Moved by
Lord Hendy Portrait Lord Hendy
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That the Bill be now read a second time.

Lord Hendy Portrait Lord Hendy (Lab)
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My Lords, Covid-19 has highlighted many of the failings in the law of the workplace in the UK. Working people have found that their workplace rights have not secured their jobs, their incomes or their health. One particular injustice is that many hundreds of thousands have only very few of the rights that Parliament has legislated that employees must have, such as rights to the minimum wage and to unfair dismissal protection. This is because “armies of employers’ lawyers”, to use a phrase used by the Court of Appeal in one case, have constructed contracts that seek to categorise these workers as something other than employees. The proper interpretation of such contracts has provided meat and drink to lawyers and judges for decades. The Bill is intended if not to remove then at least to narrow the grounds of contention by unifying the classification of workers into a single status, subject to an important exception.

Let me deal with a preliminary point on my use of the term “worker”. There is a definition in the Bill but, for the purposes of my speech today, I use the term loosely and generically: I mean a person who works for a living. This is close to the generic meaning in international law as used by the International Labour Organization, the Council of Europe and the European Court of Human Rights. The current problem is that there are subspecies of worker and this gives rise to the injustice that the Bill is intended to cure. Each subcategory—I identify six—is entitled to a different set of statutory rights. That means that employers, understandably, have an incentive to downgrade the status of staff so as to diminish the rights that they enjoy and hence the costs inherent in the provision of those rights. By creating a single status, this possibility is removed. In consequence, the effect of the Bill would be to give entitlement to all statutory employment rights to all workers from day one of their engagement, although I would gladly accept an amendment to remove or reduce waiting time for rights to be effective, such as for unfair dismissal. The Bill does not affect rights, such as to holidays, that increase over time.

I have said that there is an important exception in the Bill. This is my first category. Those who are genuinely self-employed, in business on their own account, with their own clients or customers, will be unaffected by the Bill. These are, by and large, the professionals. Examples are the owner-driver of the London taxicab or Hackney carriage—“mushers”, as they are known in London—the self-employed painter and decorator, the jobbing electrician, the gigging musician, the novelist, the barrister, of course, and many more. Their status and their rights will be untouched by the Bill. Some of these professionals have established a personal service company, a PSC, through which they find it convenient to work. This is a limited company in which the professional or a member of the family is the major shareholder and director. The professional is the sole employee and is content that his or her rights as an employee are exercisable only against their own company. Such genuine PSCs, my second category, will also be exempt.

The Bill is intended to stamp out abuse of these first two categories. It will therefore regulate my third category, bogus self-employed workers. These are workers whose arrangements are dressed up to look as if they are self-employed, but who are in reality employees. Unless they challenge their status in successful litigation, they are not entitled even to the national minimum wage or paid holidays—not even some health and safety protections. Bogus self-employment is rampant in the construction industry but by no means confined to it. Drawing the line between bogus and genuine self-employment is not easy, but the courts will be aided by the Bill placing the burden of proof on the employer who claims that the relationship is genuine.

The Bill will also regulate my fourth category: those forced into PSCs. This is where a worker is told by the real employer that if she wants to work, she must set up a personal service company to make a commercial contract with the real employer to supply her services and to make a contract of employment with herself. This contrivance is often arranged by the employer. On the face of it, the worker has full employment rights, but only against her own personal service company; the real employer is insulated against any responsibility for her rights. Such abusive PSCs are common in parcel delivery, construction and many other sectors. I will not dwell on the technicalities, but the Bill endeavours to draw a clear line between the genuine and the abusive PSC.

The fifth category are the so-called limb (b) workers. The term derives from the definitions in Section 296(1)(b) of the Trade Union and Labour Relations (Consolidation) Act 1992 and Section 230(3)(b) of the Employment Rights Act 1996. These are workers who have a contract but not a contract of employment. They are a subspecies of the self-employed. They get only some of the rights that employees have—for example, the national minimum wage and paid holidays. They do not get protection against unfair dismissal, parental leave and so on. This is the status that the Uber drivers achieved in their Supreme Court victory earlier this year. Limb (b) workers are common in food delivery, taxi driving and other service industries.

Finally, there are the employees. They are entitled to all the statutory rights that Parliament has provided, so long as they have been employed for long enough.

The Bill takes up issues identified in the Matthew Taylor report some years ago, but by proposing a single status it goes beyond Matthew Taylor’s recommendations. I wanted to give your Lordships a sense of the scale of the problem, but the statistics are limited. What can be said is that at present there are about 28 million employees, a figure that includes the single employees of up to some 700,000 personal service companies. In addition, there are just under 5 million self-employed, but the statistics do not distinguish between those who are limb (b) workers, those who are bogus self-employed and those who are genuinely self-employed. What is clear is that the number of those in PSCs and self-employment is proportionately greater and growing faster than elsewhere in Europe.

