web viewintroduction. the trades union congress (tuc) comprises 58 affiliated unions with...

Flexible, effective and fair?

TUC response to BIS Red Tape Challenge paper on employment related regulations

1.1 IntroductionThe Trades Union Congress (TUC) comprises 58 affiliated unions with approximately 6 million members, who work in a wide range of services, industries and occupations across the UK, in organisations both large and small and in the public, private and voluntary sectors. The TUC welcomes the opportunity to respond to the questions set out in the BIS ‘Flexible, effective and fair’ paper but does not recognise the concerns set out in the paper or agree that the case for labour market reform has been made out. Rigorous concrete evidence has not been provided to demonstrate the need for reform. The TUC is concerned that the Government appears to be relying heavily on the website responses to the Red Tape Challenge. It is not sound policy to rely on hearsay. There is no way of verifying the accuracy of comments made on the website. Some responses are little more than polemic or rant and there is a question as to the extent to which workers – especially the most vulnerable workers who have the most to lose from a watering down of existing employment rights – are aware of this consultation or have access to the resources to respond through the medium of the website. The government cannot seriously claim that its Red Tape Challenge website captures the views of a representative sample of businesses or workers.The TUC is also concerned that very little time has been allowed for responding to this paper.

2.1 Executive summary The TUC does not recognise the claims made by some elements

of the business community (which appear to be endorsed by the government) about the ‘burden’ of existing labour market regulations. The fundamental question to ask is why regulation was necessary. If that need still exists, so does the need for protection.

The BIS paper does not provide robust evidence to support the claim that existing employment regulation acts as a barrier to employment growth. If businesses are not recruiting new staff currently, this has more to do with the state of the economy, and the outlook for growth. In fact the OECD and ONS evidence cited in the BIS paper demonstrates effectively that the UK labour market is already characterised by light-touch regulation and that existing regulation has not hampered employment growth.

While measures to stimulate employment growth are required, given the current levels of unemployment the TUC does not believe that labour market deregulation will have that effect. This is the wrong approach, is likely to have no discernable

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effect on employment growth and will not lead to the creation of sustainable long-term jobs.

The TUC endorses a vision of the labour market where both parties to the employment relationship are informed and empowered and are able to negotiate their relationship within a framework of fundamental protections. However, as this is not the case in many workplaces we do not agree that minimum intervention by the government is desirable at this stage. The government has an important role to play in establishing the legal framework for employment relationships and ensuring, through legislation and the work of its enforcement agencies, that fundamental workplace rights are upheld.

The TUC believes that there is still much to do to ensure that workers are informed and empowered in the employment relationship and is concerned that measures currently being considered by the Government will have the opposite effect, by removing rights altogether or making existing ones more difficult to enforce. Far from agreeing with the statement in paragraph 13 of the BIS paper that refers to a perception that businesses have no rights, all too often it is workers who have few rights.

The TUC Commission on Vulnerable Employment (CoVE) which reported in 2008 found that around two million workers in the UK were in vulnerable employment – precarious work that places people at risk of continuing poverty and injustice resulting from an imbalance of power in the employer – worker relationship. The Commission found that vulnerable workers had little knowledge of their existing rights and didn’t know where to get advice.


Government vision for the labour marketThe BIS paper sets out a vision of a labour market that is:‘ flexible , encouraging the creation of jobs by making it easy to get people into work and to stay in work’

While there is a genuine need to encourage job creation, particularly in the current economic climate, the TUC does not believe that the proposed deregulation of the labour market and weakening of employment protection will achieve this effect. The TUC believes that enabling people to stay in work is equally important. We wish to see the creation of sustainable, quality jobs that are here for the long-term rather than disposable jobs – here today and gone tomorrow. Unfortunately some of the Government’s current proposals are likely to have the latter effect, enabling employers to shed jobs as easily as create them. The current proposed extension of the qualifying period for unfair dismissal from one to two years is one such proposal.

‘effective , enabling employers to manage their staff productively,’

Nobody is saying that employers should not have the “right” to manage their staff effectively – indeed they have a responsibility to do so - but effective management requires staff to be treated fairly. The existing legal framework gives employers considerable freedom in how they organise their workforce and how they deal with conduct and capability issues for example. There is evidence that treating staff fairly boosts morale and productivity at work, through reducing absenteeism and turnover for example. If employees are treated badly at work and do not have effective employment rights to protect them, they will experience stress and low morale; those that can leave and find a better job elsewhere will do so (meaning potentially the loss of key skilled staff) and those that remain may experience stress resulting in ill-health and absence from work. Stress is, for the first time, the most common cause of long-term sickness absence, according to the 2011 CIPD / Simplyhealth Absence Management Survey. Unsurprisingly in the current economic climate, public sector respondents identify organisational change and restructuring as the number one cause of stress at work.

