The Taylor Review, published in July, listed a number of proposals for reform on employment status and workers' rights. The Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee have now published a report, 'A framework for modern employment' which endorses the finding in the Taylor Review that there is "an urgent and overwhelming case for increased clarity on employment status". The Committees have also prepared a draft Bill which aims to take forward the "best" of the recommendations in the Taylor Review.

Recommendations

The key recommendations made in the Committees' report:

Clearer statutory employments status definitions

There should be simpler, clearer statutory definitions of employment status to protect workers and reduce the need to go to tribunal. In distinguishing between workers and the self-employed, the legislation should emphasise the importance of control and the supervision of workers by a business, rather than a narrow focus on whether the individual can appoint a substitute to carry out the work on their behalf.

The definition in the draft Bill includes factors a tribunal may take into account in assessing whether an individual is self-employed:

  • they can hire others at their own expense
  • they can determine the manner in which the services are carried out
  • they actively market their services
  • they can negotiate and set a price for their services

While the definition for a worker includes whether:

  • the contract places an obligation on them to perform work personally
  • the other party to the contract retains the potential to control to a substantial degree how their work will be carried out in relation to factors such as:

-disciplining them

-the activities to be carried out

-the equipment or products to be used

-the rate of pay, and

-where, how and when the activities will be carried out

  • they are integrated into the other party’s business
  • the other party provides tools or equipment
  • they are prohibited from working for others during the contract, and
  • the degree of financial risk undertaken by the individual

The factors listed are largely those that are currently taken into account by tribunals. The definitions have merely brought together the existing case law. Significantly, the factors to be taken into account by the tribunal under these definitions are not exhaustive, nor are they mandatory. So these definitions don't really make the issue of employment status any clearer - and will not bring greater certainty on employment status for individuals or businesses.

Worker by default

If the issue of whether an individual is a worker, or is self-employed, arises in a tribunal claim, the assumption will be that they are a worker unless the business can establish they are self-employed.

The intention appears to be that the worker by default model should apply to companies that have a self-employed workforce beyond a certain size. However, no indication is given as to what that number, or what proportion of the workforce, that would be.

Written statement of particulars for workers

Businesses should have to provide a clear written statement to workers on their rights and entitlements within seven days of the start of their engagement.

Zero hour contracts

Instead of banning zero hours contracts, companies that benefit from a flexible workforce should either guarantee hours that reflect the periods worked each week or compensate workers for uncertainty - with a pay premium on the National Minimum Wage or the National Living Wage. The Low Pay Commission should be involved in a pilot on compensating workers in this way.

Agency workers

The 'Swedish derogation' model should be abolished - this allows agency workers to opt out of equal pay with permanent employees of the end user and instead receive a minimum level of pay between assignments.

If this change is introduced, it will have a significant impact on those businesses that have a large number of workers permanently contracted as employees of an agency and who currently receive pay from the agency between assignments.

Workplace consultation/representation

Both employees and workers should be counted towards the 50 workers requirement for companies to be covered by the workplace consultation regulations, and the threshold for establishing workplace representatives should be reduced from 10% to 2% of the workforce making the request.

If these proposals are adopted, this could be a very significant change for small businesses in particular, which could be subject to these consultation regulations when only one or two of their workers or employees make a request.

Employment tribunals

There should be an obligation on tribunals to consider the increased use of higher, punitive fines and costs orders where businesses have already lost a similar case on employment status and National Minimum Wage, etc. In addition, there should be greater use of class actions in disputes over wages, status and working time.

Deterrents and enforcement

Stronger and more deterrent penalties should be introduced for repeat or serious breaches of employment legislation, as well as expanding “naming and shaming” to all non-accidental breaches of employment rights by businesses and supply chains. The enforcement agencies should also take a more proactive role in identifying and deterring breaches.

How the report differs from the Taylor Review

The report did not agree with the Taylor Review recommendation that workers should have the right to earn less than the National Minimum Wage if they choose to work at a time of low demand, knowing that their earnings may fall below the National Minimum Wage rate (Taylor Review calls for guarantees for workers).

Taylor Review recommendations that do not appear in the report include reforming the tax framework in the employment context, better access to holiday pay for seasonal and casual workers and introducing a more pro-active approach to workplace health. In addition, the draft Bill has not adopted the Taylor Review recommendation to re-designate the worker category as 'dependent contractor' and the self-employed as 'zero hours'.

The review does not clarify why it has taken up some of the recommendations in the Taylor Review but has omitted others. Nor is it clear what this means about the status of those recommendations that were omitted.

What next?

When the Taylor Review was published, although the Prime Minister welcomed the report, she did not make a firm commitment to legislate on the recommendations. Usually legislation is drafted by Parliamentary (or legislative) counsel - but, given the urgent need to provide clarity on employment status and mindful that Government resources are focused on Brexit legislation, the Committees have published a draft Bill. It remains to be seen whether they will be allowed legislative time to take through a Bill with Government support. However, given Theresa May's pledge when she became Prime Minister to help vulnerable workers and the fact that these proposals have cross party support, it may well be that those changes that can be made easily through secondary legislation, like the agency workers 'Swedish derogation' and the workplace consultation reforms, will be introduced soon.