Somewhere in your agency there is a folder, or a CRM field, that says a contractor has opted out of the Conduct Regulations. Last week the Fair Work Agency showed what happens when that folder is asked a question it cannot answer.
The case is short. Five IT contractors worked 19 days through an agency in May and were not paid. The agency's position was that all five had opted out, so the regulations did not protect them, and that the money could be held because they had moved to another employment business. The Fair Work Agency asked for the document that makes an opt-out work, the notice the agency gives the hirer before an opted-out contractor is supplied. It could not be shown. Without it the opt-outs were not valid, the regulations applied in full, and withholding the pay broke regulation 12. The five were paid more than £59,000. The Fair Work Agency's account is on gov.uk and takes five minutes to read.
Here is the file that would have answered the question, and how to build it this week.
Three dated documents for every opted-out contractor
The opt-out is in regulation 32 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. It is available only to a work-seeker that is a company, and it is agreed by the company and by the individual who will do the work. Three things have to be on file.
First, the agreement itself, signed by both the company and the individual, and dated before the first introduction or supply to that hirer. An opt-out signed after the assignment began does not reach back.
Second, the notice to the hirer. The employment business must tell the hirer that the opt-out is in place before the supply begins. This is the document the inspector asked for. Keep the notice, the date, how it was sent, and the hirer's acknowledgement where you have one. An email is fine. A conversation nobody wrote down is not.
Third, the Key Information Document. Regulation 13A requires one for every work-seeker and an opt-out does not remove it. If your KID was issued, the date is on it.
Two more lines on the same sheet. The opt-out cannot be used where the contractor will work with vulnerable people, so a note of the role. And the individual can withdraw the opt-out by notice, so a line for any withdrawal and its date.
The record sheet
One page for each opted-out contractor, or one row each in a spreadsheet, with the hirer, the assignment dates, the agreement date, the notice date and method, the KID date, and the withdrawal date if any. Agency Members have it as part of the Opt-Out Notice and AWR 12-Week Note, reissued this week with the hirer notice template, under Legal Templates in the library. If you build your own, those are the lines. The test is simple. Could you hand the sheet to an inspector today and could every line be backed by a dated document?
The clause to take out of your terms
Regulation 12 says an employment business shall not withhold, or threaten to withhold, any part of a payment for work done on four grounds. The hirer has not paid. The worker has not produced a hirer-signed timesheet, though the agency may satisfy itself by other means that the work was done. The worker did not work in some other period. Or any matter within the agency's control. A worker leaving for another employment business is not on the list, and an opt-out does not add it. If your worker terms still carry a sentence that ties pay to the client's payment, or to the worker staying, remove it this week and tell payroll.
Why the sum is not the point
The Fair Work Agency has recovered more than £300,000 for workers since it opened in April, and its tribunal penalties team has helped secure payment in 80 cases this financial year. A case settled at inspection stays out of the tribunal. One that reaches a tribunal and goes against the agency carries a penalty on top of the sum owed, and since 1 October a worker has six months, not three, to bring it. The agencies that will come through the next few years well are the ones whose files answer the inspector's question on the day.
What to do today
Pull the list of every opted-out contractor on assignment. For each, find the hirer notice and its date. Where it is missing, send it now and record it, and treat that contractor as inside the regulations for the assignment already running. Under regulation 32(11) a notice given part way through takes effect only when the person stops working in that position. Then read your worker terms for the withholding clause. The whole job is an hour for most desks.
The two checks are now in our compliance checklist guide, with regulation 12 in plain words, free to read. Agency Members have the reissued Opt-Out Notice and the record sheet in the library today, written from the regulations and reissued when the law moves.
Sources. Fair Work Agency, Recovery of £59,000 for five IT Agency Workers, gov.uk, 4 November 2026. The Conduct of Employment Agencies and Employment Businesses Regulations 2003, regulations 12, 13A and 32, legislation.gov.uk.