The Good Work Plan and the series of proposed changes to employment law

The Prime Minister has committed that the UK will not only maintain workers’ rights as the UK leaves the European Union but plans to enhance them. In consequence of this, the Government has made a commitment to improving quality of work in the UK by committing to policy and legislative changes outlined in the recently published Good Work Plan after a review conducted by Matthew Taylor on modern working practices. This is to ensure workers have access to fair and decent work, both workers and employers clearly understand their employment relationship and there are fairer enforcement mechanisms in place. The Government seeks to strike a balance between flexible ways of working and key protections that workers should expect to rely on.

The key proposals are outlined under the following headings:

Fair and decent work

Flexibility has been a key factor behind the success of the UK labour market, which allows people to find jobs to suit them and allows businesses to meet customer demand. However, Matthew Taylor believes this has only given ‘one-sided flexibility’ allowing: exposed risk to the worker, employers to cancel shifts last minute and for workers to remain on insecure contracts for long periods of time. In order to allow for fair and decent work the following proposals have been made:

Right to request a more predictable and stable contract

There are some workers who would prefer to work on a more flexible contract, however, the Government would like to allow workers the opportunity to request a more predictable and stable contract with a more fixed working pattern after 26 weeks of service. This process has not yet been determined by the government and could be similar to a request for flexible working, where the employer will determine whether they can accommodate or not. In addition, it appears the intention behind this proposal is to grant the ability for a worker to change employment status to the more protected ‘employee’.

Extending the break in continuous service

Under the current law, workers will build continuous service over a period of time. This is an issue for a worker who may work for the same employer intermittently, as a gap of one week in employment with the same employer will break continuous service rights. The proposal is to change the rules so that a break of up to four weeks will not interrupt continuity of service. Workers would then accrue further employment rights as many are only available to workers who have a certain length of continuous service, for example after a two year period an employee has the right not to be unfairly dismissed.

Protecting agency workers

Matthew Taylor and the review concentrated on the role of agency workers and found that protections for workers are not strong enough and the model of employment transfers all risk to the agency workers. The current law allows for businesses to opt out of equal pay arrangements between agency workers and their permanent workers under the Swedish Derogation. In certain circumstances, this provides employers to undercut rates of pay and is arguably a loophole around the Agency Workers Regulations. The Good Work Plan has proposed to abolish ‘pay-between-assignment’ contracts so employer cannot avoid agency workers’ equal pay rights.

Banning employers from making deductions to staff tips

The Report highlights most business pass on discretionary customer tips to their staff. However, there are inconsistencies on how these are treated and the report states there are a small number of employers who retain tips earnt by their staff. The Government has proposed to legislate to ban employers from making deductions from staff tips. This proposal will mean a better deal for workers and customers who are confident their tips are going directly to the staff as they intended.

Employee engagement

The Information and Consultation regulations grants staff a voice by providing a framework to encourage long-term information and consultation arrangements between individuals and their employer. This provides a mechanism for staff engagement and for their views to be taken in to account on major workforce reforms. Currently there is a threshold of agreement required for such arrangements to be implemented of 10% and there is a commitment to reduce this to 2% of with a minimum of 15 employees required as the minimum threshold for initiation of proceedings.

Clarity for employers and workers

Employment Status

As we have seen in the recent case of Uber v Aslam, large companies can find it challenging to determine employment status and this has implications for HMRC to assess how to correctly tax. Workers are more likely to suffer detriment and non-compliance from a tax perspective. The Government proposes to align employment status frameworks for employment rights and tax, so the differences are reduced to an absolute minimum. There are no detailed proposals on how this could be aligned but will bring forward detailed proposals. Currently, a Tribunal will determine employment status by looking at all of the circumstances of an employment relationship including the true intentions behind the terms of the contract and the reality of the agreement. Case law has established a series of tests that a Tribunal will use to determine whether an individual is an employee, worker or independent contractor. Some of the tests assess whether there are: mutuality of obligations, control, integration and the economic reality of the relationship. These tests may no longer be relevant to a modern working relationship and the Government has proposed to improve the clarity of these tests, so companies will be prevented from avoiding responsibilities by misclassifying or misleading their staff.

Clarity of Information

The Government believes it is imperative that everyone knows from day one of starting a job what rights they are entitled to. To do this, the Government is to extend the right to a written statement of terms and conditions to workers as well as employees, and an employer will be required to produce it on the first day of work rather than within two months. The new written statement will have further mandatory contents to be including (but not limited to): details and eligibility of sick pay, other types of paid leave, duration and conditions of any probationary period and how much notice is required to terminate the agreement. In addition, employment businesses will be required to provide every agency worker with a Key Facts Page to combat the current lack of transparency.

Holiday Pay

Matthew Taylor has highlighted that both workers and employers would benefit from greater transparency in relation to holiday pay entitlement. Awareness of entitlement remains one of the biggest barriers for individuals receiving the holiday pay they are legally entitled to. The Government has proposed to launch an awareness campaign targeted at both individuals and employers to boost awareness and understanding from paid entitlement to leave. The Government is to introduce new guidance including examples and are exploring a new holiday pay calculator. In addition, the holiday reference period is to extend from 12 to 52 weeks so workers will be entitled to a fairer amount of holiday entitlement compared to hours worked.

Fairer enforcement

Increase in compensation for employer’s aggravating conduct

Employment Tribunals already have powers to impose additional penalties where an employer has breached its obligations. Aggravated breach penalties are rarely used in practice but the Government wants to encourage these to be used more often and proposes to increase the penalty from £5,000 to £20,000. It will provide a tougher enforcement regime where employment rights are breached repeatedly on the same issue by the same employer and there will be legislation on facilitating the use of sanctions and an obligation on employment judges to consider the use of these sanctions.

Legislative Reaction

In response to the proposal the Government has already laid the first statutory instruments. The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 provides that the written statement of employment particulars must be given from day one of employment. It also changes the rules for calculating a week’s pay for holiday pay purposes, increasing the reference period for variable pay from 12 weeks to 52 weeks. The Agency Workers (Amendment) Regulations 2018 abolishes the Swedish Derogation for agency workers. These regulations come in to force on 6 April 2020. Finally, The Employment Rights (Miscellaneous Amendments) Regulations 2019 extends the right to a written statement to workers, increases penalties for aggravated breaches of employment law and lowers the percentage required for a valid employee request for the employer to negotiate an agreement on informing and consulting its employees.

Reactions

Apart from those listed above, there is no direction yet of how these proposals will be enforced, their scope or details of the process that the proposals will follow. Critics have argued that the proposals do not go far enough, they do not get rid of zero-hour contracts, do not address low-wages nor the larger problems around Brexit or worker’s rights. Some predicted an extension to sick pay and holiday pay for workers but this was not addressed. Despite this, the Government has already showed its commitment to the proposals by implementing some of these in to regulations, which is a promising sign that workers will be encouraged to enter in to employment in post-Brexit Britain.