The following Statement was made in the House of Commons on Tuesday 8 June.
“With permission, Madam Deputy Speaker, I will make a Statement on the latest steps the Government are taking to protect workers’ rights, as we look to build back better from Covid-19. That includes our plans to create a single body responsible for state enforcement of employment rights, modernise the regulator of trade unions and address so-called fire and rehire negotiation tactics.
This Government have been absolutely clear that we will do whatever we need to do to protect and enhance workers’ rights in this most challenging year. In April, for example, we increased pay for around 2 million workers, and the Coronavirus Job Retention Scheme has already helped to pay the wages of 11.5 million people across the country. We will continue to champion our flexible and dynamic labour market and to maintain the UK’s excellent record on workers’ rights.
Today, the Advisory, Conciliation and Arbitration Service has published its report on fire and rehire. I know that this is a matter of great interest to employers and workers up and down the country, and I encourage all Members to read ACAS’s report. This Government have always been clear that we do not accept fire and rehire as a negotiation tactic. Workers up and down the country have worked flat out during the pandemic, carrying out essential work to keep our economy going. It is crucial that employers take their responsibilities seriously and act appropriately when it comes to discussions about changing employment contracts.
I have been deeply concerned by reports over the last year that some employers may be turning too soon to firing and rehiring employees and are using this as a tactic in negotiations to put undue pressure on workers to rush into accepting new, and often worse, terms and conditions or face losing their jobs. It is unacceptable and, frankly, immoral to use the threat of fire and rehire as a negotiating tactic to force through changes to people’s employment contracts, or for employers to turn to dismissal and rehiring too hastily, rather than continue to engage in meaningful negotiations. We are not talking about something abstract here—this is about people’s lives and livelihoods.
At a time when many workers have shown great loyalty and commitment to carry out essential work and keep our economy going in the face of a pandemic, I expect employers to continue to treat their staff fairly and with respect. That is why my department asked ACAS to gather evidence on the practice, so that we could evaluate whether further action is needed at this time. I would like to thank ACAS for its work, which has provided my department with a balanced account, based on insights from employer bodies, trade unions and professional bodies.
The report outlines the circumstances in which fire and rehire can be and has been used, and offers views from a range of contributors on whether and how to tackle the issue. There are different views on whether the practice can ever be justified. For some of the organisations consulted by ACAS, it is never acceptable. For others, in its most legitimate form fire and rehire is a route for employers to avoid redundancies and business failures, after negotiations have been exhausted. However, the report finds agreement that fire and rehire can and should be used only in limited, legally prescribed circumstances. Some thought that this should be further reinforced in law, whereas a number of participants cautioned against new legislation, warning that it may have unintended consequences: it may lead to more redundancies.
This is clearly a complex area. Many of the people ACAS spoke to welcomed non-legislative interventions, such as guidance for businesses, the vast majority of which, I recognise, want to do the right thing. That is why I have now asked ACAS to produce better, more comprehensive, clearer guidance to help employers explore all the options before considering fire and rehire, and encourage good employment relations practice.
Some of ACAS’s participants raised concerns that fire and rehire is used by employers to break continuity of service to limit the ability of workers and employees to access their rights, as certain employment rights require periods of continuous employment. The Government have already committed to legislate to extend the time required to break a period of continuous service. That will make it easier for employees to access their rights and also deter businesses from using fire and rehire to engineer breaks in employment in order to deny individuals important employment rights.
Despite the unprecedented government support during the pandemic, this has also been an exceptionally difficult time for businesses. Many businesses have shown an incredible ability to adapt and innovate, and have played a key role in tackling the pandemic. Even so, some employers may need to make difficult decisions, in order to avoid redundancies and to ensure their business can survive and succeed. In those circumstances, employers and employees should always aim to reach negotiated agreements about terms and conditions of employment and exhaust every avenue to achieve this. But the reality is that sometimes, regrettably, negotiations will fail. In these circumstances, employers may need to dismiss staff, and potentially re-engage them. Therefore, any potential reform must be balanced against the possibility of the remedy creating a worse problem than the one it is intended to address: we must be careful not to introduce measures that inadvertently run the risk of businesses going bust, and thus more people losing their jobs.
