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Government publishes proposed reforms of workers' rights

Employment Law & HR

The Government has set its sights on reform of workers’ rights, announcing new legislation targeting gig economy workers, those on zero hours contracts and agency workers. The “Good Work Plan” published on 17th December sets out a number of proposed reforms, a number of which are expected to be introduced in legislation imminently.

The Good Work Plan implements most of the recommendations of the Taylor Review into modern working practices which was published in July 2017. Billed as “the biggest package of workplace reforms for over twenty years”, the proposals will have significant impact on some workplace practices, particularly those relating to agency workers. However, some of the proposed reforms have already come under fire from Unions and employee rights bodies for failing to provide meaningful protection for those on zero hours contracts. Legislation to be announced by the Government will:

  • Repeal the “Swedish derogation”: under the Agency Workers Regulations 2010, agency workers have the right to broadly equal employment terms with directly-hired workers after a 12-week qualification period. However, this rule does not apply where an agency worker enters into a permanent contract of employment with an agency under which they continue to be paid a minimum amount between assignments. This is known as the Swedish derogation as it was negotiated by the Swedish government when the EU legislation on which the AWR are based was being introduced. This change will have a major impact on agencies which routinely operate with Swedish derogation contracts.
  • Require a day-one written statement of workers’ rights: currently only employees are entitled to a written statement of terms and conditions under UK law. The proposals extend this right to workers and will require employers to include information about rights to sick leave and pay and eligibility for family friendly leave and pay.
  • Give workers the right to request a more stable contract: this proposal is designed to target those on zero-hours contracts. While the Government recognises that the flexibility of zero-hours contacts can be useful for some, the widespread use of these types of contract has increasingly come under fire in recent years. Unions and employee rights bodies have long argued that these contracts are detrimental to workers and are abused by employers. However, the proposals have been criticised as not going far enough to protect workers, with Frances O’Grady of the TUC saying: "The right to request guaranteed working hours is no right all… Zero-hours contract workers will have no more leverage than Oliver Twist."
  • Extend the time required to break continuous service: currently a break of a complete week ending on a Saturday is sufficient to break continuity of service. It is proposed that this will increase to four weeks. Length of service is an important factor in determining whether workers and employees qualify for certain rights, such as the right to claim unfair dismissal.
  • Increase Employment Tribunals fines: since 2003 an employer who has shown willful malice or negligence in the way they have dealt with employees or conducted an employment tribunal defence can face fines of up to £5,000. It is proposed that the maximum fine will increase to £20,000. The current fine system is discretionary and, in practice, rarely used by employment tribunals. However, the new proposals suggest that employment judges will now be obliged to consider sanctions, which could lead to a rise in fines being issued.
  • Increase holiday pay reference periods: currently when a variable hours worker requests holiday their employer must take an average of pay and hours over the previous 12 weeks to determine the correct rate of holiday pay. It is proposed that the reference period be increased to 52 weeks. While this is likely to provide greater certainty for employers and employees alike, it will require employers to be meticulous in ensuring that records of hours and pay are accurate.
  • Lower the threshold required for a request to set up Information and Consultation arrangements: The current rules apply to organisations with more than 50 employees and require employers to make formal arrangements to consult with employees in relation to workplace issues if they receive a valid request from 10% of eligible employees. It is proposed that this threshold will decrease substantially to 2% of the workforce.

The Good Work Plan sets out broad proposals for a number of other reforms to be introduced in due course. These include tackling the thorny issue of how to define employment status. A number of high-profile cases have been heard in recent years which cast doubt on the extent to which certain working arrangements can be labelled as having “worker” or “self employed”, both of which have limited rights compared with rights available to employees.

Other proposals also include a revamp of enforcement options for workers challenging underpayment of holiday pay, the National Minimum/Living Wage and possibly sick pay. In early 2019 the Government intends to unveil a new, single labour market enforcement agency to provide information to workers and support businesses to comply with the law. It is unclear to what extent this will impact on current enforcement options available in the employment tribunal and through HMRC.

The reforms will have an impact on all employers, but the current changes are likely to be of most significance to employment agencies. In addition to the proposals listed above, the Plan envisages that agencies will be compelled to provide more detailed information to workers about work offered to ensure that they are able to make informed choices about whether to accept it. That being said, the Good Work Plan suggests that the legislation being introduced now is only the starting point. It remains to be seen how far-reaching future reforms may be, particularly those involving employment status and enforcement of rights.

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