Employment Rights Bill

Baroness Penn Excerpts

Committee stage
Wednesday 18th June 2025 Lords Chamber

Moved by

[Baroness Penn]

280: After Clause 150, insert the following new Clause—
“Substitution clauses: duties of company directors(1) The director of a relevant company has a duty to ensure that the company keeps a register of all dependent contractors.(2) The director must supply details of the register under subsection (1) with the Secretary of State within 12 months of the passing of this Act and every 12 months thereafter, subject to the provisions of the Data Protection Act 2018.(3) The Secretary of State may by regulations make provision about what information must be supplied in the register of dependent contractors.(4) For the purposes of this section―(a) a “relevant company” is a company that―(i) provides services in relation to postal and courier activities, food and beverage service activities or taxi operation,(ii) has more than 250 employees in the UK and overseas, and(iii) includes provision within the company’s contracts with contractors which allow the contractor to send another qualified person (a “substitute”) to complete the work in the contractor’s place if the contractor is unable to complete the work,(b) a “director” includes any person occupying the position of director, by whatever name called, and (c) “dependent contractor” means a person who—(i) performs work or services for the relevant company,(ii) is paid according to tasks performed rather than hours of work,(iii) depends partially or primarily on the relevant company for employment and income,(iv) is not required to perform services for the relevant company, and(v) is not specified as an employee or worker for the relevant company within a statement of employment particulars or a contract of employment.”Member’s explanatory statement
This amendment seeks to require certain company directors to keep a register of the people carrying out work for the company under so-called “substitution clauses”, which allow companies to permit their suppliers – including some delivery couriers – to appoint a substitute to supply services on their behalf.

[Baroness Penn (Con)]

My Lords, Amendment 280 is designed to address the use of substitution clauses that allow for illegal working. There are different ways of measuring it, but on some estimates there are 4.7 million gig economy workers in the UK, including around 120,000 official riders at Uber Eats and Deliveroo, two of the largest delivery companies in the country.

For years we have heard stories of labour market fraud and visa abuse committed by contractors related to those companies, and much of that abuse has come through the legal loophole created by substitution clauses. These clauses have traditionally been used to give flexibility to businesses, but in the gig economy they are being used to allow illegal working. From late 2018 to early 2019 there were 14,000 fraudulent Uber journeys, according to Transport for London. During random checks two years ago, the Home Office found that two in five delivery riders who were stopped were working illegally.

I acknowledge that some action is being taken that will address part of this issue. Ministers have said that they will consult on employment status and moving towards a two-part legal framework that identifies people who are genuinely self-employed. I support that ambition, but as someone who worked on the original proposals in this area that stemmed from the Taylor review, I also understand the complexity of resolving this, and I fear that it could end up being put in the “too difficult” pile in Ministers’ in-trays.

The Government have also brought forward amendments to the borders and immigration Bill to include a legal requirement for organisations to carry out right-to-work checks on individuals they employ under a worker’s contract or as individual subcontractors, and for online matching services that provide details of service providers to potential clients or customers for remuneration. What are the timescales for the consultation and the secondary legislation to bring those measures into force? On my understanding, these provisions will not extend to the use of substitutes, meaning that this loophole will remain.

Amendment 280 seeks to go some way to addressing this through the introduction of a comprehensive register of all dependent contractors. Such transparency would help to ensure that employment rights are upheld and pay is not suppressed through illegitimate competition, and would also support the enforcement of right-to-work checks. An alternative approach would be to ban substitution clauses altogether, or at least for those companies and sectors where abuse is the most prevalent—or, as Amendment 323E in a later group from the noble Lord, Lord Berkeley, seeks to do, restrict their improper use.

Given that substitution clauses have played an important part in case law on determining employee or worker status, this could have broader implications, so I have focused on transparency as a first step. But I would be interested to hear the Minister’s view on removing or restricting the use of substitution clauses and whether that is preferable to a register delivering transparency, for example.

A further alternative would be to introduce right-to-work checks for substitutes by the original engaging business. While this was deemed to be out of scope for this Bill in the Commons, I had hoped that the Government’s amendments to the borders Bill would fill this gap. However, unless I have misunderstood—I would be grateful if the Minister can clarify this for me—their approach leaves this loophole untouched. The impact assessment for the Government’s amendments to the borders and immigration Bill reflects the harms that illegal working has on our economy. It says:

“Illegal working creates unfair competition, negatively impacts legitimate businesses, and puts additional pressure on public services. A rapid growth has been observed in the UK in modern labour market models where businesses can currently engage workers without the requirement to complete right to work checks”.


Without further action to address the abuse of substitution clauses, as the App Drivers and Couriers Union has said:

“Unfortunately there is this loophole that allows some bad people to come through. They are not vetted so they could do anything”.


The Government need to take action to guarantee fairness and justice in our labour market. A register of dependent contractors provides a way to resolve this abuse and hold big employers in the gig economy to account. I beg to move.

