Employment Rights (Miscellaneous Amendments) Regulations 2019

Baroness Drake Excerpts

Thursday 28th March 2019 Lords Chamber

[Baroness Donaghy (Lab)]

My Lords, I will be very brief. I want to raise three points. The Minister mentioned in his opening remarks that this was the most significant set of changes in employment relations in 20 years. I am quite happy for him to exercise that kind of poetic licence but there will be something really worth celebrating on Monday, because that is the 20th anniversary of the introduction of the statutory national minimum wage. To compare these regulations with that sort of development is, as I say, poetic licence but let us be generous on the last day of the week.

My second point is that when I worked at ACAS, which is of course now quite a long time ago, the helpline used to receive calls which were mainly from employees but also from employers. They showed a very different picture in the real world from what regulations and the law said. I still think that the situation has deteriorated, if anything, simply because—as my noble friend Lord Monks said, and I agreed with his every word—it is sometimes a very different picture on the ground and people are grateful for the small mercies they get. We need to remind ourselves that any change in regulation has to be monitored and any fines implemented. The picture of a whole generation of younger people with very little expectation of a permanent contract, an occupational pension or real maternity leave rights—given the extent to which women are sacked because they apply for it, even though we know that is illegal—is such that if the Government mean business, they will have to take seriously how they promote the existing law and ensure that it is enforced.

That brings me on to my point about employment tribunals and fines. One of the biggest problems was that the employers did not pay the fines, so it is all very well increasing the amount but it would be useful to know from the Minister what the situation is now. What is the proportion of employers who refuse to pay the awards made by the tribunals?

Finally, I accept that a very good step forward has been made regarding written statements, which was one of the biggest issues on the ACAS helpline. People were not being given their statements or, as my noble friend Lord Monks said, they were fed in dribs and drabs so that they would not have a complete picture. For example, an important reference to their rights would consist of, “Please look up the employer’s website”. That is an extremely important move and it would be useful if we could monitor what improvements are made as a direct result of this statutory instrument.

[Baroness Drake (Lab)]

My Lords, I too welcome the strengthening of workers’ rights contained in these regulations as a work in progress that begins to address—to use the Government’s words in their own Good Work Plan—the fact that,

“some businesses have transferred too much business risk to the individual, sometimes at the detriment of their financial security and personal wellbeing”.

These regulations, however, are introduced in the context of concerns about the consequences of the UK’s departure from the European Union, when workers will no longer have access to the enforcement mechanisms and decisions that they currently enjoy. Nor will they benefit from future decisions of the Court of Justice of the European Union or from ensuring that UK workers will not fall behind in the development of rights in the EU.

Yes, these regulations will increase the maximum penalty from £5,000 to £20,000 where there has been an aggravated breach of a worker’s employee rights, to act as both punishment and deterrent for poor employer behaviour, although that penalty is capped at 50% of any compensation award. But enhanced rights, as captured in these regulations, will be of limited value if workers do not have access to justice when they are breached. If workers cannot enforce their rights, they are rendered meaningless.

We saw a staggering fall of 70% in the number claims brought to employment tribunals when fees were introduced and a disproportionate impact of that fell on women, particularly low-paid and pregnant women. The Government have not ruled out the reintroduction of fees, observing only that there will be a consultation exercise if they are reintroduced. UNISON’s legal challenge to their original introduction resulted in the Supreme Court ruling that the Government had acted unlawfully. Reintroducing fees would undermine again the reforms set out in these regulations. Can the Minister update us on the Government’s current intentions with regard to tribunal fees?

The Government recognised the scale of non-compliance with basic employment rights in their own Statement on the Good Work Plan, when they referred to the Government considering,

“the case for creating a new single labour market enforcement agency”.—[Official Report, Commons, 17/12/18; col. 573.]

Again, can the Minister update us as to the current state of the Government’s thinking on such an agency?

These regulations, while welcome, are not sufficient to tackle the insecurity that many workers face through less job security, the decline in the quality of the employment contract and volatility of earnings. The Government frequently refer to the headline increase in the numbers in employment, but refer less to the changing pattern of employment growth underlying that headline—for example, the distinction between employee and non-employee workers, with the latter missing out on key employment protections applying to employees. Workers who are non-employees are entitled only to a lower tier of employment rights which excludes protection against unfair dismissal, entitlement to statutory redundancy pay or minimum periods of notice on dismissal. They have far less security.

The Labour Force Survey, which the impact assessment relies on to reference atypical work, does not explicitly collect data on the issue of employee and non-employee workers. The Government admit in the impact assessment that they have not established robust figures for the number of workers with the less secure status of non-employee worker.