Though some opportunistic employers will not welcome the Bill, it would in fact benefit employers generally by preventing greedy or uncaring employers from undercutting good employers who are prepared to confer full employment rights on their staff. It would also stop the worst employers free-riding on the rest of us by using categories for their staff that avoid payment of national insurance, tax and pension contributions. The Bill is obviously intended to benefit workers and I am pleased to say that it is supported by the Trades Union Congress. It will, if passed, extend employment rights to hundreds of thousands who do not currently enjoy them. It will protect those who already have such entitlement from the danger of being degraded, downgraded to or undercut by workers with fewer rights.

I have one last point. Employers often try to persuade workers of the benefits of a lesser status on the basis that it provides flexibility for the worker, but this is a false argument, since legal status has nothing whatever to do with whatever flexibility employers confer on their workers. That flexibility can just as easily be enjoyed by employees if the employer is prepared to concede it. If the Minister supports the Prime Minister’s avowed levelling-up objective, here is a measure that he can and should support. I beg to move.

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Lord Hendy Portrait Lord Hendy (Lab)
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My Lords, I am grateful for and humbled by the support around the House for the Second Reading of the Bill. I am grateful to all speakers who have contributed, particularly the noble Lord, Lord Moylan. Were it not for him, the heroic defence of the current situation by the noble Lord, Lord Callanan, would have stood alone.

It will be understood that I mean no disrespect by not summarising the elegant arguments put forward both for and against the Second Reading of the Bill, but I will take up just a couple of points. First of all, I would like to say how grateful I am for the support of the noble Lord, Lord Blencathra, and his reference to caring capitalism. Personally, I prefer caring socialism, but caring capitalism appears to be an achievable aspiration that is appropriate to aim for with this Bill.

I am grateful to the noble Baroness, Lady Greengross, for pointing out the particular vulnerability of young workers and older workers, and to the right reverend Prelate the Bishop of St Albans for expressing Christian support for the Bill and drawing to our attention the benefit to the state in increased tax and national insurance that would follow from the adoption of the Bill—a point reiterated by the noble Lord, Lord Balfe.

The noble Lord, Lord Holmes, raised a point about unpaid interns. I looked again at the Long Title of my Bill, and unfortunately I do think I would be able to persuade the authorities to include an amendment that dealt with unpaid interns—but I completely agree with him that unpaid internships should not be permissible except as a certified part of a formal educational course.

I loved the reference by the noble Baroness, Lady Wheatcroft, to the current law as a braying ass. That is a phrase I shall remember and cherish. She reminded us of the continuous struggle over centuries for the dignity and rights of workers to be protected by statute. This Bill is simply the latest attempt to achieve that.

The noble Lord, Lord Moylan, made an important point about the status of directors. Currently, directors may or may not be employees. Indeed, under this Bill they may or may not be workers; it will depend on the arrangements. I would be happy to accept an amendment to clarify the status of directors, but I am not prepared to accept Uber drivers having their contracts rewritten to make them all directors of some fictional Uber company. The noble Lord, Lord Moylan, pointed to the messy complexity of real life, but the noble and learned Lord, Lord Etherton, for whose judicial support I am grateful, pointed out that the messy complexity is in fact created by the state of the law and the exploitation of it by employers’ lawyers.

I indicated that I was not going to deal with those who kindly supported this Second Reading, but I must just mention my noble friend Lord Davies of Brixton’s intervention drawing attention to the way the Bill would protect pensions. The noble Lord, Lord Balfe, also drew attention to the fact that the protection of workers ought to be a cross-party issue; I agree with him on that.

The opposition to the Bill from the noble Lord, Lord Callanan, really boils down to an assertion that the current state of the law provides the right balance, which no other speaker apart from the noble Lord, Lord Moylan, accepts. He says that is based on the preservation of flexibility and the fundamental protections that currently exist for workers. So far as flexibility is concerned, I am afraid I cannot understand why it can be said that flexibility depends on the absence or restriction of employment rights. Flexibility is perfectly possible with full employment status and the rights that go with it. There are thousands, tens of thousands, hundreds of thousands—if not millions—of workers on flexible contracts who are still employees, so that argument simply does not hold water.

As for fundamental protections, I regard one of the protections of workers to be a right to complain if they are, or believe themselves to be, unfairly dismissed. I have not heard a justification for delivery riders such as those employed by Deliveroo, or the Uber drivers the noble and learned Lord, Lord Etherton, spoke about, being denied the right to make a complaint to a judicial authority that their engagement was unfairly terminated.

I did a case in the Court of Appeal a few years ago concerning a lap dancer, Quashie v I forget the name of the nightclub that engaged her. She worked three nights a week, week in, week out, over a period of years. An allegation was made that she was in possession of drugs; her engagement was instantly stopped. We tried to bring a claim for unfair dismissal but were met with the argument that she was not an employee but an independent contractor. We lost in the employment tribunal and won in the Employment Appeal Tribunal. Unfortunately, we lost in the Court of Appeal because of the complexity of the current law, as explained by the noble and learned Lord, Lord Etherton. I turn back to the fundamental point: why should she not have the right to say, “This allegation was false and unjustified, and my termination is unfair”?

In conclusion, I thank all noble Lords who have contributed to the debate.

Bill read a second time and committed to a Committee of the Whole House.