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Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2010

Volume 719: debated on Wednesday 23 June 2010

Motion to Approve

Moved By

That the draft order laid before the House on 23 March be approved.

Relevant document: 13th Report, Session 2009–10, from the Joint Committee on Statutory Instruments

My Lords, I welcome this opportunity to introduce these amendments to the Conduct of Employment Agencies and Employment Businesses Regulations 2003.

The regulations we are debating today govern the conduct of the private recruitment industry. This sector is of course a crucial part of the UK labour market, enhancing its strength by helping to maintain the right combination of flexibility for both workers and employers. It has grown significantly in recent years. There are now some 16,000 agencies, employing around 1.3 million agency workers in a huge variety of organisations. The sector as a whole is now worth about £24 billion a year. It is also hugely innovative, and the advent of the internet and broadband in particular has resulted in a paradigm shift in the market for recruitment services. The e-recruitment market alone was worth around £0.5 billion in 2007 and had been growing at around 25 per cent a year. The flexibility the sector offers the labour market more generally and its capacity for innovation will be essential for building a sustainable economic recovery.

Workers themselves value the flexibility and choice that agencies can offer them. For many people, agency work offers them the opportunity for greater freedom to choose their hours and conditions of work, and gives those that have been out of the labour market for a while a quick and easy route back into paid employment. For many, a temporary placement leads to a permanent position. But we know that agency workers can in some circumstances be more vulnerable than their permanent counterparts. It is important that they have appropriate protection, for instance to ensure they are paid what they should be paid, and that they are not exploited by the small number of unscrupulous operators. This brings me to the regulations that we are debating today.

These regulations were laid shortly before the election by the previous Government, and I am grateful to my noble predecessor for proposing a commendable set of measures that in my view should attract cross-party support. To proceed with them now is the right thing to do. They focus on two areas of interest to two quite different audiences. First, they will protect potentially vulnerable work-seekers by tightening the restrictions on the charging of upfront fees in the entertainment and modelling sectors. Secondly, they will reduce regulatory burdens by eliminating unnecessary suitability checks that all agencies placing workers into permanent posts currently have to carry out.

The Government have concluded that these measures are consistent with the new approach we will bring to regulatory policy because they are, as a package, burden-reducing. Although the measures to increase protections around upfront fees will have some cost impacts in part of the sector, these will be more than offset by the reduction in burdens on the sector as a whole regarding suitability checks. The Government’s new Reducing Regulation Committee has been consulted and has concurred with this analysis.

I turn now to the detail of the proposals. Their first objective is to tackle a long-standing issue that has tarnished the reputation of agencies in the entertainment and modelling sector for too long—namely the exploitation and abuse by unscrupulous agencies of the current provision for an upfront fee. The conduct regulations currently allow agencies to charge upfront fees in this sector in certain limited circumstances. This is in recognition of the long-established industry practice of using publications such as casting directories as a means for introducing artists to would-be clients. Fees are generally charged in such circumstances to offset the cost of production of the publication. There are many reputable agencies that operate this business model and provide a valuable, well regarded service and a legitimate route to work. However, there is unfortunately also a tradition of abuse of this provision by the unscrupulous. Typically, they target the young, and often vulnerable, with unrealistic promises of work, preying on their hopes of a more glamorous lifestyle. An event will often be organised, typically in a town-centre hotel, and hard-sell tactics deployed to persuade people to part with their money on the promise of work that never materialises—and was never going to materialise, because there was never going to be any serious attempt to find it.

As I say, this problem is not new and noble Lords will recall that I have argued in this House for tougher action to tackle this issue in the past. Most recently, a seven-day cooling-off period was introduced in 2008 to allow individuals to better assess—away from the limelight of the audition or photographic session—whether what they have been told is realistic and whether they want to proceed. It is clear that this has not proved effective. There has continued to be a steady stream of complaints to the Employment Agency Standards inspectorate, and a public consultation in 2009 confirmed that there remains widespread concern about this issue. It is therefore now right to take more decisive steps to tackle the problem once and for all. The statutory instrument will now amend the conduct regulations to ban outright the charging of upfront fees to would-be models, who are the target in the vast majority of these scams. This should not be of undue concern to reputable modelling agencies, which will instead be able to charge commission on actual work found—the basis on which the rest of the agency sector operates.

