Corporate report

Employment Agency Standards (EAS) Inspectorate: enforcement policy statement

Updated 25 April 2024

1. Introduction

The Employment Agency Standards inspectorate (EAS) is located in the Department for Business and Trade (DBT). Its mission is to work with recruitment agencies, hirers, and work-seekers to ensure compliance with employment rights, particularly for vulnerable work-seekers, who work through employment agencies and employment businesses (commonly called ‘agency workers’), and that everyone who uses the services of a private recruitment agency to find work is treated fairly.

The main role of EAS is to ensure compliance with the provisions of the Employment Agencies Act 1973 and associated Conduct of Employment Agencies and Employment Businesses Regulations 2003 (both as amended).

The EAS enforcement policy is in accordance with the Regulators’ Code and the regulatory principles required under the Legislative and Regulatory Reform Act 2006.

Firm but fair enforcement is implemented using the five key ‘Hampton principles’ of good regulation as set out in the Legislative and Regulatory Reform Act 2006.

The Employment Agencies Act 1973 and associated Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the legislation), require all employment agencies and employment businesses to abide by specified minimum standards of conduct. Find further guidance at the Employment Agency Standards Inspectorate.

You can also view the the Employment Agencies Act 1973 (as amended) as well as the Conduct of Employment Agencies and Employment Businesses Regulations 2003  as amended by the various amendment regulations since 2003.

2. Purpose of enforcement

The purpose of enforcement is to encourage and sustain compliance with the legislation. Compliance serves not only to protect workers’ rights, as well as the rights of hirers, but also to maintain a level playing field in the labour market. Non-compliant businesses create a competitive disadvantage, which is incompatible with economic growth.

EAS takes proportionate enforcement actions where necessary to address these issues, as set out below.

Following an investigation or inspection by EAS, any breaches of the legislation will be brought to the attention of the employment agency or employment business and followed up by the issue of a warning letter. Employment agencies and employment businesses that are issued with a warning letter must ensure they take prompt action to fully comply with the legislation where any breaches are brought to their attention by EAS, as breaches of the legislation are criminal offences.

Each warning letter will set out where the employment agency or employment business has contravened the legislation and will include the full provision of the relevant regulation they need to comply with. Failure to respond to a warning letter issued by EAS could result in further enforcement action.

This could include:

• a Labour Market Enforcement (LME) undertaking being sought from the employment agency or employment business
• an LME order where the employment agency or employment business fails agree to, or to comply with the undertaking
• consideration of prosecution proceedings
• consideration of prohibition proceedings

These enforcement actions will be applied in a considered and proportionate manner, with regard to economic growth and the impact that enforcement actions are likely to have on businesses. Prosecution and prohibition proceedings will always be used as last resorts.

3. Principles of enforcement

The 5 Hampton principles of proportionality, accountability, consistency, transparency and targeting, require enforcement activity to be targeted at non-compliance and to be proportionate in how it responds to that non-compliance.

The Better Regulation Executive and EAS, are part of DBT, and EAS apply the five principles of good regulation.

Proportionality

EAS will seek to secure compliance with the legislation by ensuring a proportionate response to the breaches by the most appropriate enforcement option. Proportionality in obtaining compliance will include intervention only where necessary, taking into account the degree of the risk of harm caused by non-compliant employment agencies or employment businesses towards workers and/or hirers.

Accountability

EAS must be able to justify decisions and be accountable for the efficiency, effectiveness, and cost of the inspectorate. Whilst not diminishing the responsibility of inspectors to comply with the law, this includes EAS’s duty to have regard to economic growth in its regulatory functions.

EAS will publish an annual report detailing the performance of the inspectorate for the previous fiscal year. Published reports since 2004 appear on the GOV.UK webpages.

Consistency

EAS will be consistent in its approach to enforcement in all the legal jurisdictions in which it operates (England, Wales, and Scotland (Great Britain))(employment agencies and employment businesses are regulated in Northern Ireland under Northern Ireland legislation by the Employment Agency Inspectorate (EAI) operated by the Northern Ireland Department for the Economy).

