The Government has responded to its short consultation on employee ownership which would allow employees to give up some employment rights such as unfair dismissal in return for shares. Unusually, BIS did not issue a press release – perhaps hoping the shocking details will be lost as the media obsesses over George Osborne’s Autumn Statement. Despite 92% of consultation respondents viewing the plans in a negative or mixed way, the Government intends to implement the policy, with some minor changes such as renaming the status ‘employee shareholder’. The Government response makes for depressing reading, confirming, among other things, that unemployed people may lose their benefits if they reject an offer of work on an employee shareholder basis.
Under the scheme employees will be given between £2,000 and £50,000 worth of shares that are exempt from capital gains tax. In exchange, they will lose their right to claim unfair dismissal, redundancy pay, the right to request flexible working or time off for training, and will be required to provide 16 weeks’ notice of their date of return from maternity leave, instead of the usual eight. Unlike Beecroft’s plans, in the event of a dismissal, there would be no consultation period, redundancy-style notice or pay-off.
In its response to the consultation the Government acknowledges that there ‘was a strong concern that individuals were losing important employment protections and that they might be coerced to take on employee owner status’ but reiterates that it ‘has already stated that the new status is voluntary’. However, BIS has previously confirmed to me that ‘companies can offer employment on this basis [employee owner] alone to new hires if they choose to. It is then up to the individual to decide whether what is on offer is suitable to them’. In other words, the new contracts will be ‘voluntary’ for employees on a take-it-or-leave-it basis. This is not quite what I had imagined when the Chancellor described the scheme as a ‘voluntary three way deal’ at the Conservative party conference.
The Government states that it is not appropriate to introduce further regulation on how the shares element of the employee owner status should operate. That would, in the Government’s view, risk negatively impacting on existing employee share schemes, and reduce the flexibility employers and potential employee owners to negotiate arrangements. Companies using the new status will simply need to satisfy themselves that they have indeed issued shares that have a real value of £2,000. The Government also believes that conditions of forfeiture should be left to contractual agreement between the employer and employee owner. As a result it seems that employee shareholders may find they have lost their most valuable employment rights in return for a class of share with fewer voting rights than ordinary shares and very little value. While an employee shareholder could go to a tribunal to argue that they were not allocated shares worth £2,000 this will be a far less attractive option next year once tribunals start charging £250 to issue a complex claim and £950 to have it heard.
The Government response also reveals that unemployed people who receive Jobseeker’s Allowance would have to accept reasonable offers of work on an employee shareholder basis. If, on a case by case basis, a jobseeker is found not to have a good reason for refusing such an offer he or she could lose their benefits for up to three years. However, the Government will consider this issue further as the law is finalised. At least being forced to accept work with limited employment rights is better than working for free on a mandatory work scheme.
Given recent media coverage of foreign companies such as Starbucks, Amazon and Google’s UK tax avoidance, you would think that the Government would be wary of seeming to give big business an easy time. Apparently they aren’t. The consultation response states that the employee shareholder scheme will be amended to allow non UK-registered companies, as well as UK companies, to impose employee shareholder status on their new employees. Given that Starbucks is already allegedly imposing less favourable contracts on employees to make up for having to pay more UK tax, it seems inevitable that many huge multinational companies would leap at the chance at depriving their workforces of vital employment rights.
This is a depressing time for anyone who believes that the State should help ensure equality of bargaining power between employers and employees. Employment rights which have taken hundreds of years to acquire are being stripped away at a rate of knots. BIS may not have issued a press release, but we should all ensure that the Government doesn’t brush these issues under the carpet.