I recently blogged that the House of Lords had voted to reject the concept of employee shareholder contracts. Under this proposal an employee would receive at least £2,000 worth of shares in their employer in exchange for surrendering certain employment rights, including the 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) and the right to a statutory redundancy payment.

The House of Lords essentially did not like the concept of employees potentially being pressured into giving up employment rights

Following this defeat in the House of Lords, the House of Commons voted on 16 March 2013 to reinstate clause 27 of the Growth and Infrastructure Bill which would introduce the concept of employee shareholder contracts.

The Government emphasised that the new employment status would be entirely voluntary. Unfortunately for the Government this assurance was not enough to satisfy the House of Lords and on 22 April 2013 they voted, for the second time, to strike out clause 27. In response to this the Government announced a list of concessions on 23 April 2013 in a bid to persuade the House of Lords to accept the clause.

These concessions were in addition to some already announced by the Government and the full list now includes:-

  1. an employee cannot accept the offer within 7 days of it being given;
  2. the employee must be provided with a written statement of the rights they are giving up;
  3. a written statement setting out the details of the shares being offered must be provided;
  4. a jobseeker who refuses a job on an employee shareholder basis will not automatically forfeit their unemployment benefits;
  5. the first £2,000 worth of shares will be free from income tax; and
  6. an existing employee will be protected from detriment if they refuse to switch to the employee shareholder status.

A further concession was announced on 24 April 2013 and provides that an employee shareholder contract will only be valid if the employee has received advice from a relevant independent advisor, such as a lawyer or union representative, prior to entering into the contract. Moreover the employer will be liable to pay the reasonable costs of that advice regardless of whether the employee subsequently chooses to enter into the contract.

This final concession on the part of the Government was enough to allay the concerns of the House of Lords and on the same day they voted to accept the clause.

The department for Business, Innovation and Skills intends to implement this new, third, type of employment status (joining employee and worker status) in Autumn 2013. 1 September 2013 was the date previously mentioned but I am not 100% sure if they will stick with that date or not. Whether any employer out there actually intends to make use of the new status remains to be seen.