PayStreams opinon: An update on the Swedish Derogation model

Thursday 24th January, 2013
Comments
Industry news

We finally have a tribunal decision on the Swedish Derogation (SD) which makes it clear that equality of pay will not apply where the provisions of Regulation 10 are satisfied. In other words, if an agency is clear that an assignment is offered on an 'SD basis' and the contract is properly drafted then, in general terms, the agency will not have to worry about equalising pay.

Whilst this was obvious in some respects - why would the legislation drafters include Regulation 10 if they did not intend it to be used? - the Tribunal decision in Bray & others v Monarch Personnel Refuelling (UK) Ltd gives some clarity as to:

  • how to successful implement an SD contract; and
  • clarifies whether a worker be switched from a regular contract to an SD contract during his time with a client

In Bray the workers (who brought the claim) were working for BP through their agency, Monarch. BP were aware of the AWR but felt unable to increase the agency workers' pay because their own staff (and the union) would ask for more money since there was an agreement in place that full time employees would be paid more than temporary workers. BP and Monarch therefore contacted the agency workers and made it clear that as from a specified date (in this case 1 December) BP would only take agency workers who gave up their right to equal pay by entering into an SD contract. This approach was found by the tribunal to work because:

  • BP and Monarch were very clear about their intentions and explained to the agency workers, at meetings and in writing, how the new SD contract would operate
  • The SD contract itself was properly drafted and included necessary provisions on pay between assignments
  • Current assignments were terminated on notice (in accordance with their terms). If BP or Monarch had simply changed the contract terms mid-assignment to SD terms the derogation would not have been effective
  • New assignments were offered subject to the workers first entering into the SD contract. If BP had not been absolutely clear on this point some of the agency workers may have been successful in their claims for equal pay because they did not sign the new contract before they started the assignment.

The case did not address the mechanics of making pay between assignments which is a question that will no doubt arise in the future but it provides comfort for agencies that have adopted an SD model that it can work if properly implemented.



In other words, if an agency is clear that an assignment is offered on an "SD basis" and the contract is properly drafted then, in general terms, the agency will not have to worry about equalising pay.