Taylor-made ideas for overhauling employment law

13 July, 2017

The Taylor Review “Good Work” report published this week included a wide range of proposals for reforming employment law, in support of the expressed ambition that all work in the UK economy should be “fair and decent” with realistic scope for development and fulfilment.

Worker status

The report recommends keeping the distinction between employees and workers, although suggests renaming workers as ‘dependent contractors’.  The intermediate ‘worker’ status is viewed as helpful in applying basic protections to less formal working relationships.  It suggests that the legal definitions of employees and workers should be revised to reflect case-law principles (particularly the key elements of mutual obligation, personal service and control), with a greater emphasis on the aspect of control in the definition of worker status going beyond just supervision of day-to-day activities.

The report crucially proposes removing the requirement for workers to have an obligation to perform work personally, such that an individual would not forego worker status just because their contract includes genuine substitution powers.  This approach would, it is predicted, result in fewer employers operating bogus self-employment arrangements and more individuals enjoying at least basic employment law protections.

Individuals would be able to bring a Tribunal claim to determine their employment status without having to pay a fee, and the burden would be on the alleged employer to prove that the individual is not an employee or worker.

Workers would be treated as employed for the purposes of tax status, so establishing clear responsibilities for the payment of National Insurance contributions.

Sick leave and sick pay

The report proposes a number of reforms to the current system of statutory sick pay (SSP).  The right to SSP as a basic level of income replacement would be extended to all workers and employees, with the current earnings threshold removed.  The right to SSP would be a right from day 1, however would be accrued in line with length of service in the same way as the right to paid holiday.  Therefore employers would not be required to give the full 28 weeks of SSP to individuals who have only worked for them for a short time.

The report also states that more needed to be done to support employees returning to work after sick leave, and advocates introducing a statutory right to return to the same or a similar job after a period of prolonged ill health.

Written statement of terms

Under the report’s proposals, written statements of terms would be required to be given to workers as well as to employees on day one of their engagement.  Currently this statement can be provided up to two months after the start of employment.  The written statement of terms would include a description of statutory rights and thus the individual would have greater clarity about their entitlement to basic employment protections.

There would also be a stand-alone right to compensation if the employer fails to give a written statement, without this right being contingent on the employee successfully pursuing some other claim.

Zero hours contracts

The report stops short of making any recommendations for the prohibition of zero hours contracts, however it suggests (subject to further advice from the Low Pay Commission) that a higher rate of the National Minimum Wage could apply to hours which are not guaranteed by the employer.

It also proposes that workers on zero hour contracts should have the right to request guaranteed hours after 12 months, with the average weekly hours worked in the previous year as the starting assumption for any new contract.

Another proposal is that larger employers should have duties to make public information on their workforce structure including information about agency services and zero hours contracts.

Holiday pay

The report proposes increasing the reference period for calculating holiday pay, where pay is variable, from 12 weeks to 52 weeks.  This proposal reflects the ECJ cases of Lock and Williams that the reference period should be properly representative and reflect normal working.  This proposal is seen as recognising the seasonal fluctuations in much casual and zero hours work.

The report also suggests that individuals should be allowed the choice of rolled-up holiday pay, although the ECJ has ruled this practice as unlawful under the Working Time Directive.  For example a person paid at the national living wage of £7.50 per hour could opt to receive a rolled-up rate of £8.41 per hour in lieu of paid holiday leave.

The report proposes giving HMRC enforcement powers in relation to holiday pay in the same way that HMRC can enforce non-compliance with the National Minimum Wage.

Information and Consultation of Employees (“ICE”)

Since the ICE regulations were introduced in 2004, organisations with at least 50 employees are required to put in place arrangements for informing and consulting with workplace representatives about issues and changes in the business, where at least 10% of the employees request an information and consultation agreement.  The process can also be initiated by the employer.  In practice this legislation is often overlooked.  In 2011 only 14% of qualifying employers had an on-site consultative forum or works council.

The report recommends that the threshold for requesting ICE arrangements should be reduced to just 2% of the workforce.  It also proposes that workers should have the same ICE entitlements as employees.  These recommendations reflect the view of effective “worker voice” and participative consultation as integral to good employment relations.

Tribunal fees

Other than its proposal about claims to decide employment status, the report does not include any recommendations for the abolition or modification of the current scheme of Employment Tribunal fees.  This omission has been criticised in some quarters on the premise that workplace rights are only as good as their ability to be enforced.

Conclusion

The outcomes of the Taylor Review are due to shape the direction of employment law reform in the coming years, although it is difficult to predict which of its recommendations will be taken forward into legislative change and which will disappear into the long grass.  Clearly views will differ across the political spectrum whether the report itself was “good work” or fell short of expectations.