article 5, we note that, despite divisions between Member States, the period after which temporary agency workers should receive equal treatment remains 6 weeks—does this mean that a measure of consensus has been reached on this issue?

  As regards the legal base, we understand that the "appropriateness" of Article 137(6) TEC to cover pay for the purposes of the Directive has also been endorsed by the Council Legal Service. We would be grateful if you could provide us with a copy of the CLS Opinion.

  The Committee decided to retain document 15098/02 COM (02)701 under scrutiny. Document 7430/02 COM (02) 149 has been cleared.

14 February 2003

Letter from Alan Johnson MP, Minister of State for Employment Relations, Industry & the Regions, to the Chairman

  Thank you for your letter of 14 February 2003 about the amended EU proposal for a Directive on temporary agency work.

  You asked about our concerns on Article 5 of the directive. The proposal now requires the comparison to be made by reference to what would have been given to a directly recruited worker, according collective agreements, pay scales, other general company provisions or, in the absence of this, legislation (for example, the national minimum wage). We are seeking greater clarity on what would happen if for example a directly recruited worker could enter the pay scale at various points depending on a negotiation with the employer.

  On Article 5, you also ask whether there is a consensus in the Council of Ministers working group as to the length of the derogation period. There is no consensus in the Council on the Commission's proposal for a derogation in article 5.4 for assignments lasting less than six weeks. Some member states oppose it, others want to extend it.

  We are unable to provide Sub-Committee F with a copy of the Council Legal Service (CLS) opinion on pay. We are advised that CLS opinions fall within the provisions of the Access to Documents Regulation protecting confidentiality of legal advice.

March 2003

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