However, having carefully considered the report, the Government want to send a clear message to employers: even if your business is facing acute challenges, all other options to save jobs and a business should be exhausted before considering the dismissal and re-engagement of staff. I believe that we can achieve this working in partnership with businesses and workers, without heavy-handed legislation.
This House should be left in no doubt that this Government will always continue to stand behind workers and stamp out unscrupulous practices where they occur. That is why today I am also confirming the next steps we will be taking to modernise our labour market enforcement regime. In 2019, the Government published a consultation that set out the benefits of bringing together our three existing labour market enforcement bodies into a single organisation. Today, the Government have published their formal response to that consultation. This new single enforcement body will help the country build back better by taking a smarter approach to the enforcement of employment law. It will make it easier for the vast majority of responsible businesses to comply with the rules. It will ensure a level playing field, through effective enforcement against those who cut corners and exploit workers. Today’s government response sets out the overarching details of the new body: responsibility for tackling modern slavery, enforcing the minimum and living wages and protecting agency workers will be brought under one roof, creating a comprehensive new authority.
The new body will go further than current enforcement, enforcing holiday pay for the most vulnerable workers, as well as statutory sick pay. It will regulate umbrella companies, enforce financial penalties against organisations that do not meet requirements to publish modern slavery statements, and run the unpaid tribunal awards penalty scheme.
Protecting workers requires support for businesses, too, so that employers understand how to comply with the rules. This is in addition to effective, visible enforcement action to deter irresponsible employers. The body will have a spectrum of powers and responsibilities to achieve that, including the ability to issue guidance and compliance notices and levy civil penalties for certain offences, and the power to prosecute the most exploitative employers.
Protecting workers is not just about support for business and effective state enforcement. Trade unions have an essential role in the workplace; I know from my regular close engagement with unions how important their work is. Today, the Government have published our plans to modernise the regulation of trade unions, bringing the certification officer in line with other regulators. These reforms will implement technical measures passed by Parliament via the Trade Union Act 2016, providing reassurance to union members and the wider public.
We are confirming three changes related to the certification officer today. First, we are extending the certification officer’s powers to enable her to proactively investigate when a third party raises concerns that a union or employers’ association may have breached its statutory duties; we will also expand the powers available to her to conduct those investigations. Secondly, we will give the certification officer the power to apply financial penalties to unions or employers’ associations where the most serious breaches are found to have occurred. The sanctions will be targeted only at the small minority of unions that breach their statutory requirements and obligations. Thirdly, we will move the certification to a levy funding model, which will bring the certification officer in line with other regulators such as the Pensions Regulator and the Financial Reporting Council. Proper and fair regulation will ensure that all trade unions and employers’ associations conduct themselves to the highest standards.
The United Kingdom has one of the best records on workers’ rights in the world, going further than the EU in many areas, and we are determined to build on that record. By modernising our labour market enforcement regime, protecting workers more extensively, supporting businesses to comply with the law and preventing them from being undercut by a minority of irresponsible employers, we can continue to be a high-wage, high-employment economy that works for everyone as we build back better.”
My Lords, workers face a real crisis of insecurity and a lack of protections, but the proposals announced in this Statement will do little to turn around the record of inaction from the Government. Whether it is dropping the employment Bill, allowing 2 million people to be paid below the minimum wage or indeed leaving the post of Director of Labour Market Enforcement vacant for months, the Government’s rhetoric on workers’ rights simply fails to match reality. We see this again today.
There is no plan for when the legislation for the single enforcement body will come to Parliament, despite three-quarters of respondents in the consultation stating that the current enforcement system is ineffective. As the Government said that the new body will
“significantly improve the Government’s ability to protect vulnerable workers and ensure they receive their employment rights”,
can the Minister confirm that the Bill is a priority and will at least be published this year?
There is no new money to merge three existing bodies into a single organisation with a significantly expanded remit. The consultation response states that the current funding will be “used more effectively”, but more funding for its new responsibilities, such as
“enforcement of holiday pay for vulnerable workers”,
is yet to be considered. So can the Minister explain how effective the body will be across all its responsibilities without additional support?