We have also seen an increase in self-employment, particularly lower-paid self- employment, which now accounts for more than 15% of the labour force, and a rise in the number of zero-hours contracts and other characteristics of the gig economy. Only a minority of the net new jobs created over the recent three-month period measured—November to January—were more traditional, full-time jobs; the others included mostly part-time jobs and full and part-time self-employment.

More than 60% of private sector workers in the UK now work for SMEs, with some 12 million working for small employers. A recent report from the Resolution Foundation revealed the extent of volatility of earnings experienced by workers in today’s world, impacting both low and middle-income earners and challenging the assumption of the steady monthly wage. Two in five workers experience persistent volatility, with significant changes in monthly pay at least six times a year. Of course, extending the right to a written statement of terms and conditions of employment to all workers is very welcome, but those statements will not be sufficient to address the transfer of too much business risk to the individual, to their detriment, when the underlying rights and security remain weak. Much more needs to be done to adapt to the realities of a changing UK labour market.

Good Work Plan

Baroness Drake Excerpts

Tuesday 18th December 2018 Lords Chamber

[Baroness Drake (Lab)]

My Lords, I too welcome the Government’s Statement on how they will implement the recommendations from the Taylor review as they open up the agenda on much-needed reforms to the labour market, particularly on the issue of one-sided flexibility where too much risk has been shifted on to the individual worker from the employer. The Government’s own Good Work Plan says:

“We will take firm action to tackle … where some businesses have transferred too much business risk to the individual, sometimes at the detriment of their financial security and personal wellbeing”.


I hope the Government will hold to that promise; people will watch closely how they honour it. There is strong evidence from both public and private sources on the levels of financial resilience that many workers lack, particularly in the face of income shocks. This lack of resilience is driven in part by a decline in the quality of the employment contract, whether that is revealed through variability in earnings, poor sick-pay provisions or ambiguous employment status. To begin to address financial resilience, one has to look at precisely what the Government have identified: the shift of risk on to the individual and the decline in the quality of the employment contract.

There are many questions I would like to ask but time does not allow. I refer to the part of the Statement that references Matthew Taylor’s call on the Government to improve access to justice, and I refer back again to the issue of tribunals. In their stated steps to improve the effectiveness of employment tribunals, have the Government decided to reintroduce fees for access to employment tribunals and employment appeal tribunals, so that the only matter being considered is how to reintroduce these fees, or are they still undecided on the reintroduction of fees? One has to bear in mind that, if workers cannot enforce their rights, these are rendered meaningless. We saw a staggering fall of 70% in claims brought to employment tribunals and a disproportionate impact of that fell on women, particularly low-paid and pregnant women.

The Statement also refers to the Government’s considering,

“the case for creating a new, single labour market enforcement agency”.

How would the remit of such an agency impact on the remit of ACAS and, in particular, on the ACAS role in conciliating on employment tribunal claims? When one reads what is intended for a new body, one can see an overlap with ACAS, so it would be useful to have some clarification. I reiterate what the noble Lord, Lord Fox, says that, notwithstanding the lateness of the hour, the reforms that could come out of this Statement from the Government, and the reach of those reforms, could be considerable, affecting many millions of people. When we get into the detail of the legislation, one can be sure that the numbers attending will be far higher than at this late hour.

[Lord Lea of Crondall (Lab)]

My Lords—

Companies (Miscellaneous Reporting) Regulations 2018

Baroness Drake Excerpts

Monday 9th July 2018 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I declare my interests as set out in the register, and as a director of companies over a number of years and as a chartered secretary. I will not delay the House, but I am doubtful of the value of some of these changes, which represent micromanagement and/or bureaucracy, and there is a decidedly mixed level of support for some of them, as can be seen on pages 49 to 51 of the impact assessment.

I am a huge supporter of good governance, but it should be geared towards long-term value creation, and in a responsible way. Good companies create value, and the tax-take from such companies—not only company taxes but all the taxes they collect: VAT, rates and income tax—finances our schools, hospitals and public services.

There is no sunset clause but perhaps the Minister can confirm that there will be a review of these arrangements in five years’ time. Further, does he agree that creating long-term value and companies’ contribution to our economy, including productivity, which was mentioned by the noble Lord, Lord Haskel, should form part of that review?

[Baroness Drake (Lab)]

My Lords, I am conscious that Members of the House want to move on to other business, so I shall concentrate on two issues in the regulations that I think warrant being brought out and receiving attention.

