Introduction

While Britain’s exit from the European Union remains uncertain, whatever the final outcome, it is imperative that workers’ rights are not just maintained but are enhanced. Good quality jobs for all workers means entitlement to decent pay, fair working conditions, a right to be consulted and an effective enforcement regime. It’s a shame that the Government has missed the opportunity to persuade workers of its alleged commitment to providing for better quality jobs and enhancing workers’ rights in its Good Work Plan and draft regulations.

In the Good Work Plan and subsequent draft legislation, the Government has finally taken the opportunity to set out its proposals for employment law reform.

This is in response to the recommendations set out in the Taylor Review of Modern Working Practices published eighteen months ago in July 2017 and its own response to the Taylor Review published earlier this year.

Some good news

Some of the reforms set out in the draft regulations are issues which workers and unions have been campaigning on for years. These include;

  • The right for all workers (and not just employees) who start work on or after 6 April 2020 to be given a written statement from the day they start employment. However people employed before then can only obtain written statement of terms if they are classified as employees.
  • The written statement for all workers must include additional information; setting out their normal working hours, the days of the week the worker is required to work, whether or not the hours or days vary and, if so, how they vary or how the variation will be determined, any other paid leave and benefits, any other benefits not already required to be provided, any probationary period including the length and any conditions that apply and any entitlement to training.
  • Removal of the so called Swedish derogation in the Agency Workers Regulations 2010 (which was aimed at providing for agency workers to be paid between assignments but which, in practice, meant agency workers lost the right to claim parity pay with those directly employed by the hirer) and so give all agency workers the right to parity of pay with those employed by the hirer.
  • The draft Agency Workers Amendment Regulations 2018 will require agency workers, who are employees of temporary work agencies (TWA’s) at the time the regulations come into force on 6 April 2020, to be given a written statement confirming the right to equal pay with those directly employed by the hirer. Agency workers will also be able to claim unfair dismissal or that they have been subject to a detriment if the TWA does not provide a statement in breach of the Regulations.
  • A reduction in the number of employees required to request information and consultation arrangements on a wide range of employment related developments under the Information and Consultation Regulations 2004 (ICE) from 10% to 2 %.

Employment status – the elephant in the room

Significantly however, the Government has avoided addressing key issue which underpins all employment rights – employment status. Currently there are three categories in the way work is performed: employee, independent worker who is business in their own account, or worker, who can be self-employed but carry out work as part of someone else’s business as opposed to their own business. The demarcation between the categories is not merely academic. Employment status is important as it signifies the level of protection available for individuals in the workplace. Being an ‘employee’, as opposed to a ‘worker’ or ‘self-employed’, is the gateway to the majority of employment protection rights. The definitions are not always applied clearly and unscrupulous employers try to take advantage of this by using expensive lawyers to draft complex contractual terms which do not reflect the reality of the situation. Thankfully in almost all the major gig economy cases in the recent past (Uber, Deliveroo, Pimlico, Addison Lee, Hermes, CitySprint), despite the protestations of the employers, the courts have seen through the written contractual materials and held that the claimants were workers and not independent contractors. However, these cases will not deter employers from continuing to try and exploit the gaps in the definitions, so as to avoid giving workers their basic employment rights.

The Taylor Review recommended that the Government clarify the law on employment status by setting out key principles in primary legislation. It also recommended a presumption of employment status and where there is a dispute about status that the employer should bear the burden of proving that the worker or employee is not entitled to employment rights. Whilst the Government has said in its Good Work Plan that it will introduce legislation to clarify the law and agrees that “businesses should not be able to avoid their responsibilities by trying to misclassify or mislead their staff”, it does not set out clear proposals for changes to the legislation. Instead all we are given is an indication as to how the Government may approach clarifying the legislation in the future, which would be by aligning the legal tests for employment status with those for determining tax liabilities. It also proposes to introduce guidance and an online tool, none of which will have any effect until the law is clarified.

The fact that the Government has commissioned yet more research “to find out more about those with uncertain employment status” smacks of a Government afraid to make bold decisions to resolve the central issue to achieving the good quality work it says it is committed to. In our response to the consultation on employee status earlier this year we proposed a single universal definition of employment status which would apply to all workers and which attracts employment rights from day one as follows:

A worker is a person who is employed. A person is employed for the purposes of this Act if he or she is engaged by another party under a contract, arrangement or other relationship, whether express or implied and whether written or oral, to perform any work or services for that other party in return for remuneration, save where that other party proves that those services are provided to her or him under a commercial business contract or arrangement as client or customer of any professional or business undertaking carried on by that individual.

This would provide the much needed clarity for worker and for business and create greater stability in a post Brexit labour market. It would also codify the thinking of the courts in the recent cases, which reflect the reality of the situation that the vast majority of workers in the gig economy.

