Lords ditch shares-for-rights proposals: a win for workers, but is this the end of such bonkers ideas?

21 March 2013

The House of Lords has voted to remove Clause 27 of the Growth and Infrastructure Bill, which would legislate to allow employers to offer shares in their organisation to workers in return for the right to claim unfair dismissal, to be paid a redundancy settlement and to request flexible working and training.

Yesterday (20 March 2013), the proposals were debated by peers in the Bill’s third day of Report Stage, receiving criticism not only from Labour lords, but also from those connected to the Conservative and Liberal Democrat parties.

“In my eight years in the House I have never witnessed a government policy with less support not only in Parliament but within the Government themselves,” Lord Adonis (Labour) said.

“To remove this clause today would be an act of mercy to the Government, let alone to the employees adversely affected by it,” he added.

Amendment 50 to leave out Clause 27 of the Bill was moved by Lord Pannick (Liberal Democrats) who gave four main criticisms of the policy: That it unfairly weakens workers’ rights, that jobseekers can be refused a job on the basis they refuse to forsake their rights for shares, that it will “negate trust” between employers and employees, and that workers would not receive independent legal advice to help them understand what they the impact of them of giving up their rights.

“Employment rights were created – and have been protected by all Governments, Conservative and Labour – precisely because of the inequality of bargaining power between the employer and the employee. To allow these basic employment rights to become a commodity that can be traded by agreement frustrates the very purpose of these entitlements as essential protections for the employee, who lacks effective bargaining power,” Lord Pannick stated.

Indeed, the Institute of Employment Rights has emphasised the dangers of Clause 27 since it was announced by George Osborne last autumn. It was quickly slotted into the Growth and Infrastructure Bill after a rushed three-week consultation, in which 92% of a total 209 respondees opposed the idea. Critics were not limited to those campaigning for workers’ rights, but also from business associations, which warned that only rogue employers would see a use for “employee-ownership” of this kind.

Other criticisms have included the tax loopholes the legislation could throw up, which would allow further immoral corporate behaviour of the kind frequently splashed across the newspapers in the past year.

Even Lord Forsyth of Drumlean, a Conservative peer, said Clause 27 was “an absolute open goal to allow the setting up of a huge tax-avoidance scheme”.

While it is of course great news that the Lords has sided with the rights of workers on this proposal, this may not be the end of Tory policies designed to disintegrate employment rights.

Director of the IER Carolyn Jones warned: “The ‘rights for sale’ was always a bonkers idea, and one the IER are keen to see kicked into the long grass. But as our Coalition Timeline shows, even bonkers ideas are often resurrected by this ideologically driven government so we need to remain ever vigilant.”