- On 21 November 2017
The Work and Pensions (WP) and Business, Energy and Industrial Strategy (BEIS) Committees yesterday published a joint report, A framework for modern employment, (Report) which contains a draft Bill which aims to take forward some of the central proposals from the Taylor Review of modern working practices, which published its report in July.
The Report makes recommendations on the following issues which the Committees considered should be tackled in primary legislation:
- Clearer statutory definitions of employment status: The Report recommends that the Government legislates to introduce greater clarity on definitions of employment status which should emphasise the importance of control and supervision. The draft Bill proposes amending s.230 of the Employment Rights Act to include a list of factors which the courts may have regard to in determining employment status, including whether the contract places an obligation on the individual to perform work personally, the potential to control how work will be carried out in relation to factors such as discipline, the rate of pay and when the work will be carried out, whether the individual is integrated into the business, financial risk and whether the individual is prohibited from working for others. The definition of worker status would remain the same apart from removing the requirement for personal service but the Bill provides that for the purposes of determining worker status the courts may have regard to the same factors as for employment status (except personal service) and also (i) whether the worker was engaged in marketing their business before the contract came into existence and (ii) whether any substitution clause is capable of being freely exercised in practice. The Bill also proposes a new definition of independent contractor; someone who is neither an employee or a worker.
- Worker status by default: The Report recommends that companies with a self-employed workforce above a certain size should have the burden of establishing that an individual is self-employed in a worker status case, although the Bill as drafted would establish worker status by default in all status cases.
- Higher National Minimum Wage for non-guaranteed hours: the Report recommends that the Government work with the Low Pay Commission to pilot a pay premium on the NMW and NLW for workers who work non-guaranteed hours. The intention is that this would operate essentially as an overtime rate for hours worked over the worker’s guaranteed hours.
- Extension of the allowance for break in service for continuous service: The Report recommends that gaps in employment of up to 1 month (rather than the current 1 week) should not break continuous service.
- Employment tribunals: The Report recommends that the Government creates an obligation on employment tribunals to consider the use of higher, punitive fines and costs orders if an employer has already lost a similar employment status tribunal case and that Government takes steps to enable greater use of class actions in disputes over wages, status and working time.
- Flexibility and the National Minimum Wage: The Taylor Review raised concerns regarding the interaction of the NMW legislation and worker status for so-called ‘gig’ economy workers on digital platforms, meaning that to avoid the potential for workers making themselves available for work at periods of low demand but still being entitled to NMW, platforms would have to implement shift systems rather than allowing individuals to work when they want. The Taylor Review recommended that existing piece rate legislation could be adapted to avoid this risk and maintain flexibility. The Committees raised concerns that this proposal risked undermining the NMW and the Report recommends that the Government rules out introducing any legislation that would undermine the NMW.
The Report also makes the following recommendations for secondary legislation:
- Extension of the entitlement to a written statement of employment particulars to workers from day 1 of a new job: The statement would need to be given within 7 days and contain a clear statement of employment status and details of the rights and entitlements of the individual by reference to that status.
- Lowering the threshold for Information and Consultation forums: currently organisations must have 50 or more employees (not workers) and at least 10% and a minimum of 15 employees must request a forum. The Report recommends that workers should count towards both thresholds and the threshold should be reduced from 10% to 2% of the workforce.
- Ending the Swedish derogation: the Swedish derogation permits an opt-out from the right for agency workers to have equal treatment in relation to pay to comparable employees where the agency workers receive pay from the agency between assignments. The Report recommends that Swedish derogation be abolished and that the Employment Agency Standards Inspectorate should be given the powers and resources necessary to enforce the remainder of the Agency Worker Regulations 2010.
- Stronger penalties for repeat or serious breaches of employment legislation: the Report recommends that the Government bring forward stronger and more deterrent penalties including punitive fines and expands the ‘naming and shaming’ regime which applies to NMW breaches to all non-accidental breaches of employment rights.
- Greater resources for the Director of Labour Market Enforcement and the main enforcement agencies to undertake investigation and enforcement.
It is important to stress that this is not a Government Bill and the Report acknowledges the main obstacle to taking forward legislation at this time, namely the lack of Government resources in light of Brexit. A formal Government response to the Taylor Review is expected before the end of the year, which may make clear what, if any, legislative response there will be to the Taylor Review in the near future.
In the meantime, it is expected that the Budget on Wednesday will include proposals to extend ‘off-payroll working’ rules from the public sector to the private sector, which would require companies to deduct tax and National Insurance Contributions automatically from the gross pay of self-employed workers who work through personal companies. Employment status and the rights which attach to the different categories of worker look set to continue to be major issues into 2018.