Consistency means taking a similar approach in similar circumstances to achieve similar ends. The overarching view of EAS is that full compliance by those we regulate is expected. However, this does not mean uniformity. Discretion will be applied. EAS recognises that the facts and circumstances of cases will never be identical and have to be considered on their own merits

Transparency

Transparency means helping those regulated to understand what is required from them and what they should expect from the regulator in return. EAS will be clear about the consequences of non-compliance (ie, warning letter, LMEU, LMEO, prosecution or prohibition). It also involves making clear what remedial action is required by employment agencies and employment businesses.     

Targeting

EAS applies a risk-based assessment process for determining priorities and directing compliance and enforcement work to where it is likely to achieve results. The process includes a weighting towards:

• geographic areas where EAS receives higher than average numbers of complaints, or a pattern is emerging
• sectors where EAS receives higher than average numbers of complaints, or a pattern is emerging
• where the nature of the activity being conducted could indicate a higher risk of non-compliance with the legislation
• history of previous inspections of employment businesses or employment agencies in particular sectors or locations
• information from other related enforcement bodies (such as the Gangmasters and Labour Abuse Authority, Care Quality Commission, The Pensions Regulator, HM Revenue & Customs’ National Minimum Wage team) which suggests non-compliance

These principles apply both to enforcement in particular cases and to our management of enforcement activities as a whole. They are not applied in isolation but are informed by an understanding of the business environment. They allow for effective enforcement, without stifling economic growth, by requiring EAS inspectors to be mindful in keeping the burden on business productivity to a minimum.

4. Investigations

EAS will consider every complaint received about an employment agency or employment business. In deciding whether further investigation is necessary, EAS will:

• consider whether the complaint is in scope of the legislation enforced by EAS inspectors can only investigate matters that fall within the remit of the legislation
• assess what other information can be obtained regarding the employment agency or employment business, both from the complainant and other sources

EAS will have due regard to the needs set out in section 149(1) of the Equality Act 2010 (public sector equality duty) and is bound by it as a public authority and in its  investigation process.

Details from complainants will be treated in confidence and their details will not be disclosed during an investigation into an employment agency or employment business unless the complainant has given EAS permission to disclose their information. 

EAS will acknowledge all complaints received and EAS has a target of 5 working days to make contact with complainants from the date the complaint is submitted. If the complaint does not fall within the scope of the legislation, EAS will inform the complainant accordingly.

Where EAS follows up a complaint and investigates, it will aim to conclude the investigation within six weeks from the date the complaint was received in EAS. Most complaints are completed within this timeframe.

Those cases that were not cleared within the specified period include cases where there may be complexities in either obtaining information or evidence; or the need to make further enquiries to consider the services being provided against the application of the legislation; in order for EAS to progress or conclude cases. Where an investigation is protracted EAS will inform the complainant of the reason for the delay at the end of the six-week period, and at six weekly intervals thereafter, if appropriate. 

Following receipt of a complaint or information which needs to be followed up, EAS will conduct an investigation in order to establish:

• causes of complaint
• any non-compliance with the legislation
• the seriousness of any breaches of the law
• what action has been taken, or needs to be taken, by the employment agency or employment business in order to comply with the legislation
• an appropriate and proportionate response to any breaches of the law that were identified
• that compliance with the law has been achieved

The EAS enforcement powers set out in section 9(1) of the Employment Agencies Act 1973 give EAS inspectors’ powers to inspect those premises which they have reason to believe are being used, have been used or are to be used for or in connection with the carrying on of an employment agency or employment business.

This includes where the activity was or is conducted from premises within Great Britain.  These powers would also apply to agencies or employment businesses that operate online.

Under section 9(1), inspectors can ask any person on the premises any question and they can inspect, copy, or remove (for the purpose of copying), any records and documents kept on the relevant premises in accordance with the legislation .

In addition, under section 9 inspectors may by notice in writing require an agency or employment business to furnish them with the record or other document or information at such time and place as the Inspector may specify.

It is an offence under section 9(3) for a person to obstruct an inspector in the exercise of their powers. If the EAS inspector is obstructed from exercising their powers they may issue a formal warning to the employment agency or employment business of the offence and consider criminal proceedings.

5. Inspections

EAS also acts proactively in carrying out targeted inspections of employment agencies and employment businesses. These targeted operations are based on risk analysis and intelligence received.

Targeted operations can be in sector type and/or geographical area. When carrying out inspections of agency records, EAS will be using its enforcement powers (see section 4 above), and inspectors will endeavour to perform their duties in a business conscious manner in order to cause the least disruption to business and the economy.

