Employment Rights (Miscellaneous Amendments) Regulations 2019
(5 years, 9 months ago)
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Lord Henley
That the draft Regulations laid before the House on 17 December 2018 be approved.
Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, as well as the Employment Rights (Miscellaneous Amendments) Regulations 2019, I will also speak to the Agency Workers (Amendment) Regulations 2019 and the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019. These three statutory instruments contain five measures to clarify and extend workers’ rights, taking forward the Good Work Plan—the biggest boost to workers’ rights in over 20 years.
The Employment Rights (Miscellaneous Amendments) Regulations contain three measures. First, they extend the right to a written statement of employment particulars to workers. Currently, only an employee is entitled to a written statement, and only after a month with the same employer. In his report, Matthew Taylor recommended greater transparency by extending the right to a written statement to workers. We agree that all workers should have the same clarity of information that employees currently benefit from.
The second measure amends the Information and Consultation of Employees Regulations 2004, lowering the threshold for a request to set up information and consultation arrangements in the workplace from 10% to 2% of the total employees. The Government agree with Taylor that voice and engagement is key to good work. Therefore, we are making it easier for workforces to request that employers be more open about what is happening in their workplace. It is important to note that this statutory instrument does not change the important rights that information and consultation representatives have, including paid time off and protection against detriment, the number of employers in scope of the regulations, which is staying at those with 50 or more employees, or the minimum of 15 employees required for a request to set up information and consultation arrangements. Good employers engage regularly with their workforce. To quote Taylor:
“Well-run companies recognise the importance of the people who work for them. They invest time and effort in good management relationships”.
The third measure increases the maximum penalty available to employment tribunals where there has been an aggravated breach of workers’ rights. From 6 April, a maximum penalty of £20,000 will be available, quadrupling the current amount. The current maximum penalty of £5,000 does not always reflect the higher value awards. The new maximum aligns with the current maximum penalty per worker for non-payment of the national minimum wage. It is important that all parties are aware of this penalty. We are providing guidance to increase awareness and highlight how tribunals can make use of these powers. This measure is targeted at businesses that breach the law in ways that are deliberate or malicious. Compliant businesses will welcome this deterrent against anyone seeking advantage by exploiting workers.
The second statutory instrument—the Agency Workers (Amendment) Regulations 2019—abolishes the “Swedish derogation”. At present, agency workers can opt out of the entitlement to equal pay in return for pay between assignments through a Swedish derogation contract. Taylor highlighted that Swedish derogation contracts can be exploitative, and workers sometimes do not receive the equal pay they are entitled to. Our consultation and earlier BEIS research uncovered cases where pay between assignments was not given. We concluded that agency workers are not benefiting from the Swedish derogation and we are therefore taking action. I think that this reform has been welcomed across parties.
Baroness Burt of Solihull (LD)
My Lords, I am grateful to the Minister for outlining the main provisions in this suite of SIs. I have to say, it is a great pleasure not to be talking about Brexit, and to be talking about improvements in employment rights following the Taylor report. I record my thanks to the TUC for its briefing, although I do not necessarily agree with all its conclusions and comments.
It is very important that we move with the times, ironing out some of the unintended consequences of previous legislation and adapting to some of the issues developing through changes in the ways that we work. The Swedish derogation is one of the unintended consequences. I well remember introducing the Agency Workers Regulations 2010 when I was in another place. We introduced the right for agency workers to receive the same employment and working conditions as permanent staff after 12 weeks of service. The Agency Workers (Amendment) Regulations seek to remedy this loophole, which meant that some employers were getting out of giving full employment rights to agency workers by using Regulations 10 and 11 to waive the right to the same pay as a permanent worker if they signed a “pay between assignments”, also known as the Swedish derogation, which promised to pay in between assignments. Some employers were abusing this regulation, not paying material pay between assignments by keeping their staff on artificial, minimum hours contracts or deducting their “between assignments” pay from their “on assignment” pay. This Swedish derogation is to be revoked on 6 April 2020. Nothing good is lost—businesses will still be able to contract to pay agency workers between assignments after revocation. However, workers will not be able to opt out of equal pay rights after 12 weeks, which is a welcome protection for potentially vulnerable agency workers—so all good there.
