The Growth and Infrastructure Act 2013 was passed on 25 April 2013 and introduces a new type of employee ownership arrangement, under which employees can give up some of their employment rights in exchange for shares in their employer. The measures are intended to be introduced on 1 September 2013.

Section 31 of the Act inserts a new clause 205A into the Employment Rights Act 1996 providing that an employer and employee can agree that, in consideration of the individual becoming an "employee shareholder" (instead of just an "employee"), the company will issue or allot a minimum of £2,000 worth of shares to the individual, with any gains made on the first £50,000 of shares being exempt from capital gains tax.

An employee shareholder has the same rights as an employee with the following exceptions:

  • No right to request time off for study or training.
  • No right to make a flexible working request, aside from those employee shareholders returning from parental leave, who will be restricted to making a formal request for flexible working to the period of 14 days beginning with their return to work.
  • No right not to be unfairly dismissed (except in health and safety cases, automatically unfair cases, or cases where the dismissal is discriminatory under the Equality Act 2010).
  • No right to a statutory redundancy payment.
  • The employee must give 16 weeks' notice if they want to return early from statutory maternity, adoption or additional paternity leave.

The government was forced to make a number of concessions to get the House of Lords to agree to the new legislation. These include:

  • Protections from dismissal or other detriment for existing employees who refuse to become employee shareholders.
  • Jobseeker's allowance cannot be withdrawn if an employee shareholder job is refused.
  • An offer of employee shareholder status must include a statement explaining the employment rights that would be sacrificed and the rights attaching to the shares.
  • The individual must receive advice about the offer from an independent solicitor, barrister, legal executive, union official or advice centre. The employer must meet reasonable costs incurred in receiving this advice, regardless of whether the offer is accepted.
  • Individuals agreeing to the offer will be entitled to a seven-day "cooling off" period from the day legal advice is received.

To view the Act click here: