The government’s proposals for employee shareholder contracts will only add to red tape for small businesses and create confusion about workers’ rights, the Law Society has warned.

The plans, contained in the Growth and Infrastructure Bill, are currently before the House of Lords having been passed by the Commons.

The government wants to boost engagement and productivity through shareholder contracts and reduce the chances of disputes ending up with an employment tribunal.

But the Law Society this week joined a growing list of critics opposed to the idea of workers ‘trading in’ rights for shares.

In a letter to the Lords, Society president Lucy Scott-Moncrieff said there would be ‘substantial confusion’ for employers on the termination of an employee’s contract.

She said: ‘There is potential for costly satellite litigation on a range of complex issues which are likely to arise at the outset and upon on termination of an employee’s contract.

‘For example, if an employer buys back forfeit shares when an employee leaves, satellite litigation could ensue on the question of market value. This runs counter to the government’s stated aim of supporting small and medium-sized enterprises through simpler regulation.’

She added that restrictions on an employee shareholder’s access to maternity rights and flexible working were ‘entirely incongruent’ with the government’s stated commitment to family-friendly policies.

‘Employers may not be aware of the interaction between these forfeited rights and those rights governed by domestic legislation which will still apply to them.

‘Employers would have to take these into consideration in order to avoid allegations of indirect sex discrimination.’

Scott-Moncrieff added that peers should ask whether the government has undertaken an adequate assessment of the likely costs and consequences, having given interested parties three weeks to respond to the original consultation.

On the unveiling of the bill, Nick Boles, planning minister, said it was important to remove red tape on British business.