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Law Society: employment law recommendations? Comply or be punished

Paul Hodgson | June 23, 2017

At the end of 2016, the prime minister asked British former political strategist Matthew Taylor to lead an Independent Review of Employment Practices in the Modern Economy to investigate the ways in which employment law and practices need to change in order to keep pace with modern business models.

Last week, the U.K.’s Law Society, the independent professional body for solicitors, submitted its comments to the review, entitled: Better employment law for better work: how to achieve the best working practices in the modern workplace. “It is important that employment law evolves so that it remains relevant to modern working practices,” says the paper in its introduction, “but it is essential that employment law can always be enforced. If workers cannot access the rights Parliament has given them then it is questionable whether these rights truly exist.” Thus the submission recommends not only creating new employment regulations but a series of enforcements to force companies to comply.

... it is essential that employment law can always be enforced. If workers cannot access the rights Parliament has given them then it is questionable whether these rights truly exist.

The Law Society

The Law Society's submission concentrates on the two key legal aspects of the review: the definitions of employment status and enforcement of rights. There are three definitions of employment status in the U.K.: employee, worker and self-employed. Most believe that certain minimum employment protections are applicable to all individuals doing paid work, regardless of legal status. Unfortunately, the reality is much more complex. The Law Society contends that: “There are no simple or definitive definitions for any of these three categories and the different rights and obligations attached to each one has developed through statute and case law” rather than statutory regulations. In addition, under the Employment Rights Act (ERA) 1996, there is no definition of self-employment at all. This means that some businesses (the submission cites just two: Uber and Deliveroo), and this was the reason for the review, are exploiting this gap in legal knowledge as “an opportunity to minimise regulatory burdens.” There is a large minority of the workforce, the submission contends, who “are working in environments where they are denied even the basic benefits set by Parliament, including access to the National Minimum Wage, when it is not clear that this is right.” For this reason, the submission offers three new, and more definitive, definitions of employment status.

The summary recommendations from the report

Create a better understanding of employment rights:

  • need to reform how employment status is defined
  • all individuals should receive a written statement clarifying their employment status and who their employer is
  • a comprehensive review of employment legislation should be undertaken to ensure our laws reflect the reality of work
  • the government should mirror the approach applied in the USA under the Fair Labor Standards Act

Create a better enforcement system:

  • the Director of Labour Market Enforcement and Gangmasters and Labour Abuse Authority (GLAA) be given the powers to ensure that the labour market remains fair
  • to help organisations and individuals comply with the law
  • the Director of Labour Market Enforcement should be able to conduct inquiries, similar to the market studies tool deployed by the Competition and Markets Authority, into sectors
  • GLAA should be given the responsibility to carry out an investigation to discover whether an organisation or group of organisations in a sector have correctly attributed employment status
  • the government should immediately scrap the current employment tribunal fee system

Encourage better information in employment practices to be made widely accessible:

  • encouraging businesses to be transparent about their employment practices will help to create fair competition
  • organisations with a smaller turnover who operate in a sector that is of particularly high-risk of labour exploitation have to report on employment practices

Source: The Law Society's Better Employment Law report

In addition to employment status, the identity of the employer is often confused and confusing. Strikingly, given the U.K.’s potential exit from the European Union, the Law Society does not recommend following EU regulations for a better definition of the employer, or of any EU country, but rather the U.S. It recommends that the government considers the approach applied in the U.S. under the Fair Labor Standards Act and, in relation to trade union matters, by the National Labor Relations Board.

Enforcement concerns are focused on the fact that so few National Minimum Wage and unpaid wages actions have been brought by employees. The submission proposes that instead of resting solely on the individual, as it does now, “responsibility of employment law enforcement should be shared between individuals and the state.” It proposes that a number of bodies be involved on the side of the state: the Directorate of Labour Market Enforcement, the Advisory, Conciliation and Arbitration Service (ACAS) and the Gangmasters and Labour Abuse Authority (GLAA). “The purpose of enforcement is to stop those who wilfully or neglectfully do not respect the law,” notes the submission, “it is not to try and catch-out businesses who want to comply. The first principle of the Directorate of Labour Market Enforcement should be to help organisations and individuals comply with the law and follow the highest standards of practice.”

The Director of Labour Market Enforcement should be able to conduct inquiries into sectors, on the application of employment legislation, if it believes there are systemic problems that need to be addressed in the public interest. ACAS will be employed to make information on rights available to workers. Under the proposals, the GLAA will be given the responsibility to “carry out an investigation to discover whether an organisation or group of organisations in a sector have correctly attributed employment status and clarified what rights and responsibilities exist.” Finally, if an employer disagrees with the GLAA's assessment, the matter will be referred to the Employment Tribunal (ET) for judgement.

But the Law Society also proposes major reforms to the current ET system. The current system of ET fees, that can be up to £1,200, have prevented many from accessing justice. Since July 2013, the most recent Ministry of Justice statistics show that there has been a decrease in claims of around 70 percent. The submission suggests scrapping the current fee system altogether. Once a decision has been reached by the ET, If an organisation refuses to comply with it, a new offence of “aggravated breach of labour market legislation” is supported by a criminal offence for non-compliance, which, if non-compliance continues beyond a court order, can lead to a two-year custodial sentence and unlimited fines.

Of course, this system only works if everyone plays by the same rules. The vast majority of employers do just that, treating their employees well and paying them fairly. However, too many still think they can get away with ignoring the rules, breaking the law, and taking advantage of hardworking men and women who want nothing more than an honest job.Rt Hon Sajid Javid MP, introducing the government’s response to the consultation on creating a Director of Labour Market Enforcement

Rt Hon Sajid Javid MP, introducing the government’s response to the consultation on creating a Director of Labour Market Enforc

Finally, the Law Society proposes that companies should be required to disclose their employment practices. There are already a number of long-standing, voluntary standards that indicate how good an employer is, including being kite-marked as a Living Wage employer or an Investors in People organisation. As far as who should be required to make disclosures, the Society says that the same standards for Modern Slavery disclosures should apply to any organisation that:

  • is a body corporate, partnership or public body
  • carries on business, or part of a business, in the United Kingdom
  • supplies goods or services
  • has an annual turnover of £6m or more

The bare minimum report should include information on the proportion of the workforce on different types of employment contracts, but further consultation on precise disclosures should be undertaken, says the Society. In line with its other recommendations, the Society also recommends punishment for non-compliance with these proposed requirements. The Director of Labour Market Enforcement should be able to request an injunction through the High Court if an organisation fails to comply, then they will be in contempt of court, which is punishable by an unlimited fine. As it rightly states, an organisation that is not in compliance with one part of employment law is likely to be non-compliant with other areas and non-disclosure would likely necessitate direct inquiry into all areas of compliance.