[Lord Hunt of Wirral (Con)]

My Lords, I congratulate my noble friend Lady Penn on tabling this important amendment. The requirement for certain company directors to maintain and report a register of dependent contractors under substitution clauses is a measure that would bring much-needed transparency to a complex area of employment. It recognises the evolving nature of work arrangements in sectors such as courier services and taxi operations. Of course, there are compliance burdens associated with maintaining such registers, especially for large companies operating over multiple jurisdictions. Additionally, data protection considerations must be carefully addressed to ensure sensitive personal information is handled appropriately and securely. These are important factors that require careful balancing against the benefits of increased transparency. We look forward to hearing the Minister’s response.

[Lord Leong (Lab)]

My Lords, I thank the noble Baroness, Lady Penn, for her Amendment 280 and for meeting with my noble friend Lady Jones and me last month to discuss this very important issue.

I reassure the noble Baroness that the Government are already taking action to tackle the main risks that arise from substitution, including illegal working. As she mentioned, substitution is a complex area on which we are still gathering data.

An ONS online survey of around 10,000 businesses from across the UK, published this month, found that close to 3% of UK businesses use substitution clauses. While we do not know the number of substitution clauses used in the gig economy, we know that this could impact a large number of individuals. Although estimates of the number of gig economy workers vary vastly in various surveys, from around 500,000 to 4.4 million people—the noble Baroness mentioned some 4.7 million people—the CIPD finds that roughly 75% of those in the gig economy consider themselves to be self-employed.

We have introduced an amendment to the Border Security, Asylum and Immigration Bill, as was mentioned by the noble Baroness, to extend the scope of employers required to carry out right-to-work checks to those who engage limb (b) workers or individual sub-contractors, such as those working in the gig economy. This requirement will cover those working as substitutes.

We understand the complexity of these issues, and of employment status more widely, and that is why we have committed to consult in detail on a simpler framework for employment status. Comprehensive consultation will better account for the full range of today’s employment relationships, while addressing the minority of employers who will seek to avoid legal obligations.

We were clear that some reforms in our plan to make work pay will take longer to undertake and implement. We do not have a set timeline for consulting on employment status at this point, and I assure the noble Baroness that we will keep her up to date as and when this happens. We understand the complexity of employment status, as I mentioned earlier, and we are definitely committed to consulting in detail. Comprehensive consultation will better accounts for the full range of today’s employment relationships, while also addressing the minority of employers who will seek to avoid legal obligations, as I mentioned.

The noble Baroness’s amendment would create significant additional reporting burdens for businesses and would not necessarily change how those businesses use substitution clauses, as I mentioned in my earlier speech. I therefore ask the noble Baroness, Lady Penn, to withdraw Amendment 280.

[Baroness Penn (Con)]

Before the Minister sits down, could I confirm what I think I heard, that the amendments to the borders and immigration Bill will cover the use of substitute workers and substitute clauses with the extension of right-to-work checks?

[Lord Leong (Lab)]

I had better clarify this. I said that the amendment to the Border Security, Asylum and Immigration Bill will extend the scope of employers required to carry out right-to-work checks to those who engage limb (b) workers—perhaps one could classify that as those without many rights—or individual sub-contractors, such as those working in the gig economy. Perhaps that answers the question of the noble Baroness.

--- Later in debate ---

[Baroness Penn (Con)]

So not, therefore, the use of substitute workers. That answers my question, but it leaves the issue unaddressed. The challenge before the Government is that they have acknowledged the existence of this problem, with amendments brought to the borders and immigration Bill on Report, but they propose to leave this loophole unaddressed. The powers they are bringing in that Bill will require further consultation and then secondary legislation, and the Minister was not able to put a timeline on that. If this is not addressed by those proposals in that Bill, then when will it be addressed?

[Lord Leong (Lab)]

I thank the noble Baroness. I stand corrected on that point. The officials have just given me a note that it does cover substitute workers.

[Baroness Penn (Con)]

Okay. Perhaps it might be good to sit down between now and Report and clarify the exact proposed powers in that Bill. If it does—although the powers are then for secondary legislation and the detail is to be worked through—if the Government are taking the powers to address this loophole and can do it through secondary legislation under that Bill, that is welcome news. The transparency measures proposed in my approach were really an interim measure due to scope and other wider considerations. If we can directly place the obligation to carry out right-to-work checks on those organisations engaging people and their substitutes, then that would be very welcome news indeed. In the meantime, I beg leave to withdraw my amendment.

Amendment 280 withdrawn.

--- Later in debate ---

My voice is about to go. That is just as well, because I now beg to move.

[Baroness Penn (Con)]

My Lords, given the hour, I will be incredibly brief. My noble friend and I do not always find common cause—even though we are on the same Benches—but this is an extremely sensible amendment, and my noble friend has explained the extent to which she has shaped it in accordance with the Government’s wider thinking in their approach to the Bill. Given the amount in the Bill that is being left to secondary legislation, if I was in the department I would welcome a proposal like this, even if it did not stem from our own proposals and officials. In having this proposed expert committee review the secondary legislation and help the department get it right first time, this is a good example of giving very careful consideration to what it would bring. That can only be welcome, so I add my support to my noble friend’s amendment.