6. What to expect during an investigation or inspection

Where EAS decides that there is sufficient cause to conduct an investigation and/or inspection, the Inspector can contact the appropriate employment agency or employment business by telephone or correspondence to carry out a visit to the agency’s premises.

When carrying out investigations, it is standard practice for EAS to deal with the case initially by telephoning and corresponding, either by email or letter, with the employment agency or employment business as this may be the most effective and efficient compliance intervention to resolve complaints.

When the EAS inspector writes to an agency or employment business about a complaint under investigation, they will set out the reasons in the correspondence and, if necessary, the allegations being made by the complainant. The Inspector will also include details of the legislation that specifically relates to the complaint and will seek a response.

Inspectors may require documentation to be sent to them including (but not limited to) the agency’s terms and conditions with work-seekers; terms of business with hirers; details of any additional services provided to work-seekers; payments of fees or wages to work-seekers.

The letter or electronic correspondence will contain details of the powers conferred by section 9 of the Act (see section 4 above) in seeking compliance and a written response from the employment agency or employment business.

When an Inspector visits an employment agency or employment business premises, either unannounced or by appointment, they will produce their warrant or identity cards and a written document setting out their enforcement powers under section 9 of the Act. The Secretary of State for DBT has the power to appoint inspectors.

GLAA Labour Abuse Protection Officers (LAPOs) have had the powers of an EAS inspector since December 2016 under the Immigration Act 2016. They may act as EAS inspectors where it is appropriate for them to do so.

Occasionally EAS inspectors might carry out joint inspection visits to employment agencies or employment businesses with other enforcement partners. This could include officers from HMRC’s National Minimum Wage team or the GLAA.

When carrying out an investigation/inspection visit to an employment agency or employment business premises, EAS inspectors will complete an appropriate record of inspection. This record is a document that is retained by EAS and is not published and is not made available to any third party.

Section 9 of the Act provides that it is illegal for any EAS Inspector to disclose any information they obtain during an investigation or inspection. There are some limited exceptions to this restriction, and these include where the employment agency or employment business agrees to the disclosure of information; and where there is a legal gateway that EAS has with another enforcement partner (for example HMRC’s National Minimum Wage team).

During an investigation or inspection visit inspectors may ask for or require to see examples of the employment agency’s or employment business’s documentation including terms agreed with agency workers; terms with hirers; the issue of key information documents (employment businesses only) to agency workers.

During an investigation into a complaint or other intelligence received or when carrying out an inspection, inspectors will normally ask to see and require to inspect all relevant information. This can include:

• all relevant documentation (obtained and provided) relating to two randomly selected placements of agency workers with hirers (temporary assignments or introductions to employers) and relevant documentation and confirmations relating to these placements
• details of any additional services provided to agency workers
• payments of fees or wages to agency workers (including where necessary timesheets, invoices remittances, bank statements etc)
• advertising of vacancies

In addition, inspectors are able to examine or request financial records and other financial documents produced or received by the employment agency or employment business.

If these records are not held on the employment agency or employment business premises or available at the time of the inspection/investigation visit, EAS can write to the employment agency or employment business to ask them to produce such records on a specified date and time, in a reasonable time period, as prescribed by EAS. If an employment agency or employment business fails to comply with this request, EAS can write to the employment agency’s or employment business’s bank and require the bank to supply the financial records.

EAS inspectors can demand detailed information not only from the agency’s directors, sole traders and managers, but also from other parties (eg, employees and third parties), who may be in possession of relevant documents and information. Inspectors may also extend their investigation where necessary and contact users of the agency services (eg, hirers and agency workers) for information during the course of an investigation.

7. Infringements of the Act and regulations

Where infringements are found, EAS will seek resolution of matters by the most appropriate enforcement action. This can be achieved in most cases by issuing warning letters. Upon receipt of warning letters employment agencies and employment businesses have the opportunity to take corrective action and with support and guidance provided by EAS. Serious or repeat cases could lead to LME Undertakings; LME Orders; prosecution and/or prohibition proceedings.

8. Warning letters

Usually, EAS will initially seek compliance by issuing warning letters. Every warning letter will contain a clear statement of the breaches that have been found. They will also contain a formal warning of the EAS powers regarding LME undertakings and LME orders as well as prosecution and prohibition.

