Draft Conduct of Employment Agencies And Employment Businesses (Amendment) Regulations 2010

The Committee consisted of the following Members:

Chair: John Robertson 

† Andrew, Stuart (Pudsey) (Con) 

† Bacon, Mr Richard (South Norfolk) (Con) 

† Bagshawe, Ms Louise (Corby) (Con) 

† Baker, Steve (Wycombe) (Con) 

† Bingham, Andrew (High Peak) (Con) 

† Blackman, Bob (Harrow East) (Con) 

† Blackwood, Nicola (Oxford West and Abingdon) (Con) 

† Creasy, Stella (Walthamstow) (Lab/Co-op) 

† Davey, Mr Edward (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

† De Piero, Gloria (Ashfield) (Lab) 

† Fovargue, Yvonne (Makerfield) (Lab) 

† Lucas, Ian (Wrexham) (Lab) 

† Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury)  

† Pearce, Teresa (Erith and Thamesmead) (Lab) 

† Sarwar, Anas (Glasgow Central) (Lab) 

† Simpson, David (Upper Bann) (DUP) 

† Spellar, Mr John (Warley) (Lab) 

† Swinson, Jo (East Dunbartonshire) (LD) 

Ben Williams, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee 

Tuesday 6 July 2010  

[John Robertson in the Chair] 

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

4.30 pm 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):  I beg to move, 

That the Committee has considered the draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2010. 

It is a great pleasure to serve under your chairmanship, Mr Robertson. It is the first time that I have been in a Delegated Legislation Committee as a Minister and it is the first time that you have been in the Chair, but I am sure that my frailties will be far greater than yours in the different tasks on which we will now engage. I also note that it is the first time that many hon. Members will have the pleasure and the joy of being members of a Committee. I am sure that you are keen for their names to be put down for more Committees in the future. 

As the Committee will be aware, the amending regulations were laid by the previous Parliament shortly before the general election, so I assume, perhaps optimistically, that they will receive cross-party support today. The regulations deal with the conduct of the private recruitment industry and focus on two different audiences. First, they will reduce regulatory burdens by eliminating unnecessary suitability checks, which all agencies placing workers in permanent posts currently have to carry out. Secondly, they will protect potentially vulnerable people seeking work by tightening the restrictions on the charging of up-front fees in the entertainment and modelling sectors. 

The Government have now had an opportunity to consider the amendments carefully. We have concluded that they are consistent with the new approach of the coalition Government to regulatory policy. Taken in the round, the amendments will reduce the regulatory burden on employment agencies and businesses. While measures to increase protections in respect of up-front fees will have some cost impacts in part of the sector, they will be more than offset by the overall reduction of burdens on the sector due mainly to the scrapping of unnecessary suitability checks. We have consulted the Government’s new Reducing Regulation Committee and it concurs with that analysis. 

Of course, when regulating we need to show that the rules are keeping pace with new technology and business practices, and we believe that is what the regulations do. The entire employment agencies and employment businesses sector has grown significantly in recent years. There are now about 16,000 agencies employing about 1.3 million agency workers in a huge variety of organisations and, as a whole, the sector is worth about £24 billion a year.

The range of services offered by employment agencies and employment businesses has grown hugely, particularly in the online sector. The e-recruitment market alone, which has seen huge innovation, was worth about £0.5 billion in 2007 and might well have grown in value, despite the recession. 

Using agency workers allows businesses to adjust their work force in the face of fluctuating demand, while for the individual employee, agency work offers greater freedom to choose their hours and conditions of work. For those who have been out of the labour market for a while, it can offer a quick and easy route back into paid employment. For many, a temporary placement leads to a permanent position. Labour market flexibility and dynamism will be vital if we are to build a sustainable economic recovery and create the conditions for enterprise and growth. 

The main purpose of the regulations is to end the requirement on employment agencies to carry out various checks on workers who they put forward for permanent recruitment—that is, individuals who will be directly employed by the hiring business. However, I should stress that the change will not reduce the obligations on employment businesses placing people on temporary assignments. In such cases, it makes clear sense for the responsibility to lie with them. 

Agencies engaged in permanent recruitment also have to conduct several checks, such as verifying the worker’s identity, experience, training qualifications and any authorisation that the hirer considers necessary. In those circumstances, it makes more sense for the hiring employer to be responsible for the checks. Indeed, a range of other legislation and the requirements of some professional bodies mean that employers already have to make such checks. Insisting on the agency also running the checks seems unnecessary and is often a duplication of effort. 