The CIPD quarterly Employment Outlook report for Summer 2011 found that: ‘job insecurity is playing on employees’ minds. There has been an increase in people saying they could lose their jobs,


particularly in the public sector, and only 1 in 20 public and voluntary sector employees think it would be easy to get a new job. There has also been a substantial rise in the proportion of people who are worried about the future.’

‘fair , with employers competing on a level playing field and workers provided with a strong foundation of employment protections.’

This notion of fairness is crucial to an effective labour market. The level playing field that employers compete on should not be the lowest common denominator one of minimal protection for workers, but if vital employment protections are weakened or removed, that is what will happen; the good employers will be undercut by the bad. While some employers may be able to resist this, others may not and may go to the wall or adopt the same unscrupulous tactics in order to compete. That is not the kind of labour market we want to see in the UK. The TUC welcomes the fact that the Government vision for the labour market says that workers should be provided with a strong foundation of employment protections and it is essential that any proposed reforms to emerge from the Red Tape Challenge do not undermine the existing framework of rights.

3.1 The current state of the UK labour marketThis section of the BIS paper acknowledges that the UK labour market is characterised by a ‘light-touch’ system of employment regulation and that the ‘UK framework is less onerous than most.’ The paper cites the findings of the Organisation for Economic Cooperation and Development (OECD) that the UK has one of the most lightly regulated labour markets amongst developed countries, only the US and Canada cited as having lighter overall regulation. This section of the BIS paper concludes: ‘Our system of employment regulation is an important element of the UK’s comparative advantage.’ Given this conclusion it is odd that the current Red Tape Challenge focuses so intently on perceived excessive burdens on employers.By international standards, the UK does not have a tightly regulated labour market. In the OECD’s index of labour market regulation, the UK is right down at the bottom of the table. Only the USA has a less regulated labour market:

Employment protection, 2008

Turkey 3.5Luxembourg 3.4Flexible, effective and fair? October 2011

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Mexico 3.2Spain 3.0France 2.9Portugal 2.9Greece 2.8Norway 2.7Slovenia 2.6Belgium 2.5Germany 2.4Italy 2.4Estonia 2.3Austria 2.2Chile 2.2Poland 2.2Sweden 2.2Netherlands 2.1OECD-Total 2.1Czech Rep 2.0Finland 2.0Hungary 1.9Korea 1.9Denmark 1.8Slovak Rep 1.8Iceland 1.6Switzerland 1.6Israel 1.5Japan 1.5Australia 1.4Ireland 1.3New Zealand 1.2Canada 1.1United Kingdom 1.1United States 0.7Source: OECD Employment data

It should be noted that Germany, which is weathering the current economic storms better than most of its fellow EU member states, including the UK, has a more tightly regulated labour market. Clearly labour market regulation is not hampering economic performance there. The TUC Touchstone pamphlet ‘The Red Tape Delusion: why deregulation won’t solve the jobs crisis’, (TUC, 2010) examined the relationship between the degree of labour market regulation and various aspects of economic performance and concluded that there is no evidence that moderate levels of labour market regulation impede economic performance and a good deal of evidence that some types of regulation can improve aspects of economic performance.The UK experience


http://www.oecd.org/document/22/0,3746,en_2649_39023495_43221014_1_1_1_1,00.html#epl

The TUC also notes that the graph on page 3 of the BIS paper entitled ‘UK employment by year’ shows the most turbulence in employment levels during the 1980s and early to mid 1990s. The period from the mid-1990s onwards, that saw the introduction of a number of important new employment rights such as the National Minimum Wage, Working Time Regulations, Part-time Work Regulations and Fixed-term Employees Regulations for example, was a period of sustained employment growth. If as some will argue, this is because economic conditions were favourable at that time, this works both ways; if employment growth has now stalled, this too reflects economic conditions that are affecting economies worldwide. When employers hesitate over taking on new staff, this is likely to reflect concerns about weakness in consumer demand, availability of finance, the prospects (or lack of them) for recovery and the wisdom of expanding in such a climate and not concerns about excessive regulation of the labour market.