There is a cross-cutting concern that, in referring to directors’ reporting responsibilities in relation to engagement with and having regard to the interests of their employees, the regulations do not refer to their “workers”; they refer only to their “employees”. This is a weakness in the regulations, as they do not encompass the reality of modern employment practices and business models, explicitly referred to in the Taylor review and the impact assessment. Reporting on a company’s impact on employment should be reflective of the entire workforce and not just direct employees.

A significant minority of the UK’s workforce is now not covered by the term “employee” and there is a correlation between indirect employment and low pay and insecurity. Excluding indirectly employed workers, some of whom are the most vulnerable, from the scope of these regulations contradicts a key rationale for statutory intervention—promoting equality and fairness. It will mean that directors’ reports will present an incomplete picture of engagement with the people whose work contributes to companies’ output and value. Therefore, do the Government intend to review Section 172 of the Companies Act to allow reporting on directors’ duties to address the workforce as a whole and not restrict it to employees only?

Another element of the regulations concerns me. Regulations that require reporting on the pay ratios of CEOs’ remuneration to employees’ remuneration are to be welcomed, but there is a risk that these regulations will fall short of what is needed. Again, they refer to employees and not the whole workforce, and that could result in misleading evidence on those pay ratios. The public interest is in the gap between wider workforce pay and executive remuneration. There is a precedent: gender pay-gap reporting covers both workers and employees, not just employees.

If evidence on pay ratios is to contribute to restoring public trust in business, it is important that there is integrity around the data collected and reported. Clear audit requirements need to be put on these pay-ratio exercises, and the lessons learned from the reported gender pay gap, highlighted by the Financial Times analysis, should not be missed. The Financial Times revealed that one in 20 UK companies that has submitted gender pay-gap data to the Government has reported numbers that are statistically improbable and therefore almost certainly inaccurate. Therefore, when do the Government intend to extend pay-ratio reporting to cover both workers and employees, and how will they satisfy themselves about the quality of the data provided on these pay-ratio reports?

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am conscious that the House wants to move on but it would be wrong to pass over these regulations, because there are rather important points within them. My noble friend Lord Haskel raised a number of points about the overall shape of the Government’s response to company powers. He talked about the need to think again about the way that shareholders are always given priority and the missed opportunity to stress the importance of productivity. My noble friend Lady Drake raised a number of points about how the figures can be used in a positive way, and I want to come back to that, although I will not go through all the points in detail. In fact, a lot of them were covered by the noble Baroness, Lady Bowles, although I am afraid that she lost the House during her speech. It may be worth reading again what she said, because a lot of it was very relevant to what our future agenda needs to be.

First, I congratulate the team behind these regulations. The Explanatory Memorandum that accompanies them runs to 55 pages and is one of the best that I have seen, but I bet that very few people here have read it. They should do so because, even if they are not up to speed with the latest arithmetical terms, it will tell them about averages and means in a way that will bring home any questions that they might have had about why people use one term or another. If I may say so, it has chosen the wrong term, but has done so in a way that has allowed it to at least shine a spotlight on the difficulty of comparing, for instance, the pay of the top person in a company with the median or average or whatever other term you want to use. It points out more difficulties than it solves so it is worth reading.

Secondly, on the date of application of the regulations, some Members of the House will be aware that I have concerns about the fact that we are observing in its absence the common commencement dates for when new regulations are placed on companies and businesses. These regulations come in 21 days after they are passed and not on the common commencement dates, which are 6 April and 1 October. I am keeping a score of the Minister’s efforts in this matter. He will be delighted to know that, of the 13 regulations he has brought forward recently, his score is now 11:2, and even those two were almost cheating because one of them was done by exception and another was done a year late. Nevertheless, I appeal to him to try to up his game.

The key point is: why are the Government not doing more on Section 172(1) of the Companies Act 2006? This section requires directors to act in a way that they consider in good faith promotes the success of their company as a whole and to have regard to, among other things, the long-term consequences of their decisions and the interests of their employees. This needs to be looked at very seriously and rewritten for the 21st century. As part of that, the review should look at the issues that should be in place for all directors, whether in private or public companies, and should include matters such as late payment of suppliers, productivity and the use of powers to try to ensure that stakeholders of the company benefit from it.

Thirdly, the point has already been made that the threshold of 250 UK employees mirrors existing thresholds, but it does not make any sense for it to be limited to UK citizens only. The Government should make it clear that the intention of the legislation is for companies to report on their whole workforce. My noble friend Lady Drake asked why we are not including “workers” as well as “employees”. All employees are workers but not all workers are employees, and it is time that this was updated to reflect that. I think the Minister has already accepted that, in time, they will do that.

My final point is that, without some central registry of reports, this requirement will not be satisfactory. I hope that the Minister will take account of what I have said and perhaps write to us on the key points, in order that we might make progress today.