The most glaring omission in this plan is that many of the most exploitative employment practices will remain perfectly legal. Bogus self-employment denies millions of workers in the gig economy basic protections and rights. On fire and rehire, the Minister said:
“This Government have always been clear that we do not accept fire and rehire as a negotiation tactic.”
But the weak promise of further guidance only kicks the can further down the road.
Almost three million people—one in 10—have been subjected to fire and rehire since last March. This will not stop until this morally wrong and economically illiterate practice is outlawed. So will the Minister commit to giving workers full employment rights to ensure that everybody has dignity and security at work?
The Statement also reconfirms that the Government are determined to hobble trade unions, which are the best mechanism for protecting workers’ rights. The proposal to give the certification officer powers to commission investigations and fine trade unions even when there has been no complaint from a member—funded by a levy on trade unions—is an attack on working people and seeks to solve a problem that simply does not exist. Why are the Government not following President Biden’s proposals—he is here in the country—to empower trade unions to rejuvenate the American economy and raise living standards? If Ministers really want to do whatever they can to protect and enhance workers’ rights, they need to stop overpromising and start delivering for working people.
My Lords, I thank the Minister for repeating the Statement. This is a relatively small, long-overdue step towards upholding workers’ rights, and to that extent it is welcome. However, it comes with no parliamentary time allocated for legislation and no new funding.
There was a glaring hole in the Queen’s Speech. After a pandemic that has made life extremely hard for many people, it is disappointing that the Government are yet to announce an employment Bill to strengthen workers’ rights and to make the rules fit for modern working practice.
A single enforcement agency is welcome but, unless we look again at people’s working conditions and the rules in place, this agency—when it eventually emerges—will not be able to deliver the change that people need in their lives. To do that, it needs proper funding. For example, the International Labour Organization recommends that Governments have one inspector per 10,000 workers. In the UK the current funding is for 0.4, so can the Minister tell your Lordships’ House if and when the new agency will be funded to deliver ILO levels of inspection?
When an illusionist is practising their art, the key skill is misdirection. In this case, our attention is in danger of being distracted by decent and welcome words condemning the practice of fire and rehire. Meanwhile, the Government have conflated employment abuses with measures to crack down on trade unions. While there may be some issues in a small number of unions, they are not the cause of the problems faced by so many families. It is sharp employment practice that is taking UK families to the edge, not trade unions, so my next question to the Minister is: how do the Parliamentary Under-Secretary’s words in this Statement help people who right now are being fired and taken back on downgraded working contracts? This Statement condemns the practice, but now the Government have asked for a further report on the subject. This is kicking it into the long grass. When will the Government actually do something to help workers?
More broadly, in October 2016 the Government commissioned Matthew Taylor to carry out an independent review of the UK employment framework. The Taylor Review of Modern Working Practices found that the labour market was changing due to the emergence of new business models and different forms of gig economy working; the Minister knows about this very well. It proposed many important measures to help support people’s jobs in those sectors. These measures received a broad welcome, and indeed warm words flowed from the Benches opposite. In their last manifesto, the Conservatives undertook to implement many of the report’s findings—yet it still gathers dust. Mr Taylor became interim Director of Labour Market Enforcement in August 2019, but then in January this year he announced that he was leaving and the role was not refilled. So have the Government abandoned their pledge to implement the Taylor review?
With or without Taylor, things need to change—and quickly. When will we see an end to the toxic practice of delivery workers being required to drive illegally so that they can meet their quotas? When will we see an end to people being forced to skip bathroom breaks? When will nearly two in five workers get more than a week’s notice of their working hours? When will gig economy workers get the wages they deserve—for example, the 20% higher minimum wage for people on zero-hours contracts? Because this is the real world of work that is facing many people right now.
Speaking in the Commons, the Parliamentary Under-Secretary said:
“Nothing is off the table.”—[Official Report, Commons, 8/6/21; col. 849.]
Actually, for the poorest, most exploited workers there is nothing on the table. These are words. When will we see some action?
