Following on from George Osbourne’s announcement of employee owner contracts at the Conservative Party Conference last month, we now have a consultation paper and some draft legislation.

The first instalment of the enabling legislation takes the form of a clause in the Growth and Infrastructure Bill which received its first reading in the Commons last week. If passed it will amend the Employment Rights Act to exclude employee owners from the right to claim unfair dismissal and redundancy rights, as well as from the right to request flexible working and time off for training. Rights to claim automatically unfair dismissal or dismissal-based discrimination claims will not be excluded.

But who exactly will qualify as an employee owner? The draft statutory definition simply repeats what we already know from Osbourne’s announcement – namely that there must be an agreement to confer the new status in return for which the employee is given between £2,000 and £50,000 worth of shares in the employer’s company.

The consultation does little to flesh out these bare bones. It says that any kind of shares will qualify, and employees can be made to sell the shares back at the end of the employment, provided they receive a “reasonable value”. They will be valued on an unrestricted basis, but the Government hopes that it will not be necessary to impose any valuation requirements “beyond those that already exist when valuing companies for other tax purposes”.

Little is said about in the consultation about the tax treatment of the shares. We are told that the shares are likely to be taxed like other employee benefits when issued or allotted to the employee, but that there will be no capital gains tax charge on their disposal. More details will no doubt be revealed in the separate consultation about the tax treatment of these shares, which is expected shortly.