It was a complete surprise to most people when, at the beginning of last week, George Osborne announced to the Conservative party conference, a plan to introduce a new kind of employee, one to be known as an ‘employee-owner’. To encourage employers to recruit, they will be able to bring in workers on the basis that they agree to sign away various employment rights, including the right to claim unfair dismissal, a redundancy payment, or a request for flexible working.
For a woman wanting to come back to work before the end of her maternity leave, she may be required to give 16, and not eight weeks’ notice in order to do so. In return ‘employee-owners’ may be given between £2,000 and £50,000 ‘free’ shares, exempt from capital gains tax, in a non-listed private company, with the right to sell (effectively) to the other owners if the employment relationship comes to an end.
The scheme is supposed to be ‘voluntary’, although in a recession it is hard to see how many employees will not feel pressured into accepting these terms, unless they have a viable alternative. And what price can they expect to get for their shares, assuming they work for a company that (unlike two-thirds of start-ups) does not ultimately fail? The Department for Business, Innovation & Skills has spotted the problem and said in a footnote to its announcement last week that this is going to be the subject of consultation. It has in mind that on a dismissal it should be for a ‘reasonable price’. And who is to say what is reasonable? One suspects lawyers will be rubbing their hands.
The proposal comes after the announcement last month by Vince Cable (apparently) on behalf of the whole government, that the Adrian Beecroft idea for a no-fault dismissal compensation scheme (the so-called ‘fire-at-will’ proposal) has finally been consigned to the waste paper bin. Unfortunately for Cable, he appears to have been on a trip to west Africa at the time Osborne chose to make his announcement to the conference last week. It would be interesting to find out who arranged it.
But if the idea is bad for employees, is it good for employers? Not a bit of it. First, it is important to remember that employers are already protected against unfair dismissal claims for the first two years of an employment. Second, if employees are in dispute with their employers at the end of an employment relationship, they are not going to shrug their shoulders and walk away. They are going to look carefully for a remedy and that might be a discrimination claim or a whistleblowing claim to be (in their view) justly compensated. These claims are potentially unlimited (unlike unfair dismissal) and will not be signed away by the ‘employee owner’.
Third, the whole concept is based upon the premise that employers are not recruiting because of all our employment ‘red tape’, and that if only it was removed they would rush out to employ. Everyone accepts that employers are not currently recruiting at the rate we would like them to. But this is for a whole raft of reasons, of which employment law is at the bottom of a long, long list. And if the government keeps reinforcing the message on ‘red tape’, they should not be surprised if employers start to believe it. In fact, in this respect more recently the government’s language has begun to alter. For example, in a subtle change of course, not spotted by many, they now speak of a ‘perception’ of red tape. And while that is a move in the right direction, it is certainly not consistent with some of the ‘noise’ being generated around this latest proposal.
It seems that when Cable addresses this subject there is going to be yet another acrimonious discussion around the cabinet table. Employment lawyers often tell their employee clients that their most dangerous time will be when they are away from the office on holiday. Perhaps no one thought to advise Cable in similar terms.
Richard Fox is head of employment law at City firm Kingsley Napley and chair of the Employment Lawyers Association, but is writing purely in a personal capacity