I thank the noble Lords, Lord Lennie and Lord Fox, for their comments. To pick up the final question from the noble Lord, Lord Fox, about the Taylor review and workers’ rights, we have made good progress in bringing forward legislation to protect workers’ rights. We have closed the loophole that sees agency workers employed on cheaper rates than permanent workers, we have quadrupled the maximum fine for employers who treat their workers badly and we have given all workers the right to receive a statement of their rights from day one.
We are committed to protecting and enhancing workers’ rights. The noble Lord pointed to the Uber Supreme Court judgment. It was clear that those who qualify as workers under existing employment law are entitled to rights such as the minimum wage, and all gig economy businesses should ensure that they are fulfilling their legal responsibilities.
On the employment Bill, which both noble Lords asked me about, I can tell them, particularly the noble Lord, Lord Lennie, who said that the Bill had been dropped, that he is not correct. We are committed to bringing forward an employment Bill to protect and enhance workers’ rights as we build back better. We want a high-productivity, high-wage economy that delivers on our ambition, and we want to see workers protected.
With regard to firing and rehiring, the Government have set out a clear and proportionate course of action to address fire and rehire. It is a complex area of law so we have asked ACAS to produce better, more comprehensive and clearer guidance to help employers explore all the options before considering fire and rehire and to encourage good employment relations practice. We are looking closely at the ACAS report. While we are not legislating at this stage, we will continue to monitor the evidence on the use and prevalence of fire and rehire.
Both noble Lords asked me about the funding for the single enforcement body. As with all government funding, that will be considered during the spending review later this year. On the questions about the Certification Officer, it is important to point out that the principle of this in the legislation was passed and agreed in the Trade Union Act 2016. This is merely the enactment of those provisions, and it does no more than give powers to the Certification Officer similar to those that many other regulators already possess in these sorts of areas.
My Lords, we come to the 20 minutes allocated to Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.
My Lords, I welcome the improved guidance that the Government have asked ACAS to produce on fire and rehire, because it is a balanced position in the impact on employers. However, the Minister will know that without strong enforcement powers a regulator, however much of a super regulator it might be, cannot do very much. He also knows that some of the most egregious abuses are happening within supply chains, not in faraway countries of which we know little but here in this country, in places such as Leicester. So when the Government tell us they are still considering options on a garment trade adjudicator, will they recognise how disappointing that is? Like other noble Lords who have gone before me, I want to press the Minister to get moving on setting up this body, giving it strong powers and then going so far as to ban goods in shops that are supplied by people who break the law.
The noble Baroness makes some good points. I agree with her that some of the appalling treatment in places such as Leicester that was highlighted in press articles is unacceptable. Our response to the consultation sets out the high-level proposals for the single enforcement body. We will be developing more detailed plans for the body’s operation and structure in partnership with the existing enforcement bodies. The noble Baroness will be aware that creating the new body will require primary legislation, and timing will depend on the legislative timescale. However, we are committed to ensuring that it has adequate funding for enforcement; we will do that through the spending review, as I mentioned.
The Government have a good record on protecting employment rights enforcement. We have more than doubled the budget for minimum wage enforcement and compliance, which is now over £27 million per year.
My Lords, a number of noble Lords have mentioned the warm words in this Statement. The one-third of active trade unionists who vote Conservative will welcome those warm words from this Government.
I have two specific questions. First, when will the proposed changes in the power of the Certification Officer be made public and put in the public domain for us to discuss? Secondly, does the Minister agree that it is important to balance flexibility with effective protection for workers?
I thank my noble friend for his comments. The legislation will be introduced shortly, and it is important that we balance flexibility with protections. My noble friend feels very strongly about this issue. It is a dynamic, flexible economy that makes the UK such a fantastic place to work and gives us such relatively low levels of unemployment compared to many other European countries. We are the envy of the world in terms of not only our protection for workers’ rights but our flexible economy. The steps that we are taking on enforcement will help the country to build back better by taking a smarter approach to the enforcement of employment law, and will make it easier for the vast majority of responsible businesses to comply with the rules.
