Traffic Commissioners to examine agency driver arrangements more closely

At a recent Traffic Commissioner public inquiry in November 2023, the Senior Traffic Commissioner, Mr Turfitt, sanctioned an operator for, among other things, failing to follow HMRC guidance when engaging agency drivers. On the conclusion of the case, the Traffic Commissioner then took the unusual step of publishing the written decision as part of a wider press release to the industry.

The decision, press release and our own recent experience representing operators at Traffic Commissioner hearings all point towards a new willingness on the part of the regulator to more closely scrutinise operators’ agency driver arrangements in future.

So what did the decision say?

The decision

The case involved a relatively small operator: Enero Logistics Ltd. Whilst it is fair to say that the issues of concern to the Traffic Commissioner were extensive, his specific concerns relating to agency drivers may be summarised as follows:

• At a previous Public Inquiry it had been identified that the operator’s permanent drivers had been providing their services to the operator through their own limited companies. The operator had given an undertaking at that hearing that all permanent drivers would be made employees and subject to PAYE and National Insurance contributions.
• It subsequently transpired that the drivers had not in fact been made permanent employees as required by the undertaking, but had in fact simply been moved to being supplied to the operator through a driver agency.
• It was only by the time of the most recent Public Inquiry that the position had changed again and the operator was now finally employing all of its drivers, save for those which had left the business.

It will perhaps come as no surprise then, that the Commissioner made an adverse finding that the operator had not complied with the undertaking in good time.

He went on however, to comment further on the approach that the Traffic Commissioners will be taking towards the use of agency drivers generally:

• “Whilst the flexibility of temporary drivers allows operators to deal with sudden or seasonal increases in work or a shortage of staff due to turnover or resulting from absences, HMRC defines temporary employees as people that are contracted to a job for a limited period, and they are hired straight from the company or through a third-party agency that staffs for other companies."

• “Even workers doing occasional work for a specific business (where the worker has to agree to terms and conditions to obtain the work, where the business provides the materials, tools, or equipment) can be subject to the deduction of tax and National Insurance contributions from their wages. Failure to comply with legal requirements can undermine the ability to hold an operator’s licence.”

• “The publicly available guidance on the GOV.UK website advises that a person is an agency worker if they have a contract with an agency but work temporarily for a hirer. I quote: “You’re not an agency worker if you use an agency to find permanent or fixed-term employment.”

• “Even where there is a legitimate agency arrangement, the 2010 Agency Regulations provided that, after a qualifying period of 12 weeks, the basic working and employment conditions (working time, overtime, breaks, rest periods for night work, holidays and pay) of temporary agency workers must be at least as beneficial as those that would apply if they had been recruited directly.”

The Commissioner also reminded the operator that the use of agency drivers engaged additional duties under Health and Safety legislation:

• “The Health and Safety at Work Act 1974, imposes duties on employers to protect the health and safety of both employees and non-employees who might be affected by the activities. A key consideration for my jurisdiction is whether a driver is familiar with an operation or its processes, or is there an additional risk to the business, other road users and to infrastructure. It is for both the employment agency and operator to ensure that a driver is given an adequate induction before starting work for a client.”

On the conclusion of the hearing, the operator’s fleet was curtailed and the director was warned that the licence would be at risk if any future lack of compliance was found.

What does this mean for transport operators?

Whilst this case is unlikely to be reflective of the vast majority of large fleet operators, it does serve as a clear warning that the Traffic Commissioners will be subjecting agency driver arrangements to far greater scrutiny in future. In any dealings with the Traffic Commissioner or DVSA, it will be for operators to demonstrate, with evidence, that their use of agency drivers comply with the HMRC guidance. In particular, operators who use agency drivers should ask themselves the following questions:

• Are agency drivers contracted to a job for a limited period, and not on a permanent or fixed term basis?
•  Are agency drivers hired straight from the company or through a third-party agency that staffs for other companies?
• Are any applicable deductions for tax and national insurance made in respect of workers who are doing occasional work for the business (where the worker has to agree to terms and conditions to obtain the work and where the business provides the materials, tools, or equipment)?
• After a qualifying period of 12 weeks, are the basic working and employment conditions of temporary agency workers at least as beneficial as those that would apply if they had been recruited directly?

Operators also need to be able to demonstrate, if called upon to do so, that the additional health and safety risks that can arise from the engagement of temporary agency drivers have been effectively managed and mitigated.

In the words of the Senior Traffic Commissioner Mr Turfitt: “It is wrongly assumed that agency arrangements will not be scrutinised on behalf of Traffic Commissioners. That would be a mistake.”