The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019 introduce the welcome reform that employment agencies must give the worker information before a contract is agreed—on pay, benefits, costs, deductions and fees. It must also include the minimum rate of remuneration payable to the work seeker and the nature and amount of any deductions made to their remuneration. It must also include a worked example of a payslip. The first payslip often comes as a bit of a shock to employees, let alone an agency worker, when they see all the deductions. This key information sheet should improve transparency around pay arrangements; it is very welcome.
The final, and also very welcome, SI is the Employment Rights (Miscellaneous Amendments) Regulations 2019. These increase the maximum level of penalty available for,
“aggravated breach of a workers employment rights",
from £5,000 to £20,000. I am not entirely sure what “aggravated breach” would entail. In his remarks, the Minister talked about the minimum wage. Is it wider than that? I understand that it would persistently be breaching employment law, but how many breaches would there need to be before it becomes aggravated? This opens up the question of how many breaches are happening at the moment. The Explanatory Memorandum says that, since introducing the penalty for aggravated breach, 31 penalties have been issued. Can the Minister confirm that this 31 relates to total time since the Employment Tribunals Act 1996? That would indicate to me that there must have been more persistent breaches of employment law than that. I think it is absolutely fair to raise the limit of fine for an aggravated breach, but this will not be much of a deterrent to an employer if there is very little risk of detection. The Minister may not have the figures relating to how many companies have been inspected since 1996 and what that constitutes as a proportion of the total number of companies, but would he be so very kind as to write to me with the statistics that the Government collect regarding inspections and prosecutions for non-aggravated penalties issued since 1996, or whichever is the correct date of the legislation coming in?
A second welcome part of this SI is the extension of the right to a written statement to “dependent contractors” as well as employees. Here I would appreciate some clarification from by the Minister. I am taking “dependent contractor” to include individuals in the gig economy, but I was hoping for a little more in the explanatory notes. I would be grateful if he could write to me, or point me in the right direction, to help me understand a little better the issues facing dependent contractors. I do understand that the Government are consulting on employment status, and that there has certainly been a lot of controversy over the employment status of employees in the gig economy. Could the Minister inform the House what progress is being made on this?
The third provision was to lower the percentage requirement for a valid employee request for the employer to negotiate an agreement on informing and consulting employees, from 10% to 2% of the total. In his remarks, the Minister said that it was important to consult. I agree, but can he give a little bit of context on this, please? I am not sure if this is a very minor issue or, potentially, a big one. Could he give any examples of what employees might need to be informed and consulted on which they are not at present? The 2004 regulations, which originally imposed this application, related to employers with at least 50 employees. I presume that the same threshold number of employees would apply to this amendment. Can the Minister confirm this?
In conclusion, although the TUC felt that many more protections and issues should have been covered in these SIs, I think there is some good stuff in here. There is always a balance to be drawn between all the partners in any enterprise. More can always be done, and, as the economy develops, more will be needed, but I believe we are at least headed in the right direction.
Baroness Gardner of Parkes (Con)
My Lords, I raised the issue of care agencies earlier, regarding carers who do one hour in one place, one hour in the next and so on, all of them potentially quite far apart. There was a court decision, at a very high level, that they must be paid for their time travelling between places. I have followed this up, and have been told that, in general, they are not being paid. It is local authorities that pay for carers, but they do not seem to be paying them for this, which is very wrong, as there has been a court decision. Where in these regulations will this be covered? It seems highly relevant. I have had a great deal to do with the people who are not getting this money; when they point it out, their companies say they have no intention whatever of paying it. This is wrong since there has been a trial case. I hope the Minister can tell me where it will be covered in these regulations.
Lord Monks (Lab)
My Lords, the noble Baroness, Lady Gardner, raises an important point. I look forward to the Government’s response to her very pertinent question.
I give a qualified welcome to these regulations. They certainly aim to alleviate, or eliminate, some weaknesses in British employment law. I particularly draw attention to the proposed end to the so-called Swedish derogation in the agency workers’ directive. This has been a long-standing loophole, allowing employers not to provide equal pay to agency workers if the workers agree to a lower rate of pay when the agency cannot find them work. I am usually an admirer of the Swedish labour market, but I wish we had not taken this import from what is normally a very advanced country on employment rights.
