New govt employment law enforcement body is “the least they can do”

While the IER welcomes the introduction of a new enforcement body for workers' rights, the one the government has proposed falls far short.

11 Jun 2021| News

Two years after a public consultation closed on proposals for a Single Enforcement Body for workers’ rights, the government has finally responded.

Confirming this week (08 June 2021) that plans for the new watchdog will go ahead, Business Minister, Paul Scully, said the government “will do whatever we can to protect and enhance workers’ rights”.

But the details released so far contain worrying indications that it is, in fact, doing the bare minimum.

Carolyn Jones, Director of the Institute of Employment Rights, said: “This new body will only protect the most mistreated workers from the worst kinds of exploitation. For the majority of people – 14.5 million of whom are already living in poverty – it will do nothing.

“Worse, current details suggest it might even weaken labour law, by introducing a system of ‘compliance notices’ rather than civil penalties for what the government describes as ‘lesser’ breaches of the law. It is yet to be seen which types of exploitation are considered unimportant.

“These proposals are a fatally watered down version of the IER’s plans for a Labour Inspectorate. It appears to have virtually no proactive role to ensure compliance with the law, relying on workers to speak out, but offers nothing to prevent employers from dismissing insecure workers in retaliation for complaints made.

“Other countries, even the USA, are announcing shifts in their policies towards progressive trade union rights and regulating the gig economy.

“But not Westminster. On the same day this new body was announced, it committed to plans to weaken the trade union movement further.

“Government knew it had to do something about the rising scourge of exploitative work, but this really is the very least they can do.”

See below for an intial analysis of the proposals.

What is the Single Enforcement Body?

The Single Enforcement Body combines the forces of the HMRC’s National Minimum Wage enforcement unit, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate.

It will continue the work of these agencies in enforcing National Minimum Wage and Modern Slavery laws, but will also have the remit to enforce statutory sick and holiday pay, to investigate complaints brought by workers, and to advise workers and employers on employment law.

A sticking plaster over bad policy

The government has been forced to respond to the explosion of insecure work its own policies have created.

Around one in nine workers in the UK is currently employed insecurely following a rise in precarious roles since the financial crisis. By 2019, most new jobs were actually ‘self-employed’ (although TUC research has demonstrated a huge proportion of this so-called self-employment is either bogus or extremely low paid, with nearly half on less than the minimum wage). The number of new zero-hour contracts in 2019 nearly equalled the number of new secure employee contracts.

For 11 years, the government has been aware of this rise and done nothing to prevent it. Instead, it has extolled the virtues of the UK’s “flexible labour market” – although with two-thirds of zero-hour contract workers saying they would prefer guaranteed hours, it’s clear that flexibility only goes one way.

Not only did it ignore the problem, but the government fuelled the casual economy with its policymaking, first with the introduction of punitive benefit sanctions that force unemployed people to take poor-quality work; then with the Trade Union Act 2016, which made it harder for trade unions to protect vulnerable workers. Its decision to introduce hefty fees when workers took their employer to tribunal to try and enforce their rights was only overturned when the Supreme Court found it to be unlawful. Despite this, there have been murmurs from Whitehall of reintroducing the scheme.

With employers granted the ability to effectively fire and hire at will – and insecure workers too afraid to rock the boat and potentially lose their livelihoods – exploitation rose sharply.

The Single Enforcement Body is the first attempt of the government to reduce this exploitation – but it does not seek to solve the problem at its root.

The new Single Enforcement Body does nothing to tackle exploitative work practices at their source and instead reacts to exploitation after the fact.

Can we trust government guidance to employers?

One of the roles of the Single Enforcement Body is to provide guidance to employers on their obligations under employment law, but IER experts highlighted during the pandemic that official Covid-19 guidance failed to properly present employers’ legal responsibilities.

In our recent publication, HSE and Covid at work: a case of regulatory failure, 11 specialists in occupational health and safety and labour law analysed the guidance released by the Department of Business, Energy and Industrial Strategy and found it downplayed employers’ legal obligations to their workers.

Below, IER Chair, Lord John Hendy QC, explains some of the problems with the guidance.

No enforcement for the bogus self-employed

Enforcement of rights can only be effective where a worker’s entitlement to rights is known.

It took GMB Union four years to drag Uber through the judicial system, all the way to the Supreme Court, in order for the ‘gig’ employer to finally admit that its drivers are limb (b) workers and therefore entitled to the National Minimum Wage, rest breaks and holiday pay. Uber had previously insisted that its drivers were ‘self employed’ and therefore entitled to nothing.

It is widely known that employers across the UK continue to pull this trick, affecting a huge proportion of workers. IER Chair, Lord John Hendy QC, has introduced a Private Members’ Bill to the House of Lords that would scrap the UK’s overly complicated employment status system in favour of one that would give all people in employment the same rights. Until such policy is backed by the government, workers will have to continue to drag their employers through the Courts to have their employment status confirmed. Then, and only then, will they be able to turn to the Single Enforcement Body to have their rights enforced.

