The Work and Pensions and Business, Energy and Industrial Strategy Committees have published a joint report on “A framework for modern employment” (the Report) which considers how the employment framework should be amended to reflect the modern workplace.
The Report acknowledges that “the expansion of self-employment and business models built around flexible work on digital platforms promise positive opportunities for entrepreneurs, workers and consumers alike”, but also stresses that the changes can also create confusion as to the rights and entitlements for workers and can add to the potential for exploitation. The Committees have therefore looked at the recommendations made by Matthew Taylor in his Review of Modern Employment Practices (the Taylor Report). In addition, the Committees have produced a draft Bill that includes many of the recommendations of the Taylor Report. The main recommendations of the Committees are:
- Employment status. Entitlement to employment rights and protections is determined by employment status. The existing statutory definitions of employment status are set out in s230 Employment Rights Act 1996 (ERA). This is supplemented by case law. The Report follows the recommendations of the Taylor Report that greater legislative clarity is required and a first draft of the legislation defining the employment status is set out in the draft Bill, which reflects many of the points from case law. It also provides that the courts may also have regard to whether the worker was engaged in marketing their business before the contract came into existence, and whether any substitution clause is, in practice, capable of being freely exercised by the individual.
- Worker status by default. Another proposal in the draft Bill is implementing a worker by default model, which would then place the burden on an employer to prove that an individual is not a worker rather than placing the burden on the individual themselves. The Report states that this presumption of worker status would apply to companies who have a self-employed workforce above a certain size defined in secondary legislation.
- Non-guaranteed hours. The Taylor Report had recommended that a higher rate of the National Minimum Wage (NMW) or National Living Wage (NLW) should be introduced for hours that are not guaranteed as part of the contract (i.e for those employees on zero hours contracts). This Report suggests that the Government should work with the Low Pay Commission (LPC) to pilot such a pay premium arrangement. The LPC would also be consulted on the rate at which the premium should be set, the potential impact on marginal hours of employment and compliance.
- Continuous service. A range of employment rights are only available to employees who have completed a minimum level of continuous service. However, under the ERA, continuous service is broken by any one week in which a workers is not covered by a contract. For flexible workers this can be an issue. The Report therefore recommends that the Government extend the time allowed for a break in service from one week to one month.
- Employment tribunals. The current employment tribunal rules enable class actions where the cases are based on the same set of fact, meaning that their use is very limited. The Report considers that employees should be able to bring ‘class actions’ in the Employment Tribunal for certain types of claims, including claims for unlawful deduction of wages, worker status, and under the Working Time Regulations..
- Flexibility and the National Minimum Wage. Interestingly however, the committee has rejected Matthew Taylor’s suggestions on adapting the existing piece rate legislation to calculate pay for those workers on the gig economy. The Taylor Report noted that working time should be sensibly calculated and that “no individual should be expecting to be paid for all that the time that he or she has the app open (regardless of whether or not they are seeking work).” The Taylor Report suggested that the Government could adapt the piece rate legislation to enable platforms to compensate workers based on output. This would also include a requirement for certain conditions to be satisfied so that a platform worker could earn less than the NMW or NLW, including a requirement for the company to provide information to the worker about the level of work they could expect to earn at a given time. The Report however suggests that this proposal is overly complex and risks undermining the NMW/NLW by inviting workers to choose to work for a lower rate of pay.
- Written statement of terms and conditions. The requirement for employers to provide a written statement of terms and conditions should be extended to workers, as well as employees and should specify the individual’s status. The right to receive this statement should apply from day one and the statement should be provided within seven days of starting work.
The Report anticipates that there should be strong support across all parties for taking these reforms forward. It will be interesting to see whether any of these recommendations or the wording in the draft bill is taken forward.