Last month, the Government published the Small Business, Enterprise and Employment Bill. As the name suggests, the Bill includes changes to many different areas of law – affecting not only small businesses and enterprise, but even childcare and pubs - but Part 11 deals with employment law.
Of these, the area which has received the most press coverage – and criticism – is probably the much-vaunted protection for zero-hours workers. How much difference will this really make?
Exclusivity in zero-hours contracts
The headline-grabbing measure which has attracted the most attention is the Government's announcement that it will ban exclusivity clauses in zero-hours contracts.
The Bill would insert a new s27A into the Employment Rights Act 1996, which would define a zero hours contract as "a contract of employment or other worker's contract under which… the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and… there is no certainty that any such work or services will be made available to the worker."
Zero-hours contracts are controversial arrangements under which an employer makes no promise of work (or payment) to a worker, but usually expects the worker to be available to work if called upon to do so. The worker receives pay only for time actually worked. Some such contracts prevent the worker from accepting any other job. Following the Government's consultation on zero-hours contracts earlier this year – which received an astonishing 38,000 replies – it has now announced that such exclusivity clauses will be made invalid and unenforceable so that no one is tied into a contract without any guarantee of paid work.
Whilst the Government hopes this will mean greater flexibility for workers on zero hours contracts and an opportunity for such individuals to boost their income, commentators have already pointed out the pitfalls of the scheme. BIS have announced that they will be consulting further to assess what can be done to prevent "bad employers" from circumventing the rules through simple avoidance techniques (such as introducing "one hour contracts" for their workers guaranteeing a minimum of one hour work and pay a week, and anything else to be on top on the same basis as previously).
There will be little opposition to the ban, but CIPD research in 2013 showed that only around 10% of workers on zero hour contracts were subject to an exclusivity clause, with a further 15% facing some restrictions. The Government's own figures suggest that 125,000 workers will benefit from the change, whilst the most recent (April 2014) ONS statistics suggested that a total of 1.4 million workers have zero-hours contracts. The TUC has complained that the new ban will not go far enough, whilst Unison have called for "much tougher measures" to protect workers.
Since employers are under no duty to offer work to those on zero-hour contracts, there is also the risk that whilst an employer cannot tie the worker in with an exclusivity contract, there is nothing to stop the employer from not offering any work to those who do work for other employers. If the ban is to have any impact, there would also need to be a right for a worker not to suffer a detriment for breaching an exclusivity clause – something which is not contained in the Bill.
If the Government decides to define a minimum level of guaranteed hours, this will undermine the inherent flexibility of the contract, which does suit some workers and employers. A CIPD survey which was reported in November 2013 found that 65% of those workers on zero-hours contracts were content with their work life balance – not a particularly high number you might think, but higher than the 58% of workers on "traditional" contracts who said the same thing.
Exclusivity clauses were just one of the issues surrounding zero-hours contracts which have been identified. The Bill does not, for example, deal with the recommendation in the Pickavance Report(written by Norman Pickavance, former HR director at the supermarket Morrisons) to give workers on zero-hours contracts who are in practice working regular hours a right to a contract with fixed minimum hours. The Labour Party has already announced that, if it wins the next General Election, that it will introduce legislation which will give workers a right to request fixed hours after six months and an automatic entitlement to this after 12 months.
Improved zero hours contracts guidance
In addition to the ban on exclusivity clauses, the Government has also announced it will improve the current guidance on the use of zero hours contracts, after 42% of respondents to the consultation said the current guidance was "not helpful". It plans to work with business representatives and unions to publish a Code of Practice by the end of 2014 on the fair use of such contracts, and to work with stakeholders to review existing guidance and improve information available to employees and employers on using these contracts.
So, aside from zero-hours contracts, what are the other changes?
In order to achieve a consistent standard of best practice for handling disclosures, and to give reassurance to whistleblowers that their disclosure is being taken seriously and action will be taken by the person to whom the disclosure was made, Clause 135 of the Bill requires "prescribed persons" to compile annual (anonymised) reports of disclosures made to them.