The rapid growth of the online recruitment industry in recent years has led to many “jobs boards” being set up. They fall within the scope of the regulations, but their business models have proved incompatible with conducting the checks that the previous regulations required. That is especially true for jobs boards that allow users to swap lists of vacancies and CVs. Such agencies merely offer a platform for the services and have little interaction with their clients. If we insist on the old regulations, that could destroy the business model of the new online agencies. 

One might say that non-compliance should seldom be an argument for repealing regulations, but I believe, as did the previous Government, that it is justified in this case. As I have outlined, the obligations for the checks for permanent positions are of minimal benefit, so forcing online businesses to comply would simply increase their costs, probably to a point where it no longer made business sense to offer their services, so the regulations could be job-reducing and could destroy businesses if we do not amend them. 

Our approach is therefore pragmatic. It will improve the regulatory environment for one of the most dynamic and innovative sectors of the UK economy. Removing the requirement to make checks on people being placed permanently will reduce agencies’ costs and make it easier for people to find employment. 

There is one important exception that I should bring to the Committee’s attention. The obligation on agencies to conduct appropriate checks will remain in force if

they are placing individuals to work with vulnerable people. Our concern is that otherwise situations might arise where there was no formal requirement for important checks to be carried out—for example, when a parent approaches an agency to hire a private tutor for their children. It does mean that a relatively small number of checks will still be carried out twice by different bodies, but I am sure the Committee will agree that safety must be our paramount concern, and we must make absolutely certain that necessary checks are always carried out. 

There are also a number of other minor improvements to reduce the regulatory burden. The regulations remove the requirement for employment agencies making permanent placements to agree terms with individuals before finding them work, and with hiring firms before placing workers with them. This removes provisions that add little value. It was clear from the consultation that agencies did not think that those were necessary. In such cases, agreement of terms is a matter between the individual and the permanent employer, while agreement of terms between an agency and a hirer should be a purely contractual matter. The deregulatory measures will further help the online sector, which found these provisions particularly restrictive. 

The regulations also remove the requirement for an advert to state whether the agency placing it is acting as an employment agency or as an employment business. Instead, the advert will simply state whether a position is temporary or permanent—terms that are far more likely to be understood by both candidates and recruiters. 

Let me now turn to the amendments in respect of up-front fees. While we know there are many workers who value the flexibility and choice that agencies can offer, there are circumstances where agency workers can be more vulnerable than their permanent counterparts. Sadly, that is the case in some parts of the entertainment and modelling sector, where there is a long history of abuse and exploitation of up-front fees by unscrupulous agencies. 

The regulations currently allow agencies in that sector to charge up-front fees in certain limited circumstances in recognition of the industry's long-established practice of using publications such as casting directories as a means of introducing artistes to would-be clients. Fees are generally charged in such circumstances to offset the cost of producing 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. 

In contrast, however, unscrupulous operators use this up-front fee provision as a way of ripping people off. They are in the business of targeting the young and often vulnerable, with cynical promises of work and a glamorous lifestyle. They use hard-sell tactics to persuade people to part with their money on the promise of work that never materialises, because there was never any serious attempt to find it. 

Members of the Committee will recall that the problem is not new and there have been previous attempts to tackle it. Most recently, a seven-day cooling-off period was introduced in 2008 to allow individuals to assess, away from the limelight of the audition or photographic session, whether the promises were realistic and whether they wanted to proceed. However, it is clear that that has not been effective. The employment agencies standards inspectorate continues to receive a steady stream of

complaints, and a public consultation undertaken by the previous Government in 2009 confirmed that widespread concern about the issue remained. 

For those reasons, I believe it is now right to take decisive steps to tackle the problem once and for all. The statutory instrument will amend the conduct regulations to ban outright the practice of charging up-front fees to would-be models, who are targeted by the vast majority of the scams. That should not cause concern to reputable modelling agencies, which will instead be able to charge commission on actual work found, which is the basis on which the rest of the agency sector operates. 

The absolute ban will not extend to the placement of other entertainers, such as actors, musicians and extras. The risk of abuse is significantly lower in those 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 up-front fee as a legitimate part of their business model. 

However, we still want to provide those parts of the sector with some added protections. Therefore, the amendments will significantly enhance the safeguards that that group has to protect it further against 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 the group, which will also benefit from increased rights on cancellations and refunds over the period. 