The absolute ban will not, however, extend to the placement of other entertainers, such as actors, musicians and extras. The risk of abuse is significantly lower in these sectors and a ban would have a disproportionate effect on perfectly legitimate businesses. Those in the casting directory business, for example, will still be able to charge an upfront fee as a legitimate part of their business model. However, the amendments will also significantly enhance the protections that this group has to further guard it against the tactics of any unscrupulous agencies, and discourage the disreputable operators in the modelling sector from simply shifting their target. The amendments will extend the current seven-day cooling-off period to 30 days for this group, which will also enjoy other strengthened rights—for instance in terms of cancellations and refunds over this period.

I turn now to the amendments that will bring business benefits by reducing regulatory burdens. In the current economic climate, it is even more important that we reflect on what more we can do to help ensure that the conditions are right for securing Britain’s economic recovery and future business success. We need to make sure that our regulations keep pace with new technology and business practices, especially in a sector such as this one, which is constantly evolving and expanding. These are the motivations that lie behind this section of these regulations. Their main effect is to remove the requirements placed on employment agencies to carry out various checks on workers they introduce for permanent recruitment. It is important to stress from the outset that this change will not reduce the obligations on employment businesses placing people on temporary assignments. It relates only to permanent placements.

The regulations currently require the agency introducing a worker for a permanent job to carry out a range of checks, including checking their identity, experience, training, qualifications and any other authorisation which the hirer considers necessary. While such checks clearly make sense in the case of temporary assignments, the logic is far less clear for permanent assignments. Whether an agency is involved in the recruitment or not, the obligation for carrying out necessary checks lies fairly and squarely with the employer providing the job. As well as it simply being in the final hirer’s own interests to carry out checks on such things, obligations are placed on them by a range of other legislation and, in some cases, the requirements of professional bodies. Requiring the agency to do the checks is, therefore, usually unnecessary and often a simple duplication.

It is also the case that the rapid growth of the online recruitment industry in recent years has led to the establishment of many job boards which fall within the scope of the regulations, but business models of which are incompatible with the carrying out of such checks. Many simply allow the swapping of lists of vacancies and lists of CVs and, other than offering a platform for these services, the agency has very little interaction with its clients. While non-compliance with regulatory requirements is not often an argument for changing the regulations concerned, this state of affairs is clearly another reason for doing so in this case. Given the minimal benefit of the checking requirements, it would certainly make little sense to try to force these businesses to comply, fundamentally altering their services and increasing their costs to the point where their viability could be in question.

These proposals therefore represent a pragmatic approach to improving the regulatory environment for one of the most dynamic and innovative sectors in the United Kingdom economy. By removing the requirement to make checks on people being placed permanently, these amendments will reduce costs and make it easier for work-seekers to find employment. There is one important exception to this overall approach, however. We do not propose to remove any checking requirements in respect of those being placed by an agency to work with the vulnerable in their own homes. In the development of the policy, it was found that there could otherwise be some situations in which there would be no formal requirement for important checks to be carried out—for instance, when a parent goes to an agency for a private tutor for their children. It is true that this will mean that a relatively small number of checks still end up being carried out twice by different bodies, but I am sure noble Lords will agree that the priority when people are working with the vulnerable must be to make absolutely certain that necessary checks are always carried out. The regulations will also make it much clearer what these requirements are.

The regulations also make several other minor burden-reducing improvements. They remove the requirement that employment agencies introducing work-seekers for permanent employment should obtain agreement to terms with work-seekers before finding them work, and with hirers before placing workers with them. This removes provisions that add little value. Agreement of terms in the case of permanent employment is simply a matter between the work-seeker and the permanent employer, while agreement of terms between an agency and a hirer should be a purely contractual matter.