My Lords, the Minister in the other place said yesterday:
“It is unacceptable and, frankly, immoral to use the threat of fire and rehire as a negotiating tactic to force through changes to people’s employment contracts”,—[Official Report, Commons, 8/6/21; col. 841.]
yet in only seven months of last year just short of 3 million workers were subjected to it. There is nothing in the ACAS report to justify not legislating. Can the Minister not accept that these millions of workers merit legislation, not just guidance, to protect them?
This is a complicated area of employment law. We want to give employers flexibility to manage their business without producing undue effects on workers. Sometimes, sadly, it is necessary for employers to introduce changes; the alternative is that they go bust and no one has a job at all. We want to get this right and we want to introduce proportionate responses, but it is a complex area and we will be looking closely at it.
My Lords, has the Minister had the opportunity to consider the relevant employment law that made it possible for a tribunal judge, as reported in yesterday’s media, to rule in favour of an employee who was dismissed by his employer for dishonesty in respect of sick leave and sick pay? Of course, the specifics of the case are not something on which it would be proper for the Minister to comment and neither is it a matter for this House. However, I would be grateful for the Government’s view on the impact of a ruling such as this one on upstanding employees as well as good employers, especially small business owners.
I thank my noble friend for her question. She is correct that it would not be right for me to comment on the specifics of the case without being in possession of all the facts, but it is vital that employees do not abuse their sick leave and pay. If they do, the employer may be able to dismiss them on the grounds of misconduct.
There is a vital balance to be struck to protect employers and employees. As the recent judgment shows, employers must act reasonably in all circumstances, follow the right procedures and conduct appropriate investigations. They should look to the ACAS code of practice on disciplinary and grievance procedures and may want to refer to the guidance on dismissal.
My Lords, for three bodies to become one, legislation will indeed be required, but there is none. Neither is there any commitment to adequate funding, as my noble friend Lord Lennie said. Specifically, why are the HSE and local authority health and safety inspectors not included in the plan for a single enforcement body? Why is there no commitment to increase the existing pathetically low number of inspectors and, regrettably, the equally pathetically low number of notices and prosecutions?
The noble Baroness is right: we are not proposing that the HSE become part of the single enforcement body. The HSE is a large, established organisation. Given its size and scope of its functions, and the focus on high-harm incidents, incorporating it into a new body could lead to a shift in priorities away from other employment rights, but we will ensure that the HSE remains a key partner for the single enforcement body. The noble Baroness should be aware that since the start of the pandemic, HSE has carried out more than 243,000 Covid-19 spot checks and responded to more than 22,000 concerns. There are currently around 1,300 workplace spot-checks carried out per day, targeted on those industries whose workers are most likely to be vulnerable to transmission risks.
My Lords, can the Minister confirm that the Government’s response to the recent court cases on the gig economy—on issues that concerned the minimum wage, sick pay and holiday pay entitlements—are that no further changes to employment law are considered necessary?
We are considering all these matters. We keep these matters under review. We are committed to protecting and enhancing workers’ rights. As I said earlier, the Uber Supreme Court judgment was clear that those who qualify as workers, under existing employment law, are entitled to rights such as the minimum wage. All gig economy businesses should ensure that they are fulfilling their legal responsibilities. I think it is important to point out that the gig economy offers individuals flexibility and it can provide opportunities for those who may not be able to work in more conventional ways. Indeed, Government research has indicated that people mostly value the flexibility that it offers—56% of respondents said that. An individual’s entitlement to rights at work is determined by their employment status, whether employee, worker or self-employed, and gig economy workers can be classed under any of these, depending on their particular employment relationship.
My Lords, we are witnessing the rampant spread of precarious contracts, exemplified by fire and rehire. Has the aphorism that we are moving to a position where instead of a proletariat we have in its place a precariat. In the absence of legislation, where is the levelling-up to come from? In addition to stronger enforcement, which is indeed vital, the trade unions’ role itself is vital—more vital than ever. The Minister said he does not want too much legislation, but will he welcome the fact that we now have a growth in trade union membership for the fourth year running? It is hardly the time for proposing, in the words of Frances O’Grady of the TUC, to tie them up in red tape. Rather, should we not be facilitating the negotiation of pro-rata rights for workers’ representatives, this being the norm in the most successful European economies?
