Analysing Labour’s ‘Plan to Make Work Pay’
With the likelihood of a Labour government increasing with every poll released and with the recent YouGov poll projecting a Labour 194-seat majority, it’s time to consider Labour’s employment law proposals in a little more detail. Of course, polls do not automatically equate to election results and things can change. However, with the polls as they currently stand, it would be remiss for us not to consider what the employment law landscape would look like under a Labour Government.
We’ve based our analysis on Labour’s ‘New Deal for Working People’ and in a series of articles we’ll examine the most important proposals and try to understand what these proposals would look like in practice. As you would imagine, being a policy document, the detail on the proposals is light, but there is enough for us to glimpse into and comment on the potential future of employment law.
Background
As background, Labour have promised legislation within the first 100 days of entering government, with measures including, employment rights from day one, a single enforcement body, banning zero hours contracts as well as banning the practice of ‘fire and rehire’. In today’s article, though, we consider one of Labour’s policy goals that is unlikely to make their first legislative draft but one with potentially the most significant impact, namely creating a single status of worker.
A Single Status of Worker
Currently, for employment law purposes, there are two categories of status which garner employment rights. There are employees, who receive the full suite of employment rights, and workers who have a more limited entitlement to some employment rights. If an individual is not an employee or a worker, then aside from some limited circumstances, they are not entitled to any employment rights.
Labour’s position is that the current three-tier status system of employee, worker & self-employed is too complex for businesses and results in individuals being denied employment rights due to ‘bogus self-employment’. To address this, Labour has put forward a proposal to move towards a single status of worker, who would, we assume, be entitled to all employment rights. In other words, a system whereby an individual is either a worker or ‘genuinely’ self-employed, the latter having no employment rights.
So, what could the new single status of worker look like?
As stated in Labour’s policy document, they plan to consult on this measure in detail before drafting legislation. Bearing this caveat in mind, we can, though, look at some of the options available to Labour for the definition of the new single status of worker:
- Keep the current definition of worker
The easiest option, from an expediency and administrative perspective, would be to stick with the current definition of worker, and have it subsume the position currently held by the status of employee in employment legislation.
The pros of this option include the relative ease with which this approach could be applied practically. Extending rights that formerly only applied to employees has been done before; albeit in a limited way – for example, when the right to a written statement of employment particulars, under s. 1 ERA 1996, was extended to workers. Furthermore, there is already a significant body of case law, relating to the definition of a “worker.” Therefore, individuals should have a good idea of whether they are a worker (under the wider definition) or not.
However, this could have an unforeseen impact on the labour market. Extending the definition of worker, to encompass employees, potentially expands a set of legal rights to a larger group of individuals. i.e., rights of unfair dismissal, TUPE rights, rights to maternity leave, etc. That, potentially, would be likely to increase the incidental costs on businesses, particularly SMEs, at a time when there is lacklustre economic growth. These potential effects would be exacerbated if those extended rights were available to workers from day one as well.
However, using the existing definition of worker may well not go far enough for Labour in terms of the individuals it captures and would leave the ‘self-employed’ status containing a number of individuals that Labour would like to extend employment rights to. Furthermore, while there is an extensive body of case law, concepts like ‘personal service’ which are intrinsic to the current worker definition, remain confusing to some, subject to case law changes and therefore perhaps do not provide the clarity Labour are seeking.
- Focus on control
Another possibility, and perhaps the most likely, is that a Labour government seeks to adopt a definition closer to that of the ‘Dependent Contractor’ status that Matthew Taylor posited in his ‘Good Work’ review of 2017. The review was largely welcomed, and the Government of the time (remember Theresa May) committed to bringing in the majority of its recommendations.
While the Taylor Review recommended maintaining the three-tier status currently in employment, unlike Labour’s proposal, it was radical in that it proposed renaming workers as Dependent Contractors and giving the concept of control far more weight in determining whether individuals fell within the said status. The rationale for this, was to ensure that those individuals that enjoyed some flexibility but were in many ways dependent on and subject to the control of one employer, had some legal protection.
In terms of the likelihood of Labour adopting this approach, or at least something close to it, it is a reasonable possibility. It would align with Labour’s desire to bring employment rights to individuals that are dependent on an ‘employer’ but without the full security that comes with employment. Furthermore, regardless of how it is perceived in case law, control has always been the element most readily associated with ‘employment’, even though the days of ‘master/ servant’ relationships were supposed to be in the past!
Additionally, a focus on control in a new definition of worker would also be consistent with HMRC’s approach to amending s. 44 ITEPA where control was brought front and centre, and personal service was removed from the definition.
- A completely new definition
Alternatively, Labour could, after the promised consultation, adopt something entirely novel as a definition for worker status. Time will have to tell on this. Introducing a new definition for worker status with all the uncertainty that would follow, is possible but perhaps unlikely in the early years of a new government.
- A completely new approach
If a completely new definition of worker seems unlikely at this stage, then a completely new approach is even less likely but, here comes the curveball.
Phrases like ‘genuinely’ self-employed or ‘bogus’ self-employment are often used as a critic of the current system enabling accusations that it results in large numbers of individuals unfairly being denied access to employment protections. Where you stand on how far employment protections should reach, aside from a technical perspective, in the employment jurisdiction, there is no legal definition (case law or otherwise) for ‘self-employed’. In general, you are an employee and qualify for all employment rights, a worker and qualify for some or you are neither. This lack of a formal definition for self-employed conflicts with the fact that from the outside the focus is often on whether individuals are ‘genuinely’ self-employed or not.
So, could Labour come at this from a different perspective and define ‘self-employment’ providing everyone with a clear legal statement on what ‘genuinely’ self-employed means? This approach is unlikely and would also fail to achieve the clarity that Labour is seeking to bring to employment rights (certainly in the short term). It would also add extra complexity to the already conflicted tax and employment jurisdictions. However, on the other hand it would at least harmonise the criticisms from the outside on employment protections with the legal definitions!
Final Thoughts
Labour’s stated aims, when exploring a single status of worker, are to, firstly, increase the pool of people eligible for employment rights and, secondly, to reduce complexity, for both the individuals and the employers, all the while ensuring that only the ‘genuinely’ self-employed remain as such. In terms of the first aim, this is achievable and will likely depend on which way Labour are swayed as they continue to be pulled between the competing wishes of businesses on the one hand and trade unions and workers on the other. The second aim, in reality, is far more ambitious and harder to achieve. Complexity is generally inherent when dealing with legal definitions, especially those connected to employment status. Furthermore, while the tax and employment law jurisdictions remain distinct, for status purposes, complexity will continue to ensue.
Disclaimer: Chartergate Legal Services Ltd has drafted this update to provide you with a general overview of the relevant law and developments. This update is provided as a general overview and should be taken as such. It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.