Further proposals

Further employment law reform recommended in the Taylor review, and also now set out in the draft legislation include:

  • An increase in the penalty employment tribunals can order employers to pay to £20,000 (up from £5,000) for aggravated breaches of employment rights where a tribunal claim succeeds.
  • Amending the Working Time Regulations 1998 for calculating holiday pay for workers who have been employed for 52 weeks to be calculated over a period of 52 weeks instead of 12 weeks.

An increase in the penalty employment tribunals can award is to be supplemented by guidance on how tribunals can be encouraged to use this power. However, as the power is within the discretion of the tribunal and has rarely been used in the 4 ½ years it has been in force, it is unlikely to have much impact. In response to a parliamentary question in January 2017 a Government Minister revealed that 18 financial penalties had been imposed and just £17,704 had been paid out in 12 of those cases since April 2014.

Although the Government explains the reason for extending the period for calculating holiday pay from 12 weeks to 52 weeks is to benefit seasonal workers, other workers may lose out such as those on paid maternity or adoption leave.

Other significant proposals in the Good Work Plan for which no draft legislation or detail has yet been published and which were recommended by the Taylor Review include:

  • The right to continue to accrue employment service where there is a gap in employment of four weeks;
  • A right to request a more stable contract for those who have 26 weeks service and work variable hours;
  • A requirement on employment businesses to provide agency workers with a statement of key facts which would include information about the type of contract, minimum rates of pay, how they will be paid and if paid through an intermediary company any deductions or fees that will be taken and an example of what this means for their take home pay.
  • A ban on employers making deductions from staff tips.

The right to accrue employment service where there is a gap in employment of four weeks is an improvement on the current provisions where a gap of just one week can break continuity of service. If implemented it should make it easier for employees to accrue some employment rights such as the right to notice pay.

The right to request a more stable contract for those on variable contracts is no right at all without a corresponding obligation on employers to agree to it.

A ban on employers who deduct administration fees, amongst other things, may be well meaning but it will need effective enforcement.

Enforcement

The Government’s proposals for better enforcement includes:

  • Naming and shaming employers who fail to pay tribunal awards
  • A new single labour market enforcement agency
  • Expanding the remit of the Employment Agency Standards Inspectorate to investigate complaints involving umbrella companies where agency workers have not received adequate pay
  • Introduce sanctions on employers who repeatedly breach employment rights
  • Reforming SSP
  • The introduction of state enforcement of vulnerable workers holiday pay rights

There is a lack of detail as to how they will work in practice. Although naming and shaming employers started on 18 December 2018 it remains to be seen when, or if, the other enforcement measures will be implemented.

What’s missing?

It is very disappointing that the Government has failed to give a clear commitment not to re-introduce fees in employment tribunals. It is clear such a regime is a barrier to accessing justice.

There are also a number of key recommendations set out in the Taylor Review which the Government does not propose to implement including:

  • A higher rate of NMW where workers are required to work non-guaranteed hours
  • The right for agency workers to request a permanent contract with the hirer where they have worked there for 12 months
  • A standalone right to compensation where an employer fails to provide a written statement
  • A right to return to work following a lengthy period of sickness absence

The Government should at least provide for compensation where shifts are cancelled as recommended by the Low Pay Commission.

Conclusion

The proposals fall well short of meeting the Governments stated commitment of improving quality of work and encouraging better worker engagement, particularly given, the failure to legislate on employment status, ban zero hours contracts and unpaid internships and give trade unions a right of access to workers or workplaces.

The employment law reforms set out in the recently published regulations are broadly to be welcomed. However, there is no good reason for delaying implementation until April 2020 bearing in mind that the right to an itemised pay statement for all workers is due to come into force next year on 6 April 2019.

There are also a number of shortcomings in the draft regulations such as;

  • Ensuring the written statement specifies:
    • A guaranteed minimum number of hours,
    • Minimum advance notice before the start of a work assignment,
    • Arrangements for overtime including overtime pay,
    • Provision for a worker who is employed at various places to determine their place of work,
    • Procedures for determining and allocating holiday,
    • The length of, and method for determining, the notice period,
  • A right to a more stable contract (not just a right to request),
  • Protection for those who are dismissed by TWA’s in anticipation of the repeal of the Swedish derogation and;
  • Provision for recognised union representatives to be automatically treated as the information and consultation representatives

Another crucial omission is the failure to include any proposal to ensure good employment practices and quality jobs are considered as part of the procurement process along the same lines as the Welsh Governments Code of Practice on Ethical Employment in Supply Chains.

We reserve judgement on proposals on enforcement until the role, remit and resources of the labour inspectorate and just how state enforcement will work in practice.