Finally, the regulations remove the requirement for an advert to state whether the agency placing it is acting as an employment agency or an employment business under the terms of the regulations. Instead, the requirement will be framed in rather plainer English; it will be necessary merely to state whether a position is temporary or permanent—terms that I am sure noble Lords will agree are far more likely to be understood by both candidates and recruiters. I beg to move.

My Lords, I spoke on this subject when it first came up a long time ago. I welcome the return of this instrument, but I have a few continuing concerns.

First, the Minister’s description of parties and gatherings was rather naïve. There is frequently a very real cost for those who attend these events. They frequently pay for photography or the costs of preparing themselves to attend these events. The most notorious of all these gatherings are audition parties where a producer may require 20 or more young women to participate in a group activity in a film. These are held out as great career opportunities where one can meet influential production executives. In some cases the entrance fee to those gatherings is unscrupulously sold by the staff of the agency in and around the local clubs. As a result, these girls buy these tickets at considerable cost in the belief that they will be able to earn enough money during the evening to recover the cost, make a profit and have fun at the same time. It sounds like a good deal, but it is not. These events are sometimes appalling with large quantities of white powder frequently floating round the room.

There ought to be much greater and more rigorous management of the proceedings. The agency should require an authoritative person to be present to stop this nonsense. There have been a number of well publicised examples of this recently such as the famous Manchester United Christmas party where the agency staff actually sold the tickets in clubs to women ambitious to become WAGs or whatever. It would not have been bad if it had ended there, but, of course, it did not. Therefore, the instrument goes nowhere near far enough in requiring supervision of the parties to which these young people go.

However, I am much more concerned about the block bookings of young people who are recruited to provide the catering staff at various sporting events around the country. I have a lot of experience of this, having been responsible for all the major race gatherings in Britain over a number of years until some three or four years ago. I know exactly what goes on at these affairs. It is not only the race meetings where these young people are in such demand—major golf tournaments also feature. Without doubt, the major golf tournaments present a much bigger risk than the race meetings as the young people work until much later in the evening, until the last of the light has gone and the corporate entertaining goes on much longer. Therefore, the young people are out much later and are exposed to increasingly inebriated gatherings of older men attending the corporate entertaining, so it is a very hazardous place for young people.

The agency recruitment generally takes place in and around well known catering training schools and colleges. The recruiting agencies put on a bus or two buses to take virtually all the students at the catering colleges in, for example, Newbury and Reading, and ship them up to wherever the meeting is to take place—St Andrews, or wherever. Herein lies the great risk, which I do not believe the instrument even begins to address. The students go up for, say, a five-night stay in a place far from home, with the cost of their transport paid for by the agency as the latter will have done a deal with the organisers of the tournament or the meeting. When the students get to the meeting, there is a very undefined line—the instrument does not deal with that—as to whether they are the responsibility of the agency which has recruited them or of the promoter of the event who has hired the agency to recruit them. There is a lack of definition of where that responsibility lies. With it, goes the responsibility for security. There is no clear definition of the rules that should govern the overnight accommodation for the people when they get to the event. There is no specific rule outlawing unisex dormitories or other provision in the temporary accommodation of these people. That is ridiculous; there should be. There is no requirement for permanent overnight supervision by a mature and responsible person in those situations or for security to keep away predatory corporate guests, male members of staff, players or whoever else has been engaged in the event. These places are lethal—nowhere near enough security is provided.

However, a greater hazard may arise. An innocent person may attend one of these events and find that on the first night they are subjected to undesirable treatment. They may decide the next day that this is too much for them and they want to leave. However, they cannot do so because the coach that was sent up is part of the cost structure for the whole deal and will not be made available for certain people to travel back on their own. The promoters will not give these people the rail fare to enable them to go back on their own. That would probably cost almost as much as sending them back in the coach, if they travelled from St Andrews to Reading, for example. These young people are then stuck. There is no obligation on the organisers or the agency to provide alternative accommodation away from the site for anybody who has had a bad experience on the first or second night. The pay the workers receive for their first day’s work will not be anywhere near enough to pay the rail or any other fare back down to civilisation whence they came.

