Proposals to improve workers’ rights welcome, but reform must go further still

20 November 2017

Today’s publication of a draft bill from the Works and Pensions (DWP) Committee and Business, Energy and Industrial Strategy (BEIS) Committee to improve workers’ rights and strengthen their enforcement is welcome, but the Institute of Employment Rights says reform must go further still to adequately protect workers.

Both DWP and BEIS Committees have been running an inquiry into employment rights in the modern workforce concurrently to the Taylor Review (which was published in July). Today, they released their recommendations, including draft legislation, in a report entitled ‘A framework for modern employment‘. 

Their proposals take into account the evidence gathered through the Taylor Review as well as that collected themselves through interviews and submissions from workers and employers, as well as Matthew Taylor and Director of Labour Enforcement Sir David Metcalfe.

Overall, the IER notes that despite the participation of Labour Party members in the inquiry, the recommendations in the report more closely follow those put forth by Matthew Taylor than those proposed in the Labour Party Manifesto For the Many, Not the Few.

The report also does not take into account the broader picture of how workers’ rights affect the productivity of the workforce and the economy as a whole. Nothing is said about the pressing problem of lack of skills and hence of training and apprenticeship and equitably spreading the burden of funding by employers. Hence, the role of the Dept of Education is unmentioned.

Nothing is said about the burden on taxpayers of paying benefit to millions of workers to make up for bad wages by employers. Britain needs a wage rise which would then increase demand and hence be good for employers. This is ignored.

Notably, the role of trade unions in protecting workers, giving them a voice at work, and enforcing their rights was completely excluded, notwithstanding that 6.5 million of the workforce are members.

Some of the recommendations made by the report are captured in the Committees’ draft bill, and others are not. The recommendations, and our comment on them in more detail, are as follows:

Proposals in the draft Bill

1. Clearer clarification of employment status in law, and in the case of “worker” status a shift in focus so that judges lean more heavily towards the question of how much control the employer has over the worker when deciding if they are “self employed” or a “worker”, rather than any reliance on the “right to substitution”.

   The IER comments that a clearer definition of ’employee’ is certainly desirable, but that proposed by is hopeless for a variety of technical reasons, amongst which is that listing factors that tribunals merely ‘may take into account’ invites employers to argue that they should not.

   The proper definition is a complex matter that it was rightly proposed in the Labour Party Manifesto For the Many Not the Few should be considered by a Commission of experts. As the courts have pointed out, employers will instruct ‘armies of lawyers’ to find loopholes in the definition so as to avoid their staff achieving employee status. Any definition must therefore be watertight.

2. Default “worker status”. Everybody working for a company with a large “self employed” workforce shall be considered a worker by tribunal, until proven otherwise, with the onus on the employer to prove their workers are “self employed” rather than vice versa. Which employers will be affected by such legislation is as-yet unclear.

   While the IER welcomes the burden of proof being shifted to the employer, we recommend further action to make “worker” a universal status. Currently, people in employment can have either “worker” or “employee” status, with employees eligible for more rights than “workers”. This has led to some employers hiring “workers” – such as temporary agency workers, or people on zero-hour contracts – instead of “employees” with permanent jobs, in order to create a vulnerable workforce that can be more easily exploited. The IER recommends the dissolution of the distinction between “workers” and “employees” so that everybody in employment is eligible for the full suite of workers’ rights from day one.

   We also note that there are two potential meanings to the term ‘worker’ as used in the Bill – either a ‘worker’ in the general sense of a person in employment who is not “self employed” (including both “workers” and “employees”) or a limb (b) “worker”, distinct from an “employee”. It is as yet unclear which of these the Bill refers to. However, if it intends that the default status is set at a limb (b) worker this could cause significant problems. The effect will be that many employees will find themselves classed as workers with lesser rights.
   

3. Clarity of employment status and rights in contracts. The Committees’ proposed that employers should be legally required to provide a written statement to all workers within the first seven days of employment that contains information regarding whether they are a “worker” or an “employee”, as well as which employment rights their status makes them eligible for.
4. Minimum wage premium for workers without guaranteed hours. The Committees recommend that the minimum wage for people who are not offered guaranteed work, such as those on zero-hour contracts, should be higher in order to compensate “workers” for their loss in rights; and disincentivise employers from exploiting “workers” in order to evade employment laws associated with “employees”.

   The IER is in favour of moves to level the playing field so that one section of the workforce can no longer be undercut by another – a system which has hitherto induced a race to the bottom on employment rights and has contributed to creating an economy overly reliant on low-skiled and low-paid work. However, we recommend that further moves are made in this direction. We recommend that people with non-guaranteed hours are provided with Defined Hours Contracts, which offer a minimum amount of work per week or month and a paid retainer for a percetange of hours (up to 10-20%) ‘on call’.