I am delighted to recommend the package of proposals to the Committee. I am grateful to the Ministers in the previous Government for their work in shaping the proposals and listening to points made, for example by the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), who showed a particular concern for models and believed that a cooling-off period might not be effective, as has been proven the case. I believe that we have a balanced package, which I commend to the Committee. 

4.42 pm 

Ian Lucas (Wrexham) (Lab):  It is a pleasure to appear before you for the first time, Mr Robertson. It is also a pleasure—perhaps that is not the right word—to have the Minister in his new post. I welcome him there and wish him well in that role, however brief it may be. I note that the tremendous team behind him is bright-eyed and bushy-tailed, and I am sure that there will be many more statutory instruments to come, which will be more contentious than the one before us today. It always helps when the Opposition who have presented a statutory instrument when in government then address it in opposition. 

I caution the Minister: not all political parties say the same thing after an election as before it. However, in this case, we are dealing with the Labour party, so I am pleased to say that the proposal is one that the former Minister of State, my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), had taken forward and done much work on. He is my colleague in shadowing the Department for Business, Innovation and Skills, and he certainly commends the new Government’s approach of taking forward the legislation at an early stage. 

The issue of up-front fees for modelling has been a problem for some time. As the Minister indicated, the previous Government sought to address the problems in 2008 with a seven-day cooling-off period. However, as a result of the consultation undertaken by the previous Government it became clear that it was widely held across the sectors that as far as modelling was concerned, there needed to be an outright ban. The proposal is sensible. It appears to be widely approved of within the sector, and we welcome it from these Benches. 

I have a particular concern. The Minister referred to the distinction in respect of acting and the fact that the outright ban will not apply to that area. Clearly, there are hazy areas between acting and modelling that might cause some difficulty in definition. Could the Minister say a little more about the definitions? How can we be sure clear distinctions will be drawn between acting and modelling, in order to avoid future problems? 

The regulations refer to the terms of agreement between the employment agencies and the model—or the actor, because the question applies to both situations. I am not clear at the moment whether those agreements are required to be in writing, or will oral agreements suffice? From the documentation that I read, it is not clear whether a written contract is required—that would be helpful, but I am not certain of the position. 

One further area of great concern in the sector is that of vulnerable people. Could the Minister say a little more about the definition of what constitutes a vulnerable person? It will apply to minors, clearly, but would it extend to others who we might generally consider vulnerable? I would welcome clarification. 

Subject to those questions, those are my submissions. 

4.46 pm 

Mr Davey:  I am grateful to the hon. Gentleman for welcoming the regulations, but not that surprised. It is good that on this occasion the Labour party is saying the same thing in opposition as in government. I hope I can give him the answers that he seeks. 

The hon. Gentleman’s first substantive question concerned the distinction between modelling and acting. The previous regulations made those distinctions—we

are not introducing anything new. In fact, our concern was more whether, if we had extended the ban to acting, we would have had a much greater problem with definitions distinguishing between extras and actors—there are some difficult distinctions there. That is not why we did not apply the ban on up-front fees to actors; as I am sure the hon. Gentleman is aware, the findings of the consultation were that there was less abuse in that sector, so it would have been disproportionate to have a ban on the fees. However, the distinction from the past between modelling and acting in all its different guises is not one with which the employment agency standards inspectorate has found a problem. The consultation did not deem that to be an issue, so I can reassure him. 

The definition of vulnerable people is in legislation, and it bears on the previous, 2003, regulations. The change is slight and technical, but I am happy to read out the full definition: 

“any person who by reason of age, infirmity, illness, disability or any other circumstance is in need of care or attention, and includes any person under the age of eighteen”. 

It deals with the elderly, the young, the disabled and people who are ill; it is a common-sense definition of “vulnerable person”, which I am sure will commend itself to the Committee. 

As to whether the agreements with employment agencies legally have to be in writing, I will have to write to the hon. Gentleman, unless I have inspiration in the next few seconds. [ Interruption. ] In fact, inspiration has arrived: the agreement to terms does not have to be in writing but it should be documented. That is provided for in regulation 16(7). I am not sure whether that means a record that is produced in due course, but I am happy to send the hon. Gentleman the full details. 

I hope that answers the hon. Gentleman’s questions. 

Question put and agreed to.  

Resolved,  

That the Committee has considered the draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2010. 

4.49 pm 

Committee rose.