Those issued with warning letters will be asked to confirm in writing what remedial action they intend to take, or have taken, in order to correct each breach and, where appropriate, to provide supporting evidence. In all warning letters issued by EAS, the employment agency or employment business will be asked to provide a written response with 14 days of the date of the warning letter.

If further time is needed to respond, for example to include revised documentation, the employment agency or employment business must contact EAS and obtain written agreement to any extension. EAS will consider extensions on a case-by-case basis and will usually grant these provided the employment agency or employment business has provided a reasonable justification.

9. Labour Market Enforcement (LME) – undertakings and orders

In May 2016, the government introduced measures in the Immigration Act 2016 to provide a more coherent framework for identifying and preventing abuses of labour market legislation, and to strengthen the enforcement response. This includes new powers to obtain Labour Market Enforcement (LME) undertakings and orders. EAS (and the Gangmasters and Labour Abuse Agency and HMRC’s National Minimum Wage team) will have regard to the relevant Code of Practice when using the LME regime.

LME undertakings

An undertaking may be sought where EAS believes a trigger offence (a breach of the legislation) has been or is being committed and a ‘measure’ in the undertaking is necessary to prevent further non-compliance.

The factors that will be taken into account by EAS before seeking an undertaking from an employment agency or employment business include:

• the number of trigger offences that are believed to have been committed
• if previous enforcement action has been taken
• the number of workers affected by the offence
• any harm, physical or otherwise, to workers
• the amount of money due to workers
• whether the breach believed to have been committed was committed recklessly or intentionally, as opposed to by straightforward error, and if so
• the level of recklessness by the business that led to the breach, and
• whether EAS believes the breach was committed intentionally

EAS will give a notice to the employment agency or employment business identifying the trigger offence which it believes has been committed and giving reasons for that belief and inviting them to give an LME undertaking in the terms attached to the notice.

An undertaking can be given by an individual, a company or both. An undertaking takes effect when it is offered by the relevant employment agency or employment business and accepted by EAS. The duration will be specified in the undertaking subject to a maximum of 2 years.

An undertaking can be used instead of or alongside existing sanctions. For example, EAS could seek to enforce the payment of wages due to an agency worker and seek an undertaking to prevent future non-compliance.

Where EAS issue an LME undertaking they will take reasonable steps to monitor whether the agency or employment business is adhering to it and if necessary, apply to the courts for an LME order in cases where the subject of an LME undertaking has failed to comply with its terms.

LME orders

EAS may apply to the courts for an LME order where an employment agency or employment business has refused to give an LME undertaking or has given one and breached one of the measures in it.

Additionally, a court may be invited to make an LME order when sentencing a defendant where EAS has brought a prosecution case against that person. In such cases, the LME order process may start at sentencing and it would not be necessary for EAS to have issued an LME undertaking notice first.

An offence would be committed if a respondent fails, without reasonable excuse, to comply with an LME order. The maximum penalty on conviction on indictment is 2 years imprisonment and/or an unlimited fine. The maximum penalty on summary conviction is 12 months’ imprisonment and/or an unlimited fine.

Where offences are committed under more than one area of legislation (enforced by EAS; GLAA; HMRC) the GLAA can co-ordinate activity and seek a combined LME undertaking/order. Each enforcement authority will work together closely to identify the appropriate response to non-compliance where more than one enforcement authority is involved.

EAS will endeavour to meet the government’s intention that a business (employment agency or employment business) should only  be subject to one undertaking or order at a time where possible.

10. Criminal proceedings

In determining whether or not it is appropriate to conduct a criminal investigation, EAS will consider a range of factors including:

• the extent to which work-seekers have been affected by the breach and whether they have been subjected to abuse or detriment by the failure of the employment agency or employment business to comply with the law
• any explanation or statement that has been provided by the employment agency or employment business including in relation to non-compliance with the legislation
• whether the employment agency or employment business has been found to have breached the legislation previously and has disregarded any previous advice and guidance regarding compliance
• the impact or potential impact of the offence on the industry
• the severity and degree of non-compliance
• the benefit, financial or otherwise, to the offender arising from the failure to comply
• the level of culpability of the offender
• whether there is sufficient admissible and reliable evidence to provide a realistic prospect of conviction

These factors are not exhaustive and those that apply will depend on the circumstances of each case.