(Prescribed persons are those other than the employer to whom a worker may in certain circumstances make a disclosure without fear of retaliation. The list includes at present the Commissioners of HMRC, the Environment Agency, the Health and Safety Executive and the Pensions Regulator, depending on the subject of the disclosure).
Whistleblowing law in the UK aims only to protect the whistleblower and there is no legal obligation that disclosures must be investigated. Research by the whistleblowing charity Public Concern at Work and Greenwich University suggests that at present, around 75% of whistleblowers say nothing is done about the wrongdoing they report. It is hoped that this measure will increase whistleblowers' confidence that they will be taken seriously.
Public Concern at Work has criticised the reforms, saying they do not go far enough and calling the Bill "a clear missed opportunity for the Government to strengthen the law that protects whistleblowers" especially in the light of the drop in claims following the introduction of tribunal fees.
Failure to pay tribunal awards
At present, there are what the Government describes as "no significant consequences" if an employer does not pay the award owed to a successful claimant. Around half of these never receive the amounts they have been awarded.
Clause 136 of the Bill will add a new s37A to the Employment Tribunals Act 1996. This provides that if an enforcement officer finds that an employer has not paid an award ordered by the tribunal, the enforcement officer must send a warning notice giving at least 28 days to pay in full but warning that if the employer does not, an additional financial penalty will be imposed. The warning notice must explain the grounds for the penalty, how it is calculated, and the employer's right to make representations about the payment or its ability to pay.
If the payment is not made by the time specified, then the enforcement officer can impose a penalty of 50% of the outstanding tribunal award (a minimum of £100 but capped at £5,000). The penalty does not go to the claimant, but to the Secretary of State.
If the employer pays the penalty and the outstanding amount due to the claimant within 14 days of the penalty notice, then the penalty is halved.
This procedure will apply whether or not the claimant goes on to enforce the award ordered by the tribunal.
Employment tribunal postponements
Whilst the number of claims being made has dropped, tribunals are still being criticised for long delays in hearing claims.
Under Clause 137 of the Bill, there will be amendments to the Tribunal Rules of Procedure which will limit the number of postponements which will be granted at the request of a party, and an obligation on the Tribunal to consider making a costs award when dealing with late applications for postponements, although the Bill does not explain what a "late application" will be (this is for secondary legislation).
National minimum wage
The national minimum wage is £6.31 for those aged 21 or over, with reduced rates for younger workers and apprentices. Clause 138 amends the National Minimum Wage Act 1998 to state that the fine for paying below the minimum wage is £20,000 per affected worker.
Public sector exit payments
Clause 140-2 of the Bill make provision for Regulations to be made which will require all or part of a redundancy payment made to a public sector worker to be repaid if that individual rejoins the public sector within a certain period. There have been a number of recent high profile cases of individuals who have received large payments and quickly returned to public sector roles – including in the NHS where the Health Select Committee found among 19,000 redundancies, 17% had been rehired and most within a year2; and local government, where an audit commission report in 2010 found that of 37 chief executives who left by mutual agreement over a two year period from January 2007, six had been employed in another council within 12 months.
The Treasury has issued a consultation paper in which it recognises that although the number of public servants to whom it applies is small, it remains a waste of taxpayers' money. In a number of workforces, arrangements exist to recover exit payments where an employee returns after a short period but this is not always the case. Subject to the results of the consultation, the Government proposes that the new rules should require those earning £100,000 or more to repay the full amount should they return to the same sector before 28 days and a pro-rata amount should they return between 28 days and 12 months. Tapered recovery requirements would also apply to those earning £80,000 or more.
The consultation closes on 17 September 2014 and responses should be e-mailed to:email@example.com.
When is the Bill due to come into force?
Simply – we do not yet know. The Bill had its first reading on 25 June 2014 and must now make its passage through Parliament with no date being announced as yet for it to come into force. However, since a General Election must take place in April 2015 at the latest, the Government is likely to want to pass the Bill before then.