Ahead of the upcoming election on Thursday, 4 July, Alex Haines examines the major parties' proposals for employment law reforms.
In this first instalment Alex looks at Labour’s proposals to create a single status of worker and the Conservatives’ continuing efforts to reform trade union legislation and what this could mean for businesses and individuals.
Labour – Single Status of Worker
Worker? Employee? Self-employed? In today’s economy, and especially in the gig economy (with temporary, flexible, or freelance jobs), it can be difficult to distinguish an individual's legal working status.
The current definitions of workers and employees have been criticised in recent years for lacking clarity and not being applicable to the modern gig/platform-based economy.
Labour has proposed creating a system with two employment statuses: worker (inclusive of “employees”) and genuinely self-employed.
Under the Employment Rights Act 1996, an employee is defined (under section 230 of the Employment Rights Act 1996) as an individual who has entered or works under a contract of employment (service or apprenticeship, express or implied, oral or in writing).
Meanwhile, a “worker” is an individual who has entered into or works under either an employment contract or any other contract (our emphasis). The individual undertakes to do or to perform personally any work or services for another party to the contract whose status is not, by virtue of the contract, that of a client or customer of any profession or business undertaking carried on by the individual.
The distinction is potentially confusing but legally important. Workers enjoy some protections, including those under the minimum wage and common law duties of care; employees are afforded additional protections and rights, including:
- being covered by the ACAS Code of Practice on Disciplinary and Grievance Procedures;
- rights when transferred under TUPE (albeit note that the definition of employee has, confusingly, been wider than under other legislation);
- statutory maternity pay (SMP);
- statutory paternity pay (SPP);
- statutory adoption pay (SAP);
- shared parental pay (ShPP);
- statutory parental bereavement pay (SPBP);
- parental leave;
- shared parental leave (SPL);
- shared parental bereavement leave (SPBL);
- ordinary maternity leave (OML);
- additional maternity leave (AML);
- right to request flexible working;
- statutory sick pay (SSP);
- not to be refused employment because of membership or non-membership of a trade union;
- various rights to paid and unpaid time off;
- statutory minimum notice periods;
- protection from unfair dismissal;
- statutory redundancy payments, and
- the right to collective redundancy consultations.
As with many pre-election policies, the details of Labour’s proposal are scant at present. Labour has promised to simplify the definitions and create a two-tiered system of worker and genuine self-employed. This change might help to reduce the backlogs in the Employment Tribunal by reducing the need for hearings on individuals' employment status. However, whilst this policy may reduce one layer of litigation, it alone will not reduce such delays.
It appears likely that Labour would plan to afford workers the same rights as employees and protections. This may offer greater certainty to individuals (and businesses) as to the status and rights of those providing services, one way or another.
Labour also says they “will also clamp down on bogus self-employment.” There is care here to avoid penalising those individuals who have actively chosen to be genuinely self-employed. For many, being self-employed may be a conscious choice that offers them freedom and independence from the bounds of a traditional employment contract.
Such a substantial realignment of employment rights will require significant thought, lengthy consultation, and careful implementation. Any changes will unlikely occur within Labour’s first 100 days in office and will be subject to scrutiny and refinement.
Nevertheless, it is good practice for employers to review their current employment contracts and consider whether there are individuals whose status has inadvertently been miscategorised. The documentation should reflect the parties' intentions and the reality of the working relationship. If not, this will always be susceptible to challenge, as in the leading case of Autoclenz Ltd v Belcher.
Where the documentation does not reflect the party’s intentions or reality, we recommend employers update and correct contracts and working arrangements as appropriate.
It may also be prudent for an employer to undertake a higher-level review of their working arrangements to identify whether new arrangements are needed to provide both parties with greater certainty.
Conservatives – Trade Union Reform
The Conservatives have not been as forthcoming with their employment law proposals for the upcoming election. However, the introduction of the Strikes (Minimum Service Levels) Act 2023 merits mention.
Strikes (Minimum Service Levels) Act 2023 (“Strikes Act”)
This Act attempts to mitigate against the disruption caused by strike action by requiring minimum service levels to be maintained, most notably in the health, transport, education, fire and rescue, and border control services.
The Act has proved controversial, with the Public and Commercial Services Union (“PCS”) being granted permission to initiate a Judicial Review of the Act. The PCS claim that the law is an infringement of Article 11 of the European Convention on Human Rights (“ECHR”), which enshrines the right to freedom of peaceful assembly, association with others, and the right to form and to join trade unions. Any restrictions that are to be imposed on this right must be in the interests of national security or public safety and must be necessary and proportionate.
Other countries, including France, Spain, and Ireland, also have minimum service legislation to ensure that minimum standards are met in certain sectors. However, there are often requirements for employers to enter into agreements with the union following consultations. The Strike Act does not appear to require any specific negotiations between the employer and union to establish a mutually agreed service level. Instead, the Secretary of State can specify the minimum service levels for the sectors, having consulted “such persons as the Secretary of State considers appropriate”. How this will work in practice remains to be seen, but enabling such government intervention may cause concern that unions will not be adequately consulted and that the right to strike will not be respected.
Under the Strikes Act, the employer can, following consultation with the union, serve a “work notice” on the union, detailing which workers are required to work and what they are required to do. If the union fails to take reasonable steps to comply with the notice, it will lose its immunity from tort claims by the employer.
Repeal of Regulation 7 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003
In addition to legal challenges over the Strike Act, the Conservatives could revive their efforts to repeal regulation 7 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (“the Regulations”), which prevents employment businesses from introducing or supplying agency workers to cover strike action.
The Conservatives previously repealed regulation 7 in 2022, however this repeal became subject to a judicial review which was heard by the High Court on two grounds.
- That the Government failed to comply with their statutory duty to consult before making the 2022 Regulations that repealed regulation 7.
- In repealing Regulation 7, the Government breached Article 11 of the ECHR, which prohibits unlawful interference with the rights of trade unions and their members.
The High Court ruled that the Government had failed to consult bodies representative of the interests concerned. Whilst the Government contended that the consultations in 2015 were sufficient, the High Court held that, as circumstances had changed since this consultation and the implementation of the repealing legislation. Moreover, the High Court ruled that the Government had not considered the outcome of the 2015 consultations when considering whether to repeal Regulation 2.
As a result, we may see the Conservatives seek to run a fresh consultation on repealing regulation 2. However, as the second limb of the Judicial Review was not considered, further uncertainty will remain over the enforceability of any repeals in the context of human rights legislation.