Employment status has been left a grey area in UK labour law, so those who are falsely categorised as ‘self employed’ will have to demonstrate their entitlement to rights through the Courts before they can enforce their rights.

What about when things get complicated?

Employment Tribunals are regularly faced with cases that stir up disagreement over what the law means. One high-profile example is in the definition and application of ‘working time’.

The Supreme Court recently ruled that care workers are not ‘working’ during ‘sleep-in’ shifts, and therefore are not entitled to the National Minimum Wage. After the Supreme Court decision that Uber drivers are workers, and therefore due the minimum wage, the ‘gig’ employer announced it would pay drivers only for the times they are assigned to a passenger. This is despite both groups of workers being ‘on call’ at the workplace and therefore not able to engage in leisure or other pursuits.

It seems disputes over what is and is not work will continue to have to be dragged through the courts before workers can approach the Single Enforcement Body to have their rights enforced.

It seems the Single Enforcement Body will not be able to help workers whose employers use loopholes in the law to keep their pay as low as possible. These cases will still have to go through the Courts.

Employers could still retaliate by dismissing workers who complain

The Institute of Employment Rights has long argued for the establishment of a Single Enforcement Body to ensure compliance with labour law. However, we have always maintained that it is vital this agency has a proactive role, carrying out regular inspections of workplaces.

Because the government’s Single Enforcement Body is almost purely reactive, the onus will remain on workers to recognise when their employers are in breach of the law and contact the authorities to enforce their rights.

To some extent, the government’s consultation response addresses this, saying: “There are many reasons workers may not come forward.

“They may fear repercussions, either from their employers or, in cases of illegal workers, from the authorities. Workers may simply not know what their rights are in the first place or be unsure where to go for help.”

However, the government’s plans to address this are vague. It says it will raise awareness of the enforcement body’s existence as well as its role as a guide to workers’ rights, build links with community and worker groups to access harder to reach demographics, and be transparent about what happens when an individual makes a complaint.

But the vulnerable workers that are most likely to need the body’s enforcement powers are often in insecure roles with no right to guaranteed hours, nevermind to claim unfair dismissal. What is to stop the employer from retaliating by simply ceasing to offer a worker shifts?

The government promises to establish “a culture that makes workers feel safe to come forward”, but without a change in the law to ensure complainants keep their jobs – such as through Lord John Hendy QC’s Status of Workers Bill – how does it plan to do this?

There appears to be nothing to stop employers from retaliating to complaints by “zero-ing” out an insecure worker – i.e. no longer offering them shifts. A change in the law to prevent this form of dismissal, and a proactive enforcer, would be a stronger method of ensuring compliance with the law.

No attempt to ‘level up’ by raising wages

We’ve heard countless times from Johnson’s administration about its plans to ‘level up’. With real wages no higher than they were in 2008, workers across the country are struggling across the country. A shocking 14.5 million people – more than one in five – lived in poverty even before the Coronavirus pandemic. To most people, ‘levelling up’ is about improving quality of life – and that can only be achieved by improving wages.

But nothing in the government’s plans attempts to increase incomes. The Single Enforcement Body simply improves the likelihood that a worker will be paid the paltry sum they are due by employers who would otherwise skimp on the Minimum Wage, sick pay or holiday pay.

While the government continually boasts that it has ‘raised’ the minimum wage, the hourly rate still falls well below the cost of living, as calculated by the Living Wage Foundation. And when it comes to sick pay – the UK offers almost the lowest legal minimum in Europe. In fact, it’s so poor that it has been found to be in breach of international law.

Collective bargaining has been found to be the best way to raise wages and it’s not only left-wing groups saying this anymore – the International Monetary Fund now sings from the same hymn sheet. By repealing anti-trade union laws and promoting collective bargaining, the government could truly ‘level up’ and provide a better quality of life to its citizens.

The rights that will be enforced are worth only paltry sums to workers and there has been no attempt to lift 14.5 million UK citizens out of poverty. 

Aimed at only the most mistreated

While the IER’s proposed Labour Inspectorate is intended to enforce labour law in its entirety, the Single Enforcement Body concentrates only on the worst excesses of bad employers – slavery and non-payment of moneys owed.

It has long been argued that a system reliant on individual statutory rights entices employers into a race to the bottom, compared with a system based on collective rights, which drives constant improvement.

The same can be said for enforcement. An employer who can no longer getting away with skimping on holiday pay may still engage in workplace discrimination, or unfair dismissal.  Further, workers who are paid correctly but are victim to other forms of employment law breaches will find no help at the Single Enforcement Body.

During national lockdowns, while most people worked from home, new types of exploitation and cruel working conditions rocketed. Employers seized the opportunity to use workers’ webcams to spy on them in their own homes; those who couldn’t work remotely were forced into unsafe environments. Yet the Single Enforcement Body will not deal with any such complaints.

