UK: The Biggest Shake Up of Employment Law in a Generation?

by Littler
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On July 11, 2017, the UK government published the Review of Modern Working Practices.  The report was issued by Matthew Taylor, chief executive of the Royal Society of Arts and a former policy chief to Tony Blair. Current Prime Minister Theresa May commissioned the "Taylor Review" to consider how the UK labour market can address challenges of modern working practices.

The Review follows a number of high-profile employment tribunal decisions involving the gig economy and Teresa May’s assertion that workers will benefit from more – not less – employment rights following Brexit.

The key recommendations are:

  • All workers should be subject to PAYE/payroll tax withholdings and national insurance/social security payments.
  • Employees should have a choice to be paid “rolled up” holiday pay for the first time (i.e., receiving a 12.07% premium payment above their normal weekly earnings in exchange for separate holiday pay).
  • The UK’s “worker” test should be re-cast and broadened with a view to including all gig economy workers (for whom the status is currently unclear and subject to legal challenge).
  • The burden of proof should be reversed so there is a presumption of worker/employment status unless the “employer” proves otherwise.

In addition to the headline points, other recommendations include:

  • The existing three-tiered classification of employee, worker and self-employed individual should remain.
  • A statutory test for employment status should be introduced.  While the “worker” category should be broadened, the employment test should be based on existing case law, meaning the “employee” category should not be broadened.
  • The “worker” category should be renamed “dependent contractors” (we continue to use the term “worker” in this note).
  • Special national minimum wage rules should be created for those working through technology platforms, which will be based upon 120% of the average hourly rate.  Platforms should be required to notify individuals of the average hourly rate at the beginning of the pay period and upon request.
  • “Workers” should be entitled to a statement of employment terms on the first day of a job (similar to the requirements applicable to employees).
  • The Government should use artificial intelligence to develop an online employment status indicator tool to give greater certainty.
  • Agency workers should have the right to request a direct employment contract after 12 months. The hirer should be required to consider requests in a reasonable manner.
  • "Zero hours” workers with 12 months' service should have the right to request a contract with guaranteed hours reflecting those hours actually worked.
  • The threshold for employee consultation arrangements should be reduced.  Consultation arrangements will be required if 2% of the workforce request it (reduced from 10% of workforce and with “workers” being included for the first time).
  • Large employers should be required to disclose details of their employment practices.
  • All agency workers should be entitled to equality of terms with permanent staff irrespective of whether they are entitled to pay between assignments (i.e., repeal of the so-called “Swedish derogation”, which currently allows a 12-week grace period before the equal remuneration requirement applies).
  • HMRC (the UK’s tax authority) should assume responsibility for holiday pay compliance.
  • A judgment on employment status should be exempt from employment tribunal fees.   On the broader controversial issue of employment tribunal fees, the Report says “With regret we recognise that it is unlikely that the Government will move to abolish these higher fees but we do ask that the Government continues to keep the level of the fees under review.”
  • Enforcement of tribunal awards and sanctions for employers that have previously lost similar cases should be improved.

The Taylor Review merely makes recommendations, so none of the recommendations will necessarily make it into law.

We understand that the Review had broad support within the government and the expectation before the election was that the findings are likely to be broadly adopted. Theresa May has spoken repeatedly about workers’ rights and has clearly identified herself with the Taylor Review - choosing to speak at its launch. The fate of his Review will ultimately depend on the duration of her premiership and the response of the opposition.

To place the above in context, we provide the following summary of the main rights that currently attach to each category of worker/employee/self-employed person.

Summary of Worker Rights

 

Employee

Worker

Self-Employed

Unfair Dismissal

Yes

No

No

National Minimum Wage

Yes

Yes

No

Holiday

Yes

Yes

No

Statutory Sick Pay

Yes

No

No

Maternity, Paternity, Adoption, Shared Parental Leave and Pay

Yes

No, Except 14 Weeks Maternity Leave

No

Discrimination Protection

Yes

Yes

Yes

Whistleblowing Protection

Yes

Yes

No

Employee Taxes and National Insurance / Social Security

Yes

Depends

No, National Insurance is Paid at Reduced Rate

(Law stated as of July 11, 2017)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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