Agency working is now a major feature of the British labour market and is being abused in some cases. I do not want to overstate the case—there are plenty of areas where it works well—but European law designed to regulate this area has been built up over a period. We used to refer to agency workers, and temporary workers in general, as atypical workers. We do not use that term any more, because now agency working is typical; in many parts of the country, it is the main offering. It is a rather insecure method of working, a method which I do not think too many people like. Some it suits, but many it does not. The EU certainly sought to bring atypical workers’ conditions in line with those of regularly employed people, and for them to receive equal treatment. That was a long-standing theme of European employment legislation. It is important that unscrupulous employers do not use agency working to undercut the terms and conditions of regularly employed workers.
The Swedish derogation is one weakness—I repeat that I welcome the action that the Government have taken on it—but one other loophole remains, which these regulations do not cover. An agency worker must work for 12 weeks before they become entitled to pay equal to that of a directly employed worker. There are many agency workers whose assignments never reach 12 weeks, and some employers who make sure they never do by rolling them on to a new assignment and a new contract. I ask the Government to re-examine this weakness in the regulations.
Baroness Donaghy (Lab)
My Lords, I will be very brief. I want to raise three points. The Minister mentioned in his opening remarks that this was the most significant set of changes in employment relations in 20 years. I am quite happy for him to exercise that kind of poetic licence but there will be something really worth celebrating on Monday, because that is the 20th anniversary of the introduction of the statutory national minimum wage. To compare these regulations with that sort of development is, as I say, poetic licence but let us be generous on the last day of the week.
My second point is that when I worked at ACAS, which is of course now quite a long time ago, the helpline used to receive calls which were mainly from employees but also from employers. They showed a very different picture in the real world from what regulations and the law said. I still think that the situation has deteriorated, if anything, simply because—as my noble friend Lord Monks said, and I agreed with his every word—it is sometimes a very different picture on the ground and people are grateful for the small mercies they get. We need to remind ourselves that any change in regulation has to be monitored and any fines implemented. The picture of a whole generation of younger people with very little expectation of a permanent contract, an occupational pension or real maternity leave rights—given the extent to which women are sacked because they apply for it, even though we know that is illegal—is such that if the Government mean business, they will have to take seriously how they promote the existing law and ensure that it is enforced.
That brings me on to my point about employment tribunals and fines. One of the biggest problems was that the employers did not pay the fines, so it is all very well increasing the amount but it would be useful to know from the Minister what the situation is now. What is the proportion of employers who refuse to pay the awards made by the tribunals?
Finally, I accept that a very good step forward has been made regarding written statements, which was one of the biggest issues on the ACAS helpline. People were not being given their statements or, as my noble friend Lord Monks said, they were fed in dribs and drabs so that they would not have a complete picture. For example, an important reference to their rights would consist of, “Please look up the employer’s website”. That is an extremely important move and it would be useful if we could monitor what improvements are made as a direct result of this statutory instrument.
Baroness Drake (Lab)
My Lords, I too welcome the strengthening of workers’ rights contained in these regulations as a work in progress that begins to address—to use the Government’s words in their own Good Work Plan—the fact that,
“some businesses have transferred too much business risk to the individual, sometimes at the detriment of their financial security and personal wellbeing”.
These regulations, however, are introduced in the context of concerns about the consequences of the UK’s departure from the European Union, when workers will no longer have access to the enforcement mechanisms and decisions that they currently enjoy. Nor will they benefit from future decisions of the Court of Justice of the European Union or from ensuring that UK workers will not fall behind in the development of rights in the EU.
Yes, these regulations will increase the maximum penalty from £5,000 to £20,000 where there has been an aggravated breach of a worker’s employee rights, to act as both punishment and deterrent for poor employer behaviour, although that penalty is capped at 50% of any compensation award. But enhanced rights, as captured in these regulations, will be of limited value if workers do not have access to justice when they are breached. If workers cannot enforce their rights, they are rendered meaningless.