Therefore, there are still some very serious holes in the instrument. I welcome it but it leaves more serious issues unaddressed than ever before. It is a good start but goes nowhere near far enough to address the appalling incidents that can happen at these events.

My Lords, naturally I concur with the Minister’s splendid analysis. She talked about the importance of agency working and flexibility and we do not demur from that. However, in applying the European directive, we need to enhance the rights of agency workers and address past discrepancies. I was also pleased to note that her analysis of the regulatory burden concurred with ours. The previous Government sought not to add to the regulatory burden.

There is no such thing as a perfect piece of legislation. Nevertheless, I agree with the Minister’s analysis that the measure seeks to deal with an area where a large amount of exploitation arises. That is not to say that there are no reputable agencies; there are. Unfortunately, however, young people who wish to embark on a modelling career often pay ridiculous sums of money up front on the promise of employment that never arises.

I understand the concerns expressed by the noble Lord, Lord James, but one hopes that parental responsibility will be exercised where these vulnerable young people are concerned. That area may not be covered by the instrument. I do not know whether that was raised with us beforehand. We were addressing what was commonly observed to be an area of significant exploitation. The statutory instrument addresses that and we welcome the Government’s decision to introduce it.

I welcome these two statutory instruments, which were laid for good reason. I shall be interested to hear the response to the noble Lord, Lord James. I believe that I have heard him make these comments before. I welcome the fact that the second instrument seeks to protect the workers whom we are discussing and reduces bureaucracy.

I shall make a general comment. Over the lifetime of a Parliament—quite rightly so—Governments make regulations that are opposed and sometimes, as time goes on, they need to be looked at again. That is why from time to time people raise the issue of sunset clauses. In view of the present Government’s strong commitment to reducing bureaucracy, particularly for business, the processes in place—I do not know much about them, although I know about sunset clauses—such as statutory instruments, tend to be reactive, although I am open to be corrected by the Minister. People may have said, “There is a problem with the regulations, so can that be addressed?”. I do not have sufficient knowledge on this. Given that overregulation and defunct regulation are big issues for business and people generally, what proactive ways to address these sorts of problems are there that would greatly cut regulations that, over time, lose their need to be there? I am sorry to impose on the Minister. I wished to make a general point.

My Lords, I hope that the regulations strike a sensible balance between the need to protect workers from unscrupulous practices, the need to maintain a flexible and dynamic labour market and the need to benefit business to ensure that the UK is in the best position possible to recover from a recession.

A number of specific points have been raised. I am, in particular, grateful to the noble Lord, Lord Young, for saying that we are building on his good work. I am glad that that is how he feels, because this truly is based on his previous work. It is nice to be able to take it forward in this way.

I can understand why the noble Lord, Lord Cotter, asked his question. We shall have to do a lot more of this. There will be a lot more statutory instrument work. We will be looking to build sunset clauses into our legislation as we move further along, so that, when things have had their time, we can let them go. I hope that that is how we will proceed in the future.

I am grateful to my noble friend Lord James for raising an important issue, which is of serious concern and on which he has spoken previously. The role of the Employment Agency Standards Inspectorate is to ensure compliance with the conduct regulations and that those who may be vulnerable are not exploited. The inspectors would therefore be interested to receive any further information about cases such as those that he raised. If the information provided suggests in any way that these young people are being mistreated or taken advantage of, the EAS will investigate further and take appropriate action. If the activity is not regulated by the EAS, it will pass on the information and allegations to the appropriate authorities for them to consider. I hope that that will take things forward better for my noble friend. Given his great experience of such gatherings from his work in the racing industry and so on, we hope that he might talk in confidence to these organisations.

Having addressed those points, I repeat my hope that we have agreed that the regulations strike a sensible balance between the need to protect workers from unscrupulous practices, the need to maintain a flexible and dynamic labour market and the need to benefit business to ensure that the UK is in the best position possible to recover from recession. For these reasons, I commend the proposals to the House.

Motion agreed.

Sitting suspended.