Opt out’ is a common phrase in the recruitment industry, but who is opting out and what is it they are opting out of?
The term ‘opt out’ is a term used to describe the situation where a limited company and the individual working through that limited company agree that the Conduct of Employment Agencies and Employment Businesses 2003 (the “Regulations”) should not apply. The right to opt out is contained within r.32(9).
An opt out is only valid where it is given by both the limited company and the individual to be supplied by the limited company to do the work, notice must be given before the introduction or supply and the end client must also be notified of the contractors status as an opted out work seeker. Many fall over in dealing with the timing requirement, and may want to seek advice on how to get process properly in place to avoid the issues that can then arise.
What are the benefits of obtaining opt outs?
There are several advantages to agencies, such as:
1. Less administration – The rules within the Regulations relating to the agreement of specific terms and gathering of references will not apply.
2. Withholding of payment – The restrictions on withholding payment to work seekers where payment is not received from the client found at regulation 12 will not apply.
This allows the agency commercial protection in the event that payment is not received from the client by reducing the risk of having to pay a contractor when payment is not received. This is of course subject to what the contract between the parties allows.
3. Restrictive covenants – An agency can restrict an opted out candidate by contract from working for certain parties following termination, other than through that agency. This is for a period of time which commonly varies between 3-12 months. Such restrictions would not be permitted where the Regulations apply under R.6.
Who can’t opt out?
Regulation 32(12) prevents two classes. A candidate who is to work with someone under the age of 18, e.g. a teacher; and a candidate who is to work with someone who for any reason is in need of care or attention, e.g. a locum doctor.
In addition, whilst an agency cannot refuse to help a candidate who declines to opt out, this would not prevent recruiters from offering differing types of services for opted out and non-opted out candidates.
It is therefore important to ensure that all of the requirements are met so that the opt out is valid, to ensure that commercial benefits of dealing with an opted out work seeker are gained. If for example the client is not notified of the opt out, a recruitment company would not be able to rely on any restrictive covenants contained within the contract.
One last point – the government may review these rules under the forthcoming agency law consultation. For more information or advice, please call Theresa Mimnagh on 01273 236236.
Adrian, a highly experienced lawyer, founded Lawspeed in 1997. He is responsible for developing our extensive portfolio of products and services, including the widely used Lawspeed contract templates. Adrian is an expert on “recruitment law” and specialises in contracts, regulatory compliance, employment status and dispute handling. He is chair of the trade body the Association of Recruitment Consultancies, the only lawyer lead recruitment trade body in the UK. Adrian and his co-director Ravi devised Standards in Recruitment as a vehicle for helping drive up standards and compliance in the industry.
Adrian is our lead in discussions with the government over regulatory evolution. Apart from assisting with client support, Adrian’s primary role is research and development into methods of business delivery, our latest service Proterms being his most recent project. Adrian heads our IR35 lawyers team.