The recent case of HMRC v Thorn Baker in the High Court on 14 July 2006, concerned whether agency workers on fixed term contracts of no more than three months were entitled to Statutory Sick Pay (SSP). The challenge focused on the wording of the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, which despite excluding agency workers, was deemed to have changed the law relating to the eligibility of all workers to claim SSP under the Social Security Contributions and Benefits Act 1992.

Prior to the 2002 Regulations, employees engaged on contracts for less than three months were excluded under the 1992 Act and so were not entitled to claim SSP from their employer. ‘Employee' in this context includes anyone who is paid subject to PAYE and National Insurance Contributions, and therefore includes
so-called ‘agency workers', i.e. those supplied by an employment business who do work under the control of another person, the client. This exclusion was considered discriminatory to fixed term ‘employees' and so was removed from the Act by the 2002 Regulations.

The problem arises in the fact that the 2002 Regulations specifically stated in Regulation 19 “these Regulations shall not have effect in relation to employment under a fixed-term contract where the employee
is an agency worker.

The resulting judgment held that on a construction of the wording in the 2002 Regulations, Regulation 19 was not qualified in any way and applied to ‘these Regulations' in their entirety. This means that none of the provisions of the 2002 Regulations could apply to agency workers, including the provision removing the three month exclusion for ‘employees' with less than three months' service being eligible for SSP.

The effect of this judgment is that all workers supplied by employment businesses, whether engaged on a contract for services or a contract of employment will only be eligible for SSP after a working for a period of three months for their agency, i.e. entitlement to SSP did not arise and therefore the appeal by HMRC should be dismissed.

HMRC were, however, granted extra time to consider whether to appeal against that decision to the Court of Appeal. HMRC, DWP and DTI are now together considering the judgment and its implications.

latest developments regarding the national minimum wage (nmw)