We saw a staggering fall of 70% in the number claims brought to employment tribunals when fees were introduced and a disproportionate impact of that fell on women, particularly low-paid and pregnant women. The Government have not ruled out the reintroduction of fees, observing only that there will be a consultation exercise if they are reintroduced. UNISON’s legal challenge to their original introduction resulted in the Supreme Court ruling that the Government had acted unlawfully. Reintroducing fees would undermine again the reforms set out in these regulations. Can the Minister update us on the Government’s current intentions with regard to tribunal fees?
The Government recognised the scale of non-compliance with basic employment rights in their own Statement on the Good Work Plan, when they referred to the Government considering,
“the case for creating a new single labour market enforcement agency”.—[Official Report, Commons, 17/12/18; col. 573.]
Again, can the Minister update us as to the current state of the Government’s thinking on such an agency?
These regulations, while welcome, are not sufficient to tackle the insecurity that many workers face through less job security, the decline in the quality of the employment contract and volatility of earnings. The Government frequently refer to the headline increase in the numbers in employment, but refer less to the changing pattern of employment growth underlying that headline—for example, the distinction between employee and non-employee workers, with the latter missing out on key employment protections applying to employees. Workers who are non-employees are entitled only to a lower tier of employment rights which excludes protection against unfair dismissal, entitlement to statutory redundancy pay or minimum periods of notice on dismissal. They have far less security.
The Labour Force Survey, which the impact assessment relies on to reference atypical work, does not explicitly collect data on the issue of employee and non-employee workers. The Government admit in the impact assessment that they have not established robust figures for the number of workers with the less secure status of non-employee worker.
We have also seen an increase in self-employment, particularly lower-paid self- employment, which now accounts for more than 15% of the labour force, and a rise in the number of zero-hours contracts and other characteristics of the gig economy. Only a minority of the net new jobs created over the recent three-month period measured—November to January—were more traditional, full-time jobs; the others included mostly part-time jobs and full and part-time self-employment.
More than 60% of private sector workers in the UK now work for SMEs, with some 12 million working for small employers. A recent report from the Resolution Foundation revealed the extent of volatility of earnings experienced by workers in today’s world, impacting both low and middle-income earners and challenging the assumption of the steady monthly wage. Two in five workers experience persistent volatility, with significant changes in monthly pay at least six times a year. Of course, extending the right to a written statement of terms and conditions of employment to all workers is very welcome, but those statements will not be sufficient to address the transfer of too much business risk to the individual, to their detriment, when the underlying rights and security remain weak. Much more needs to be done to adapt to the realities of a changing UK labour market.
Lord McNicol of West Kilbride (Lab)
My Lords, I thank the Minister for his introduction to these SIs. Many of the points that I intended to make have already been made by the noble Baronesses, Lady Burt and Lady Gardner, and my noble friends Lady Donaghy, Lady Drake and Lord Monks. The House will be pleased to hear that I shall therefore not repeat everything that has been said as well as the many questions that have been asked. However, there are a couple of issues that I want to highlight and reinforce, and a couple of questions I want to ask.
The greatest concern on this side of the House is that these regulations do not do justice to the, admittedly limited, Taylor report. When first published, my honourable friends in the other place warned that its recommendations did not go far enough, yet it seems that the Government are failing to meet even those basic suggestions.
There is also the issue of the considerable delay. After years of consultation and press releases, what has eventually been published amounts only to some minor tweaks and limited changes to employment laws. Ultimately, this is only further evidence of the Government’s failure to address the growing inequality in the quality of work, and increasing insecurity and low pay, across the UK. It will soon be three years since the review was first commissioned. Before I move on to the specific instruments at hand, can the Minister confirm that all 53 of its recommendations will finally be implemented by that milestone?
The crux of the Employment Rights (Miscellaneous Amendments) Regulations 2019 is to ensure that workers, rather than employees, are given a written statement of certain information relating to their position. The fact that a written statement will be given is welcome, but it is disappointing that that information is contained in separate negatives. Why has it been decided that this information would not be in this instrument? It is also questionable what a statement will achieve without the necessary routes to challenge the information given in the document. Regarding that, what exact mechanisms will exist for workers to challenge the information given in the statements, if they had understood the particulars to be different?