By focusing on only the worst excesses of exploitative employers, the Single Enforcement Body helps only the most mistreated and does nothing to improve working life for the majority. Instead of a race to the bottom encouraged by statutory rights, collective rights would drive up standards across the board.

Does not prevent undercutting of good employers by bad ones

The government’s announcement of the Single Enforcement Body stated that “increased enforcement will make sure good businesses aren’t undercut by unscrupulous rival employers who aren’t paying or treating their workers correctly”.

Without a change to the UK’s employment status system, the enforcement body will not do any such thing.

Currently, the UK’s workforce is grouped into different ‘classes’ of workers eligible for different workers’ rights. Those with traditional contracts – ’employees’ – are entitled to receive all employment rights after relevant qualifying periods have passed.

Limb (b) workers – such as those on zero-hour contracts, hired through agencies, and working on ‘gig’ platforms – can only access basic rights like the minimum wage, holiday pay and rest breaks.

Another group of workers are misclassified as ‘self-employed’ – entitled to no workers’ rights, either by a ‘gig’ employer or because they have been compelled by their employer to set up their own Private Services Company.

Many exploitative companies use predominantly limb (b) workers, who are easy to fire without repercussions and are therefore kept in a state of perpetual insecurity that discourages them from speaking out about their working conditions. One such firm – Sports Direct – was described as being akin to a “Victorian workhouse” following an investigation by MPs.

Although limb (b) workers may benefit from the promise of enforcement around holiday pay (assuming the employer does not retaliate with dismissal), their very existence as a separate ‘class’ with fewer rights means that bad employers can undercut the good.

The very structure of employment law, which the government seeks to maintain, allows for poor employers to undercut the good. This fact entirely undermines the government’s promise to use an enforcement body to prevent undercutting of good employers.

Will it be properly resourced?

After 11 years of public sector cuts and freezes, no State service or enforcement body is feeling flush. Even during the pandemic, The Health and Safety Executive (HSE) – which was tasked with making sure workplaces were ‘Covid-secure’ – was offered a tiny lump sum to complete the job and then prevented from spending it on training new inspectors to replace the thousands lost due to austerity. As a result, it spent half of its funds paying private sector debt collectors to do its work. It is hardly surprising, then, that the majority of employers never received their promised ‘Covid spot check’.

Will the government do better with its new Single Enforcement Body? Will it be properly resourced to hear the complaints of the UK’s 32 million workers? Details of its funding are yet to be announced.

Without adequate funding, the Single Enforcement Body will be unable to fulfil its remit. But the government has a very poor track record when it comes to resourcing public services.

Naming and shaming – does it work?

The government has announced that its new enforcement agency will continue ‘naming and shaming’ companies that do not pay their workers the minimum wage.

After temporarily dropping the policy to review its effectiveness, the government astonishingly reintroduced it in a weaker form last year. Where employers were initially ‘named and shamed’ for being £100 in arrears to workers (and after being given several opportunities to rectify this situation), the threshold has now been increased to £500 in arrears.

Yet, every year, top brand names are on the list of underpayers – in 2020, these included Pizza Hut, Superdrug, Muller, Costco and Tesco.

So does the policy even work? Research in the US has shown that when naming and shaming was used to encourage compliance to workplace health and safety legislation, it was only effective where there was a strong collective bargaining arrangement in place. But the government has weakened trade unions, and now plans to weaken them even further.

The goverment plans to continue with its (now weaker) ‘naming and shaming’ policy, but research suggests this might not even work without the help of trade unions.

How a collective approach could make all the difference

Much modern research has demonstrated that well-supported trade unions, particularly when they have access to sectoral collective bargaining arrangements, are the best way to raise wages, make workplaces safe, and reduce inequality.

They also have a vital role in not only ensuring the law is enforced, but proactively monitoring compliance, and driving standards up above the legal minimum.

As discussed above, trade unionism has also been key to ensuring the effectiveness of government policies, such as naming and shaming.

But on the day it announced the Single Enforcement Body, the government finally responded to two four-year-old consultations on the Trade Union Act 2016.

Consultations on increasing the powers of the Certification Officer, the trade union regulator, and imposing a new levy on trade unions were published in 2017.

This week, the government finally responded to say that will push ahead with its plans to give the Certification Officer new powers to investigate complaints made by non-members – thus opening the door to vexatious and ideological complaints; and to charge the affected trade unions for the cost of conducting these investigations.

Once passed by Parliament, these new regulations are due to come into force in April 2022.

And with that, the government takes with one hand and gives with another. What it has taken is power from an already restricted labour movement, that if supported would be the best employment law regulator – and economic equaliser – the country could have.

What it has given is a watchdog to deal only with the worst excesses of bad employers, which workers may simply be too afraid to use, which may not even impose penalties on law breakers, and which may not even have the resources to fulfil its remit.

Paul Scully says he just made employment law enforcement better, but he just made it worse.

On the same day the Single Enforcement Body was announced, the government committed to plans to futher weaken the trade union movement – demonstrated across the world to be the best enforcer and improver of workers’ rights.