I bow to the noble Lord’s superior knowledge of the proletariat and the precariat, or whatever words he used. I do not have strong feelings about any potential growth in trade union membership. People are free to join a trade union if they wish. I would merely point out to the noble Lord that, of course, only a small minority of employees choose to join trade unions.
My Lords, I start by telling the Minister that the claim in the Statement that the UK has one of the best records on workers’ rights is patent nonsense. We know it and, as a reasonable man, I am sure he knows it too. We also know, not only from the Taylor review, that one thing that could be done to improve the regulation of workers’ rights is to eliminate the scope for employers to exploit regulatory arbitrage. Will the Minister therefore give a commitment to reduce the number of categories of workers with different entitlement to statutory rights?
I am afraid I just do not agree with noble Lord. We have an excellent record of workers’ rights in this country. Of course, the best workers’ right of all is the right to a job. We have a better record on employment and employment creation than most of the rest of Europe.
My Lords, can the Minister outline what discussions have taken place with the devolved Administrations to ensure that all workers throughout the UK have full employment rights? Will the recruitment practice of fire and rehire be outlawed once and for all?
I can indeed tell the noble Baroness that Ministers and officials from both my department and from the Department for Work and Pensions, hold regular meetings with counterparts in the devolved Administrations to discuss various employment-related issues, including regular reviews of the legislative framework.
The Statement upholding employment rights gives and takes away at the same time. Its praise for ACAS is right. I remind the House that I am a former chair and in receipt of an ACAS pension. As the Minister knows, the Certification Officer is part of the ACAS family, and the proposals in the Trade Union Act 2016 were of such concern that my party raised it at Report. They are not technical measures, as the Statement claims, and third-party claims are an invitation to anti-union newspapers to make mischief. Will the Minister be willing to discuss these points, particularly about the future of the Certification Office, to ensure that this really is about upholding employment rights, not about feeding red meat to his less enlightened colleagues?
This is not about feeding red meat to anybody. Some people may be vegetarian and not enjoy red meat. The noble Baroness may not like it, but the principle of the reforms was introduced in the Trade Union Act. We debated it at the time in this House, and the principle was passed then. This is merely the enactment of those provisions, which have previously been agreed.
My Lords, I draw on figures from The UK’s Enforcement Gap 2020 report by Unchecked. These are figures for the fall in staffing numbers between 2009 and 2019: the Equality and Human Rights Commission, 61%; the Employment Agency Standards Inspectorate, 57%; the Health and Safety Executive, 34%; Her Majesty’s Revenue and Customs, 16%. That has rightly been described as a collapse of enforcement. We are told we have to wait until the spending review—apparently what was exposed in Leicester is not a sufficient emergency to require emergency action from the Government—but will the Minister assure me that the department will be pushing in that spending review to at least get funding levels and staff members back to 2009 levels?
As I said earlier, of course we will provide the appropriate funding in the spending review. I do not know where the noble Baroness has got her figures from, but we have more than doubled the budget for minimum wage enforcement and compliance. It is now more than £27 million annually, up from £13.2 million in 2015-16. More than 400 HMRC staff are involved in the enforcement of the minimum wage. In 2021, HMRC concluded more than 2,700 minimum wage investigations and returned more than £16.7 million in arrears to more than 155,000 workers.
My Lords, in 2020, 347,000 workers did not receive the statutory minimum wage. That has been a persistent problem. The financial penalties have not had the desired effect and clearly need to be strengthened. Will the Minister introduce legislation stating that the penalty for each violation should be not less than the total remuneration of the directors of the offending business? If not, why not?
This builds on my answer to the previous question. Since 2015, the Government have ordered employers to repay more than £100 million to a million workers. Over the course of 2020-21, HMRC’s Promote team facilitated nearly 800,000 employers and workers to seek further information on the minimum wage. So there is considerable enforcement going on in this space, and I just do not recognise the picture painted by the noble Lord and the previous speaker.
My Lords, all speakers have now spoken. The next business is due to start in less than a minute, so I suggest that instead of adjourning the House, we all just sit quietly and compose other thoughts until 2.20 pm.