11. Prosecution

The purpose of prosecution is condemnatory and a deterrent to others. In more serious or heinous cases, where there is sufficient evidence and it is in the public interest, EAS can prosecute the offences as provided in the 1973 Act and associated regulations. EAS considers the growth duty that applies to regulators when deciding whether to refer a case for prosecution.

Prosecution in England and Wales

EAS will engage DBT prosecution lawyers to decide whether it is appropriate to instigate proceedings.

The decision whether to prosecute is made by DBT prosecution lawyers located in the Insolvency Service in accordance with the Full Code Test set out by the Director of Public Prosecutions in the Code for Crown Prosecutors.

The Full Code Test is first whether there is sufficient evidence for there to be a realistic prospect of conviction. If and only if that stage is met, the prosecutor goes on to consider whether prosecution is in the public interest. The public interest stage can include the factors set out at 10 above. The Code also requires that the decision to prosecute is kept under continuous review and any new facts or circumstances are considered.

Prosecutions in England and Wales commence in a magistrates’ court. However, cases which are taken forward can be tried ‘either way’. This means that the case can be tried in a magistrates’ court or the Crown Court, which can result in potentially unlimited fines.

Prosecution in Scotland

In Scotland, decisions whether to prosecute are made and proceedings are conducted by the Procurator Fiscal. EAS will submit a file to the Procurator Fiscal as a Special Reporting Agency.

The Procurator Fiscal needs to be satisfied that there is sufficient evidence and that prosecution is in the public interest in Scotland before deciding whether to bring a prosecution. This may be on the basis of a recommendation by EAS. However, the decision whether to bring proceedings is made by the Procurator Fiscal, having taken into account the evidence and the public interest in accordance with the Prosecution Code. Find further information about The Crown Office and Procurator Fiscal Service Prosecution Code.

12. Prohibition

Under section 3A of the Employment Agencies Act 1973, EAS can, on application by the Secretary of State, apply to an employment tribunal to prohibit (ban) an individual or corporation from running or being involved in running an employment agency or employment business, because of their misconduct or unsuitability.

A prohibition can take different forms. Most commonly, once someone has been prohibited, they cannot run or be involved with running any employment agency or employment business during their prohibition period. However, different conditions can be attached. For example, a person can be prohibited from running an employment agency from their own home, but not necessarily from business premises.

A prohibition order could also prevent a person from running online job boards that was caught by section 13 of the Employment Agencies Act 1973 as employment agency or employment business activity, and where the activity was conducted from premises within Great Britain. 

A prohibition may be sought by EAS after a successful LME order; or an EAS prosecution for offences under the legislation. EAS may also use other evidence, including prosecutions by other enforcement bodies, as a basis for applications for a prohibition.

The maximum period of any prohibition order is 10 years. Any person who breaches a prohibition order can face criminal proceedings.

13. Publicity

EAS maintains a public list of prohibited individuals who have been and are currently prohibited from running an employment agency or  employment business.

14. Corporations, partnerships, and individuals

Prosecution and/or prohibition will be taken against individual persons considered to be responsible for the offence. Where it is alleged that a corporation (company, limited liability partnership) or a Scottish partnership, is involved in the offence, EAS can also prosecute that legal entity. EAS may also commence legal proceedings against officers of any corporation, including directors, managers, secretaries, who have control over the relevant activities and there is considered to be sufficient evidence of their guilt or neglect.

In the case of a prohibition order, an order may be made against the corporation, or its directors, managers secretaries or in a case of a partnership business or a Scottish partnership, the individual partners or a manager employed by the partnership business or Scottish partnership.

15. Sharing information

Section 9(4) of the Employment Agencies Act 1973 provides that information obtained in the course of exercising the powers conferred by the Act shall not be disclosed without the consent of the person by whom the information was furnished.

Information can  be shared where there is a legal gateway. Currently EAS can share information with the Gangmasters and Labour Abuse Authority and HM Revenue & Customs National Minimum Wage team.

In addition, EAS can disclose information to certain other public authorities under section 17 of the Anti-Terrorism, Crime and Security Act 2001 if it is relevant for the purposes of any criminal investigations or proceedings, or the initiation of such investigations or proceedings, by that other authority.