Agencies that win contracts by breaching government regulations could face legal action from rivals.

Recruiter has learned that agencies securing a contract by sidestepping Employment Agency Act rules could face legal actions if a compliant rival lost the tender.

Employment law experts believe the rule could extend to agencies.

For instance, if an agency secured a contract by neglecting to ask for statutory information about health and safety on a temporary assignment, a competitor that lost out could sue.

Adrian Marlowe, managing director of Lawspeed, said: “Provided there is the proof to support that an agency was breaching the regulations and that another agency lost out as a result, then the second agency could be entitled to damages.”

Fiona Coombe, head of legal services at the Recruitment and Employment Confederation trade body, said: “The scenario is a hypothetical one. However the regulations permit any person who has suffered damage as a result of the non-compliance with the regulations by an agency or employment business to bring an action to recover their loss.”