4.15.1 Principles for reform of the labour market framework

Having stated that the UK labour market is characterised by ‘light-touch’ regulation and that the existing system of employment regulation is ‘an important element of the UK’s comparative advantage’, the BIS paper goes on to say that ‘there is more that we can do to encourage firms to take on staff.’ While measures to boost employment growth are required in the current economic climate with unemployment at a 17 year high, it must be recognised that the Government’s current economic policies and the effect of spending cuts are actually hampering growth. In paragraph 6 of the BIS paper the Government sets out its vision for the labour market ‘in which both employers and workers are informed and empowered, able to negotiate their relationship within a framework of fundamental protections, with minimal intervention by the Government.’

The TUC too wishes to see a labour market in which the parties to the employment relationship are informed and empowered, but the reality is that the two parties do not enter an employment contract as equals; workers have far less negotiating power, especially where they are working in sectors where union density is low and in organisations where trade unions are not recognised. In most cases the prospective employer and employee do not sit down as equal parties and thrash out the terms of an employment contract. The reality is that the employer dictates the terms and it is very much a case of ‘take it or leave it.’ Of course there will be some highly skilled and professional workers whose skills and expertise are in short supply and who may be able to negotiate terms, but these are Flexible, effective and fair? October 2011

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a small minority – especially in the current economic climate where on average, there are 5.6 applicants chasing every job vacancy. Given that the two parties to the employment relationship do not contract as equal partners, the framework of fundamental protections that are said to be part of the BIS vision are vital to redress the imbalance between employer and worker. It should be remembered that not all workers enjoy the status of “employee” and such workers have even fewer rights. The TUC Commission on Vulnerable Employment (CoVE), which reported in 2008, estimated that around two million workers in the UK were in vulnerable employment and the Commission’s final report contained case studies that provided graphic illustrations of what it means to be in vulnerable employment in the UK today.The TUC is concerned that far from ‘informing’ and ‘empowering’ some of the Government’s current proposals will have the opposite effect on workers, including increasing qualifying periods for unfair dismissal and introducing fees for taking a claim to an Employment Tribunal.Q1: How can we create the space for employers and their staff to manage their relationship effectively?

Paragraph 6 states that the Government believes that the best outcomes arise when employers are able to sit down and discuss issues direct with their staff, where process supports that conversation rather than stifling it.While the TUC agree that it is undoubtedly better for employers and workers to be able to resolve disputes amicably, informally and at an early stage, good employers are already doing this, in consultation with trade unions where they are present. Unfortunately, this does not happen in all workplaces. The existing laws on unfair dismissal and dispute resolution are there to protect workers where employers act in an arbitrary and draconian manner and refuse to discuss issues with workers. An employer who follows a fair process in tackling conduct, capability, reorganisation and redundancy issues for example, has nothing to fear from the law. The TUC believes that fair processes encourage employers and workers to resolve issues and do not stifle conversation. Removing the legal framework that underpins dispute resolution will undermine the resolution of issues at an early stage within the workplace. For example, doubling the qualifying period for claiming unfair dismissal from one to two years’ service removes the incentive for employers to act reasonably in terminating employment for those with less than two years service as an unscrupulous employer will be aware that they can act with impunity and the employee will have no right of


redress (unless the dismissal falls within a reason that is automatically unfair and which does not require completion of the qualifying period).The TUC believes that the Government role should not be to withdraw and “let the parties get on with it”, but to empower the parties to create a good employment relationship and resolve difficulties by providing and maintaining a strong framework of fundamental protections for workers and focusing on improving access to information about rights and responsibilities and understanding of these for both workers and employers.

Q2: What more can Government do to reduce the fear factor in employing staff, particularly the first member of staff that a business takes on?The TUC agrees that both employers and employees need to be sure of their rights and responsibilities and they need to know what to do and where to go for help if and when they need it. This is fundamental to an effective framework for employment regulation.The TUC disputes the extent to which there is a ‘fear’ factor for employers in taking on staff. This is based on hearsay and anecdote and more than a little political opportunism. This argument certainly does not hold for large employers, who have dedicated HR departments, suitable software for monitoring and managing staffing issues and access to legal advice. Use of probationary periods: Most employers will engage new staff on a contract that includes a probationary period. Continued employment will be dependent on satisfactorily completing the probation period. This gives employers the opportunity to assess the new employee and ensure that they are fulfilling the requirements of the job before they are confirmed in post Probationary contracts are often for a period of some months – three or six months for example. The practice of offering employment subject to completion of satisfactory probation is another reason that employers need not have the ‘fear factor’ about taking on new staff. Given that a year’s service is currently required to bring a claim of unfair dismissal (due to increase to two years), most staff who are not kept on at the end of their probationary period cannot (in most circumstances) effectively challenge this decision.Small firms and micro employers: Firstly, it is worth noting that many sole traders have no intention of ever becoming employers. A substantial minority are “lifestyle businesses”, whilst another sizable group of sole traders fear that taking on an employee would simply be grooming a potential rival to walk off with their list of customers and set up in opposition. Such businesses are unlikely to become employers, irrespective of Government policy, the state of the economy or the extent of regulation.Flexible, effective and fair? October 2011

