The recent changes and proposed changes to tax legislation affecting the recruitment industry have attracted media attention, allowing May's less newsworthy amendments to the regulations which govern the conduct of the private recruitment industry to slip under the radar. Amendments to the Conduct of Employment Agencies and Employment Businesses Regulations 2003 ("the Conduct Regulations") detailed at the end of this article came into force on 8 May 2016. In comparison to the changes to the travel and subsistence expenses and IR35 tax legislation, these amendments are relatively lacklustre. They do, however, afford us the opportunity to remind staffing companies of the importance of drafting temp-to-perm and temp-to-temp fee provisions correctly and ensuring that opt out notices are valid. These complex and commonly misunderstood areas covered by the Conduct Regulations have not been amended.
Surprisingly frequently, we continue to see temp-to-perm and temp-to-temp fee provisions in staffing companies' client contracts which do not comply with the Conduct Regulations. If the Conduct Regulations apply, the failure to offer the client the option to engage a contractor for an extended period as an alternative to the payment of a temp-to-perm or temp-to-temp fee and attempts to charge such fees outside the period prescribed by the Conduct Regulations will render the charging of any such fee unenforceable and unlawful. These kinds of provisions, even where the Conduct Regulations do not apply, are also subject to the general law on unlawful restraint of trade, and so must be reasonable in order to be enforceable. This could be a red flag issue for a potential purchaser of a staffing company. It is advisable to have your contracts reviewed by an expert so that you do not fall down in this area.
Opt out notices
We often advise staffing companies in relation to attempts at contractor migration on the loss of a preferred supplier contract. When this occurs, it is crucial to be able to show that the Conduct Regulations do not apply meaning that contractors can be restricted from being engaged directly by the client or via another staffing company. The Conduct Regulations do not apply if a contractor does not act for and under the control of the client. However, if this is not the case, it is important that opt out notices given by company contractors agreeing that the Conduct Regulations do not apply are given by the right people to the right people at the right time, otherwise they will be invalid. Seek expert advice to ensure that your opt out notices and processes are straightforward and compliant so that your business is protected in this area.
- Removal of Regulation 9: there is no longer a restriction on employment agencies and employment businesses purporting to the client and the work-seeker to be acting on a different basis.
- Removal of Regulation 11: there is no longer a restriction on employment agencies and employment businesses entering into a contract on behalf of a work-seeker with a client or vice versa.
- Removal of Regulation 17: the requirement for employment businesses to enter into written terms and conditions with clients before supplying any services has been removed. It would of course be commercially advisable for staffing companies to agree contracts with clients.
- Amendment to Regulation 23: the removal of provisions requiring an employment agency or employment business to check that any other employment agency or employment business they contract with is suitable to act in that capacity.
- Extension of the scope of Regulation 27A: the scope of this Regulation (which requires employment agencies and employment businesses that wish to advertise elsewhere in the EEA for work-seekers to take up specific vacancies based in Great Britain to advertise these vacancies in English in Great Britain as well) has been extended to cover generic advertising as well as advertising for specific vacancies.
- Amendments to Schedules 4 and 5: requirements on employment agencies and employment businesses to include certain particulars in their records relating to work-seekers and clients have been removed.
- Removal of Schedule 6: employment agencies and employment businesses are no longer required to include particulars in their records relating to other employment agencies or employment businesses.
- There was disappointment for job boards and suppliers of online recruitment related services which were not removed from the scope of the recruitment sector regulatory regime.
New post of Director of Labour Market Enforcement
In a related development, there will be a new post of Director of Labour Market Enforcement. The Director will oversee and co-ordinate enforcement of worker exploitation legislation of the Employment Agency Standards Inspectorate (which enforces the Conduct Regulations), the Gangmasters Licensing Authority (shortly to be renamed the Gangmasters and Labour Abuse Authority) and HMRC.