   In addition, we recommend that anyone with over 12 weeks of continuous service should have a right to fixed and regular working hours.

5. The length of gap in work allowed as part of ‘continuous service’ to be extended from one week to one month. This allows workers with non-guaranteed hours to accrue employment rights.

   This proposal would still not offer “workers” fundamental rights such as the right to claim unfair dismissal, and even for “employees” it takes two years to accrue this “right”. The IER recommends that all rights are day one rights, following a reasonable probationary period.

6. Tougher penalties on employers who fail to improve working practices after losing at tribunal. Currently, when a worker wins a case at tribunal, other workers eligible for the same rights must take their own legal action in order to receive them. This leads to a “wait and see” philosophy among employers, who do not change their working practices unless a high enough proportion of their workers take them to tribunal.

   The Committees recommend that employment tribunals should consider imposing tougher penalties on employers who have similar cases brought over and over again, to disincentivise a “wait and see” approach.

   The Committees further propose the government consider allowing the use of “class action” in cases relating to wages, working time and employment status, which could mean that, for instance, when a tribunal finds that a group of Uber drivers who brought cases are “workers” rather than “self employed”, all Uber drivers would be considered “workers” and eligible for workers’ rights, without having to bring their own individual cases.

   The IER notes that, in advocating a complex procedure for class actions for a very few workers’ rights (why not all?) they seem blissfully unaware of the possibility of trade unions bringing claims on behalf of workers as in the Collective Redundancy Consultation Regulations. Likewise had they had they benefit of legal advice they might have considered the useful and flexible procedure for class actions in the High Court: Group Litigation Orders.

Recommendations not in the Bill

7. The government must not pass legislation that undermines the minimum wage.
8. “Workers” as well as “employees” should count towards the 50-worker threshold for ICE regulations and implementation threshold of these regulations should be reduced to 2% from 10%. Currently, ICE regulations allow for workers who do not have a trade union representative consultation rights with their employer on business decisions that affect them, but only if there are 50 “employees” in the organisation (“workers” are excluded); and only if there is 10% support among the workforce. The Committees recommend that these thresholds are lowered to improve employee engagement and workplace democracy.

   The IER is in favour of all moves to improve the strength of workers’ voice, as this is a fundamental cornerstone of democracy and is vital to maintaining decent labour standards. However, we stress that strenghtening trade union rights remains the best way to achieve this. The IER recommends that trade unions’ rights to recognition and to enter the workplace are improved to allow more workers to be represented by their union, and that sectoral collective bargaining is reinstated to allow trade unions to negotiate with employers’ associations for the benefit of all workers across their industry. 

9. All agency workers should be entitled, without exception, to the same treatment as permanent employees once they have completed 12 weeks’ service (i.e. end the ‘Swedish Derogation’). At the moment, some agency workers are being exploited by a loophole that allows for them to ‘opt out’ of equal pay in the workplace in order to receive a retainer between jobs. This recommendation would end this practice, reducing the ability of employers to undercut other sections of the workforce with agency workers.

   The IER recommends that all people in employment are provided with the same rights from day one, under a universal employment status of “worker”, thus removing the ability of employers to undercut one section of the workforce with another.

10. More punitive fines and penalties for employers who breach the law, including naming and shaming those at the top of the supply chain if a contractor breaks the law. 

    The IER comments that, contrary to the Report, tribunals do not impose fines! There is certainly a role for the criminal courts as there was for wage rate orders by the old Wages Councils (criminal offence to pay less than that stipulated in the order). But the Committees’ report does not address such a criminal jurisdiction.

    The IER welcomes any move to disincentive rule breaking among employers, and would add to the Committees’ recommendations that criminal penalties should be imposed on employers that commit serious breaches – including blacklisting; a new unit of the Crown Prosecution Service should be established to consider cases of Corporate Manslaughter; and, where appropriate, the introduction of a duty on supply chain heads for the health and safety of workers across the supply chain. 

11. More independent enforcement powers for the Director of Labour Market Enforcement, giving them a proactive as well as reactive role, with resources to do “deep dive” investigations in high-risk industries, locations, and supply chains. 

    The IER comments that giving inspectorates sufficient resources to do their job is most certainly essential. However, the list of said inspectorates all dealing with slightly different aspects of the same problems (see para 52ff of the report) surely makes the case of the IER Manifesto for a single unified labour Inspectorate under a Ministry of Labour; the difficulties in coordinating between the Home Office and the BEIS Dept (at para 64) supports the case for the latter.

    We recommend this independent labour inspectorate should also have power to bring legal proceedings on behalf of workers, cancel dismissal notices, order reinstatements, require employers to cease and desist, and impose criminal sanctions on serious offenders.