Select Committees propose overhaul of ‘employment’ framework

24 November 2017

Following the Taylor Review and a string of ‘gig economy’ employment cases hitting the headlines, two House of Commons Select Committees have published a joint report – ‘A framework for modern employment’.

The report sets out how they believe the employment framework should be amended to reflect the modern world of work.

In the document, the Prime Minister is urged to prioritise legislating on identified issues, with a draft Bill included to set out the proposed legislative changes.

Here’s a summary of the key recommendations included in the draft Bill:

Clearer statutory definitions of employment status

  • Amend employment legislation to include a list of the key factors which the courts may refer to when deciding on employment status. The list should include things like whether the individual is obliged to perform work personally, and the level of financial risk to the individual.
  • Introduce a new concept of ‘independent contractor’ which is neither an employee nor a worker. Relevant factors to take into account when determining whether or not an individual is an independent contractor should include whether the individual assumes responsibility for the success or failure of their business or not, and whether or not the individual is responsible for their own indemnity cover or public liability insurance.

Worker by default

  • ‘Employees’ should be regarded as ‘workers’ by default, and companies who have a self-employed workforce above a certain size (the report doesn’t propose what this should be) should have the burden of establishing that an individual is self-employed in a ‘status’ case.

Non-guaranteed hours

  • The government should work with the Low Pay Commission to put a pilot scheme in place. Through this, workers who work non-guaranteed hours would be entitled to a premium on the national minimum wage and the national living wage.

Continuous service

  • For the purpose of accruing employment rights, a break in service of one month should be allowed without breaking ‘continuous service’. Currently, this stands at one week.

Employment tribunals

  • In disputes that cover claims for unlawful deduction of wages, worker status and working time, employees should have a facility to bring ‘class actions’ at an employment tribunal. This would mean that if a ‘class action’ was successfully brought by one person, the result would apply to everyone in the class.
  • If an employer loses an employment status case similar to one they’ve already lost, employment tribunals should be required to consider using punitive fines and costs orders.

The below recommendations were also included in the report, but did not form part of the draft Bill:

Entitlement to a written statement of terms and conditions

  • Employers should be required to provide a written statement of status to an individual within seven days of them starting work. This statement should specify whether the individual is an employee or a worker, and detail their rights and entitlements.

Lowering the ICE threshold and support levels

  • As well as employees (who are already counted), workers should count towards the threshold of 50 employees required for companies to be covered by the Information and Consultation of Employees Regulations. In addition, the threshold level of support for the implementation of an information and consultation forum should be reduced from 10% of the workforce down to 2%.

Ending the Swedish derogation

  • As it stands, the ‘Swedish derogation’ allows an opt-out from an agency worker’s entitlement to be paid the same as a permanent member of staff doing the same job, after they’ve completed 12 weeks’ service if they receive pay between assignments. The report recommends that the government should repeal this opt out.

Deterring non-compliance

  • Businesses which commit repeated or serious breaches of employment legislation should be subject to stronger and more deterrent penalties, including punitive fines.
  • The government should expand ‘naming and shaming’ to all non-accidental breaches of employment rights by businesses.

A word from us

Dave Hewitt, Head of HR & Employment Law Information at Citation, commented: “In the wake of recent high-profile cases such as Uber and Deliveroo, ‘employment status’ is becoming an increasingly challenging issue for clients.

“The principal piece of employment legislation in the UK is now over 20 years old and the report, from a group of cross-party MPs, provides an interesting insight into how they believe the legislation could be updated to bring more clarity to this issue.”

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