Law dictates your AWR status, not mantras

Setting the AWR record straight

We would like to set the record straight on what appears to be a commonly held belief - that one can avoid the impact of the Agency Workers Regulations solely by drafting amendments to contracts, or by having the parties agree to designate their relations as being outside the scope of the AWR, none of which is necessarily correct.

Limited only, agents claim

In response to the AWR, some recruitment agencies have insisted that they will only deal with and supply workers who operate through limited companies. This appears to reflect the fact that it has become something of an AWR truism that if you work through a limited company you will be "self-employed" and therefore automatically fall beyond the reach of the AWR.

It can certainly be said that those individuals who are genuinely self-employed will not satisfy the definition of an agency worker, either because such individuals are by definition not going to be working under the supervision and direction of the end-user/client, or because either the agency or the client can be said to be a customer or client of a profession or business undertaking carried on by the individual.

Some ‘Ltd’ owners likely not to be self-employed

However, one should not underestimate how difficult it can be to show that the above conditions apply and, in reality, many individuals who work through their own limited companies are likely not to be self-employed. Determination of employment status is nuanced and complex, involving questions of mixed fact and law, and will depend on the circumstances of each case.

The law applies, not mantras nor wishful thinking

It is therefore overly simplistic to adopt the mantra, as some agencies and clients appear to be doing, that a person who is working through a limited company is self-employed and therefore need not worry about the AWR. The law is very clear that it is not of itself sufficient that the parties have labelled the relationship to be one of self-employment if upon closer scrutiny what happens in practice does not reflect this, and the individual cannot objectively be said to be genuinely in business on their own account.

Agencies that are requiring contractors to incorporate on the basis that this will take them outside the scope of the AWR are in most cases doing no more than re-labelling an existing relationship. That is to say if these contractors were not genuinely self-employed before they incorporated then in many cases they are unlikely to be self-employed after incorporation.

Agencies under pressure to say AWR won’t apply

A lot of end-users/clients are seeking declarations from agencies confirming that the AWR do not apply, as well as blanket indemnities in respect of AWR claims. In some cases these are even being given simply on the basis of the mistaken belief that the contractors that are being supplied are outside scope because they are operating through their own limited companies.

Not only does such an approach underestimate the complexity of employment status issues but it may also result in the agencies and end-users/clients being caught by the draconian MSC legislation and debt transfer provisions.

Oliver Weiss, a senior solicitor at law firm Blake Lapthorn, was writing with Contractor Umbrella.

Tuesday 29th November 2011