Can an agency ask a worker who works through a personal service company to sign away their AWR rights?
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An agency owner plans to include a clause in the contracts of workers who work through their own limited companies stating that AWR doesn’t apply to them. What legal standing does such a clause have, and and how advisable is this course of action?
Kevin Barrow, a partner at Osborne Clarke, responds: “Those who are not working under the supervision and direction of a hirer and/or genuinely self-employed will fall outside the scope of the AWR- this includes most if not all of those personal service company contractors who are outside IR35 (which the vast majority claim to be) .
If those workers then bring an AWR claim they may risk having their IR35 status challenged by a tax inspector and face significant tax claims exceeding the amount of AWR equal pay they are making. This, and the likelihood that IR35 will remain for the time being, is the main reason why many people involved in the supply or use of agency workers are taking the view that personal service company contractors are very unlikely to bring AWR claims.
However, people do sometimes bring claims which on the face of it are not sensible, and therfore, assuming that your personal service company workforce genuinely falls within the self-employed category, there is nothing to stop you inserting a clause within the contract with the personal service company (remember you do not have a contract with the individual worker in these cases) stating that the workers supplied via the personal service company do not have AWR rights.
You could point to that statement in any proceedings if and when a claim is made and an Employment Tribunal would take that into account especially if the statement can be shown to have been brought to the attention of the director of the personal service company and it does not look to the tribunal like a “sham”. It would be sensible then to get the personal service company to back that up with warranties and indemnities which you could sue on if an AWR claim is then made (and if the worker has stopped using the company but persists with his AWR claim you could threaten him with personal liability under the Insolvency Act).
Getting such a statement and set of warranties/indemnities from the worker direct may seem sensible but could give rise to tax and co-employment risk which we do not have time to cover in this piece.
