Written by Brabners LLP
Important Court of Appeal Case gives an insight into how compensation is dealt with under the Agency Workers Regulations 2010 where there is an equal pay breach and confirms a surprising outcome.
In the recent case of London Underground Ltd v Amissah and Others , the Court of Appeal considered how compensation should be calculated and apportioned under the Agency Workers Regulations 2010 (“AWR 2010”). The Court of Appeal reached a surprising decision and found that the end client should be required to pay 50% of the compensation due for the breach, despite the fact that: (a) the client had already paid the correct sums over to the agency; and (b) it was the agency at fault for not then passing this on to the workers!
Why did that happen? Well, read on for further details!
As a recap, Regulation 5 of the AWR 2010 confirms that, after a 12 week qualifying period, an agency worker is entitled to receive equal treatment as if they had been recruited by the end client directly. The equal treatment requirement applies to specific terms and conditions, which includes in respect of pay.
The Claimants were agency workers who worked for London Underground Ltd (“LUL”) on assignment from October 2011. They were employed by a recruitment business named trainpeople.co.uk Ltd (“the agency”) who then supplied the workers on assignment.
Initially, the agency and LUL contracted on the basis that the workers were not entitled to equal pay under the AWR 2010 believing that they fell within an exemption under the AWR 2010 known as the Swedish Derogation. They then changed their position and decided that the AWR 2010 did apply.
After a short delay whilst LUL gathered information about appropriate comparators, from October 2012, the agency paid the workers (correctly) at an increased rate. Between December 2012 and May 2013, LUL also made payments to the agency to fund the back pay owed to the agency workers. However, the agency did not pass these payments on to the workers as it should have. The agency then went into involuntary liquidation in November 2013 and the workers were left out of pocket.
The workers brought claims against LUL for breaches of the AWR 2010 asserting that they were paid less than comparable staff at LUL and that they had not received equal treatment under the AWR 2010.
The decisions of the Employment Tribunal (“ET”) and the Employment Appeal Tribunal (“EAT”)
The ET found that there had been a breach of the AWR 2010 and apportioned the liability for this breach as 50/50 between LUL and the agency. However, when assessing the actual amount of compensation that should be paid out, the ET applied the “just and equitable” test in the AWR 2010 and awarded the claimants no compensation!
In the ET’s view, the underpayments were due to: (i) the agency’s failure to pay over the monies received as arrears from LUL; (ii) the worker’s delay in enforcing their rights; and (iii) the agency’s insolvency. The ET also held that there were exceptional circumstances and LUL should not have to “pay twice” as a result!
The workers succeeded with an appeal against this decision to the next court up (the EAT). LUL then appealed against that decision to the Court of Appeal.
The Court of Appeal (“CA”)
The CA dismissed the appeal. It held that the previous courts had both erred in their interpretation of the AWR 2010. In contrast, the correct interpretation of the AWR 2010 is that workers do have a substantive right to equalised benefits and each underpayment constituted an infringement of the AWR 2010.
The CA then considered the loss attributable to that infringement and the proposal for LUL not to be accountable for compensation owed (even though it had been found to be 50% responsible for the breach). The CA found that it would only be in exceptional circumstances that a respondent (a client hirer or agency) would be required to pay less compensation to the worker than the amount for which it was responsible. For example, in the context of serious misconduct by the claimant. The CA did not consider this to be one of those exceptional cases. As a result, the ET was wrong to find that it was just and equitable for LUL not to have to pay the workers any compensation.
Whilst it was regrettable that LUL should have to “pay twice”, the CA held that it was not just and equitable for the workers to be deprived of any compensation when there was no misconduct on their part. After all, it was LUL who chose to deal with a dishonest agency!
The workers’ claims were remitted to the original ET to calculate the amount of compensation due and it was confirmed that LUL was liable to pay 50%.
The Court of Appeal’s decision is a reminder to all parties in a supply chain to work out whether the equal treatment rights under the AWR 2010 apply or not. If the correct amount of pay had been paid at the outset, then the issue with the back pay may have been avoided.
It also reinforces the need for business to do their due diligence on other parties in the supply chain and to check their financial position. Whilst this decision may seem harsh to some, it does reinforce the willingness of the courts to interpret the AWR 2010 on a pro-worker basis and why extra care should be taken to ensure that equal treatment is provided.
This bulletin is for general guidance purposes only and should not be used for any other purpose. Brabners is a Limited Liability Partnership