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Tribunal gives guidance on the equal pay exception in the AWR

Employment Law & HR
BG Purple

A recent employment tribunal decision has clarified the circumstances in which the “Swedish derogation” found in the Agency Workers Regulations (AWR) can be used.

The Swedish derogation, also known as the “pay between assignments model”, derives its name from the Swedish government’s insistence that it be included in the Temporary Workers Directive upon which the AWR are based. 

The Swedish derogation allows an employer to be exempt from the principle of equal treatment under which agency workers would normally be entitled to the same pay and conditions as directly-employed staff after 12 weeks of employment. To do so, the agency must enter into a permanent contract with the agency worker which guarantees them a minimum amount of pay (broadly half pay or the national minimum wage, whichever is the greater) for at least four weeks between assignments. 

In this case, BP had an on-going relationship with an agency to provide tanker drivers. After the AWR came into force, BP insisted that the agency switch to Swedish derogation contracts to avoid unions demanding a pay rise for directly-employed staff. The tanker drivers signed the new agreements but later raised a tribunal claim, alleging that they were invalid.  

The basis of their claim rested on the fact that Regulation 10(1)(a) of the AWR 2010 states that workers must agree to give up their right to parity of treatment before "the beginning of the first assignment under that contract". In other words, the workers need to know what they are giving up before they sign the contract and start the assignment. 

Here, the drivers had a longstanding on-going relationship with BP and there had not been any gap between assignments when they began working on the Swedish derogation contract. However, the tribunal held that, although the drivers had been working with BP for years, they had been assigned on separate assignments. Further, they had signed the new contracts before the beginning of the first assignment under the Swedish derogation system and therefore the contracts were valid.  

Given the relative infancy of the AWR, this particular provision has had little judicial examination. However, the emerging case law demonstrates that the Swedish derogation model is valid, provided that agencies and hirers strictly adhere to the rules of Regulation 10. If your organisation is an agency or hirer and you have any doubt about the steps you need to take to invoke the Swedish derogation exception, contact your legal manager to take advice.

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