163: Court of Appeal rules that London Underground must compensate agency workers for underpayments

In London Underground v Amissah, the Court of Appeal considered the calculation of compensation under the equalisation provisions of the Agency Workers’ Regulations 2010 (the AWR), and how it should be apportioned between the temporary work agency and the hirer.

Under the AWR, after twelve continuous weeks in the same role, temporary agency workers are entitled to the same basic working and employment conditions as permanent employees of the hirer in the same job. There is an exemption to this principle for agency workers who are paid between assignments under a permanent contract of employment with the agency (known as the Swedish derogation). An Employment Tribunal may award such compensation as it considers just and equitable for breach of this right, having regard to the nature of the infringement and any loss suffered. Compensation will be apportioned between the agency and the hirer as the Employment Tribunal considers just and equitable.

The claimants in this case were agency workers who had worked for London Underground since October 2011. The agency, and London Underground, initially believed that the workers were not entitled to equal pay and terms because the Swedish derogation applied. However, when London Underground reconsidered the issue, it decided that the AWR did apply. From October 2012, the agency paid the workers correctly at a significantly increased rate. Between December 2012 and May 2013, London Underground made payments to the agency to fund the arrears of underpayments, but the agency dishonestly failed to pass those payments on to its workers. In November 2013, the agency went into involuntary liquidation.

The Employment Tribunal ruled that there had been a breach of the AWR in relation to hourly rates until October 2012 and that liability should be apportioned equally between the agency and London Underground. The agency was at fault for initially asserting that the AWR did not apply, but London Underground had delayed in providing information about comparators. However, the Tribunal concluded that it was not just and equitable for London Underground to pay any compensation because the underpayments were due to the agency’s failure to pass on the arrears; the workers had delayed enforcing their rights until after the agency’s insolvency; and in any event, London Underground should not have to pay twice.

The agency workers appealed successfully to the Employment Appeal Tribunal (the EAT), which held that London Underground should have to pay compensation. The EAT noted that London Underground had chosen to use agency workers and that those workers were in a weaker bargaining position. It was irrelevant that the workers had not brought their claims before the liquidation. A further appeal by London Underground has now been dismissed by the Court of Appeal, which clarified how the compensation should be assessed. The Tribunal had established that London Underground was 50% liable for the underpayments, so the next step was to identify the workers’ loss attributable to the infringement, which was the loss of their enhanced pay. Although it was regrettable that London Underground would have to pay twice, it was not just and equitable for the workers to be deprived of compensation, and they should not carry the burden of the agency’s dishonesty. The claims were remitted to the Employment Tribunal to calculate the appropriate amount of compensation.

This case is a reminder to hirers that they can still be liable where an agency asserts that the equalisation provisions in the AWR do not apply. It also illustrates the uncertainties involved in assessing compensation under the just and equitable principle. The Court of Appeal stressed in this case that it is only in exceptional circumstances that a respondent will be ordered to pay less compensation than it has been held liable for, such as where a worker has been engaged in some kind of fraud.