Holding the Prime Minister to her word, the Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee (the Committees) have published a joint report and a draft Bill on employment status and the gig economy. The Committees (chaired by Frank Field and Rachel Reeves, both Labour MPs) have taken the opportunity to remind Theresa May of the promises she made on her first day in office to protect workers and those without job security. In a forthright statement the Committees declared “the law must not allow willingness to exploit workers to be a competitive advantage” and “the Bill would put good business on a level playing field, not being undercut by bad business“.
The report recognises the importance of new business models built around flexible work on digital platforms as a key contributor to Britain’s prosperity. However, with this change in the world of work comes confusion about the rights and entitlements of workers and the potential for exploitation. The report states that some of Matthew Taylor’s recommendations can be satisfied by policy changes or secondary legislation but the “most transformative” require primary legislation. Whilst apologising modestly for the drafting, the Committees request the Government to engage in the spirit of the Bill.
The following are the highlights from the draft Bill:
- Case law on employment and self-employed status to be codified in primary legislation: Recognising the need for clarity in this field, the Committees have drafted a Bill defining worker status. As would be expected the Bill focuses on control and personal service but also lists a number of other categories of familiar criteria such as: level of integration into the business, who provides the tools and equipment, who carries the financial risk and whether the individual can genuinely exercise a substitution clause.
- A statement of employment status to be provided within seven days of beginning a new job: The statement must confirm whether the individual is a worker or an employee and set out the employment rights which ensue.
- Worker status by default: Where a complaint is made to an Employment Tribunal about whether an individual is a worker, there will be a statutory presumption of worker status. The onus will be on the business to prove self-employed status. This would have a significant impact on businesses working in the gig economy.
- Wage premium above the National Minimum Wage and National Living Wage for individuals on non-guaranteed hours: The hope is to redress the balance and to encourage employers to offer more stable work. The suggested pilot for the non-guaranteed hours scheme is set out in the draft Bill.
- Class actions: The Committees also suggest making it easier to bring a class action for groups of workers who are questioning their employment status, allowing them to bring collective proceedings. This novel concept is included in the draft bill.
The Committees went on to recommend the following:
- Higher fines for businesses that have previously lost similar Employment Tribunal cases: The Committees hope this will act as a powerful deterrent against using “bogus self-employed” status for individuals.
- Ending the Swedish Derogation: All agency workers should be entitled, without exception, to the same treatment as permanent employees once they have completed 12 weeks’ service. The “Swedish Derogation” exemption which allows agencies to opt-out of certain equal treatment rights with regard to pay providing they pay the agency worker between assignments should be abolished.
- Enforcement: The report recommends increasing the powers of the labour market enforcement bodies such as HMRC and the Gangmasters and Labour Abuse Authority . Punitive fines and a robust enforcement regime should be brought in for repeat offenders and/or serious breaches. Employers who commit non-accidental breaches should be “named and shamed”.
- The report also requires the Government to make it easier for workers and employees to have a say on decisions that affect them at work and end practices that leave agency workers open to exploitation.
The Committees have certainly not held back and have sought to implement the majority of the Taylor Review recommendations. Whilst recognising that the Government is otherwise occupied trying to seek the best possible Brexit deal, the Committees have urged the Prime Minister not to let the urgent issue of Britain’s labour market to fall by the wayside. The Committees emphasises a number of times that businesses should not gain a competitive advantage by exploiting their workforce, “a race to the bottom risks undercutting the vast majority of businesses that do treat their workers well“.
The reforms suggested are fundamental and, if enacted in their present form, bode an end to decades of case law. However, arguably the principles set out in the draft legislation don’t offer anything new. We already have an extensive body of case law on the issue of employment status and experienced judges to apply that law to different situations. Having statutory tests may simply shift the judicial debate to the meaning of the legislation (which clearly has not been written by parliamentary draftsmen).
What is perhaps more radical is the “worker by default” position. This change would have a significant impact on the gig economy. With over one million people working in this sector and a number of innovative, tech-based companies basing their entire business model on a self-employed contractor basis; “worker by default” is a game changer. Worker status brings with it a number of additional employment protections including: NMW, holiday pay and increased discrimination protection. Businesses would need to factor in the additional costs and re-work their business model to ensure the customer experience is not lost.
Although the changes suggested are substantial, it is still early days in the process. We wait with anticipation to hear the Government’s response to this report and draft Bill; however the Government’s appetite for reform in this area is still uncertain and with Brexit to contend with it is unlikely the changes suggested will find themselves high up on the Parliamentary agenda. We will keep you updated.
For more information please Get in Touch