My noble friend Lord Monks has already touched on information and consultation. I support his points on that.
The Agency Workers (Amendment) Regulations 2019 seek to amend the loophole in the regulations which has meant that agency workers employed on permanent contracts with recruitment agencies can miss out on the right to equal pay, in return for a promise of pay when the agency cannot find them work. As the House has heard, these are known as payments between assignment contracts, or Swedish derogation contracts. The removal of the Swedish derogation is welcomed by this side of the House. The TUC has previously found that, as a result of this loophole, workers have been earning up to £4 an hour less than directly employed staff, even though they may carry out exactly the same work. Unfortunately, the changes will not come into force until 6 April 2020. Why will workers have to wait another year before they receive equal pay?
As a result of these regulations, there will be a significant burden on the EAS to enforce the changes. Can the Minister confirm that the inspectorate will be fully equipped to ensure that all businesses which exploit agency workers will be taken to task?
As my noble friend Lord Monks said, there is also the issue of other loopholes in the legislation, which could lead to the original purpose of the regulations being undermined. Have the Government considered fully removing the 12-week qualifying period, as that would help remove one of them?
Finally, I come to the conduct of employment agencies regulations. In a similar vein to the other regulations, this SI sets out new provisions in the conduct regulations, meaning that agency workers will be entitled to further key information about their assignments. It ensures that employment agencies provide agency workers with a key information document before signing the terms of employment. Any attempt to address issues of pay confusion are, and will be, welcomed, but it is unclear whether this new document will be in the most appropriate format. Will guidance be given to businesses on how the document should be formatted? In common with the other regulations debated today, it is important that provisions of enforcement have been considered. Unless enforcement is properly resourced, even the limited proposals announced will amount to very little. How does the Minister envisage enforcement taking place?
In conclusion, the limited regulations debated today are welcome and have qualified support, as my noble friend Lord Monks said. The issues that have been raised show that the problems lie largely with the fact that they are too timid. If the Government were serious about improving the lives of workers, they would be implementing a far more transformative set of policies rather than these tweaks, especially in the light of the recent prime ministerial statement attempting to woo the trade unions and Labour MPs to support her deal on Brexit. Are her offers of strengthening workers’ rights now gone, with her threat to resign? If not, how do the Prime Minister’s interventions fit with today’s SIs?
Lord Henley
My Lords, I thank all noble Lords who have spoken for their generally fairly positive response to the regulations. I will start by correcting myself, and trying to assist the noble Baroness, Lady Donaghy, who accused me of poetic licence in describing these as the most significant change in 20 years. I must make clear that I was not saying that these regulations were, in themselves, the most significant change; it was our Good Work Plan that was. I offer a small correction to her and say 19 years and 360 days, to allow her her 20th anniversary of the minimum wage, which the coalition Government and this one have continued. I think all parties agree that the national minimum wage, and the national living wage introduced by the Conservative Government, have made a great difference. The Taylor report was commissioned by this Government, and my right honourable friend came up with the Good Work Plan after it. The noble Baroness will be familiar with it; she will have gone through all the recommendations and noticed the large number for which the response is “Accept, accept, accept”, or “We will consult”, or “We will do this or that”. We have a good record and I will amend the 20 years to 19 years and 360 days. That obviously makes her happy.
It is important to remember that these are just one small part of that package. The Good Work Plan sets out a very ambitious programme of work to do, some of which will require primary legislation, some no legislation at all, and some secondary legislation of this sort. We are committed to bringing forward further legislation. The noble Baroness, Lady Drake, and others will obviously have to wait until we get that. We will continue in that vein.
The noble Baroness, Lady Drake, expressed her concern that we were going to fall behind Europe. As I have made clear on other occasions—she knows my views—we are well ahead of European provisions in many areas. One has to look only at paternity pay, which was introduced by this Government, and at where we are on maternity pay. I could go on, but will not because we are debating only these three sets of regulations at the moment. There is a proud tradition, in all parts of the House, of getting workers’ rights right. We regularly surpass UK standards and are leading the way internationally in tackling challenges to modernise the labour market, at a time when it is, necessarily, changing because technology and the way we work change.