You can now view the Government response to the ‘Implementing Employee Owner Status’ consultation.
You will note paragraph 3 which begins: “Whilst a very small number of responses welcomed the scheme and suggested they would be interested in taking it up…..”
It is no surprise that the scheme is proceeding. The consultation was with regard to the implementation of the scheme rather than whether it was a sensible idea in the first place.
At paragraph 5 of the summary, concerns over the ability of employers to force employees to sign away rights is dealt with simply by asserting that the scheme is voluntary and that guidance will be issued. A number of points arise.
1. As noted in the recent ELA annual lecture, the employment relationship is different to a commercial contract. An employment contract is a document which creates a legal relationship in which one party is subject to the lawful orders of the other party. In most cases, the bargaining position of the two parties is far from equal. It is clear from experience that simply attaching the label of ‘voluntary’ does not make it so.
2. Specific protections will need to be considered, for example the need for an employee to seek advice prior to signing away their employment rights. A counter point to this is that an employee will not accrue their right to claim unfair dismissal for a period of two years in any event, so the effect is minimised. Of course, the key point is that many people may not have their right to claim unfair dismissal at the forefront of their mind, it only becomes pertinent when they realise that they may need to be relying upon it. Paragraph 4.3 of the consultation reply deals with this simply by indicating that ‘guidance’ will be issued.
3. How will a ‘voluntary’ change in the employment relationship sit with variation clauses? The extent to which variation clauses are effective is debatable at present. If an employee consents to a variation clause in their contract, then they are expressly agreeing to that term. What if that clause provides the right to vary to a different employment relationship in the future? Does the fact that the employee consented to the clause mean that they fall within the meaning of ‘voluntary’?
4. The Supreme Court decision in Autoclenz v Belcher [2011] UKSC 41 highlights the difficultes that exist in determining the true relationship between the parties, notwithstanding express terms that exist. It appears to be the intention that ‘Employee Owner’ is a fourth category of employment status. It may the intention of the government that in the event of a dispute over status, the mere fact of share ownership is determinative of the point. Whilst understandable, it would be a departure from the appoach in respect of all other forms of employment status, where Tribunals frequently look at a range of factors in determining the correct status. It is correct to say that mutuality of obligation is a determinative point in terms of employee status, but in making findings of fact in respect of mutuality, the Tribunal will be taking into account a much wider range of evidence than the simple case of share ownership = employee owner.
5. In any event, the concluding point is that the whole discussion feeds into the wider point about how employment law is viewed by the government. Rights are bad, when you reduce them, things are better. This narrative should be challenged at every opportunity.
My hope is that this concept is limited to those businesses and individuals that are genuinely benefiting from its arrangements. This is likely to be a very limited group. If the scheme becomes of wider application, is is likely to result in increased rather than reduced legalism.