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While taking on the first employee may be daunting, the appropriate way for Government to deal with this is to provide small employers with access to support, training, advice and management information systems that can help them to manage the employment relationship – not to remove rights from workers in small firms. The latter approach will simply make working for small employers a less attractive option and undermine the reputation of small firms, meaning that workers with a choice will seek better employment conditions elsewhere, potentially depriving small firms of necessary skills and expertise. Organisations such as trade unions, ACAS, Citizens Advice have a vital role to play in advising employees on the legal framework and the various employer associations and representative groups such as British Chambers of Commerce, CBI, Institute of Directors and Federation of Small Business can play a vital role in getting information out to their membership and providing support in understanding legal requirements. It is unfortunate that Government policy in the past year has served to wind down the Business Links organisation with the Regional Service being abolished from November 2011 (although the Business Link website and national helpline will continue to operate). The clear role for the Government in tackling any perceived barriers to sole traders in taking on their first employee is in promoting access to clear information about the existing framework of employment regulation and resourcing or signposting to sources of guidance and support in managing the employment relationship – whether these be to government or independent sources. There are other more fundamental barriers to recruitment of staff that relate to the state of the economy and lack of prospects for growth. Businesses have more pressing concerns to contend with in the current economic climate, such as lack of consumer confidence, access to credit, and cash flow difficulties. For many organisations, now is not the time to expand and they are taking a strategic decision not to do so and it is this ‘fear factor’ about the immediate prospects for UK and global economy which is hampering job creation, not ‘excessive red tape’ or ‘fear’ about employing staff.For example, the Federation of Small Business (FSB) is on record as saying that small firms would be hard hit by the 2.5% increase in VAT that the Government introduced in January 2011 and would be least able to absorb this increase, having to pass costs on to customers and that this could cost jobs. The FSB called on the Government to raise the VAT threshold, saying this could help to create jobs. The Government has already introduced National Insurance Contribution holidays for Employers for new businesses, but take up


to date has not met expectations. The scheme was supposed to help 400,000 new businesses and create 800,000 new jobs in worse-off regions; but so far 5,137 firms have been helped to create just over 10,000 jobs. £940 million was allocated for the scheme, but the government has so far only spent £10.3 million.The NIC holiday lets new small businesses in regions outside the South East off the first year’s employer National Insurance Contributions (NICs) for their first ten employees. The idea behind it is that one reason we face high unemployment is that employers are put off hiring by costs like NICs. However, the scheme has had little impact to date in the light of the scale of public sector cuts and lack of consumer demand. Just as with NIC holidays, so too with employment regulations; the real problem lies elsewhere it is not the ‘costs’ associated with employment but lack of demand and an economy that is ‘flat-lining.’The Government’s approach in attempting to boost employment growth by watering down existing employment rights does not enjoy universal support from employers bodies and some have questioned whether the policies will have the stated effects on employment. The CIPD for example, has expressed concern over the proposed extension of the qualifying period for unfair dismissal from one to two years:‘While watering down unfair dismissal rights is seen as a way to boost recruitment and improve job prospects for young people and the long-term unemployed, the short-run impact will be limited by the overall weak state of the labour market while in the long-term any positive effect on hiring is likely to be offset by a corresponding increase in the rate of dismissals.

The vast weight of evidence on the effects of employment protection legislation suggests that while less job protection encourages increased hiring during economic recoveries it also results in increased firing during downturns. The overall effect is thus simply to make employment less stable over the economic cycle, with little significant impact one way or the other on structural rates of employment or unemployment.’

The CIPD conclude:

Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy . Although the policy change will undoubtedly be welcomed by the deregulation lobby, it isn’t the way to boost growth and jobs.’


Q3: what rights should be included in the set of fundamental employment protections?Paragraph 8 of the BIS document refers to a ‘streamlined framework’ that gives workers ‘greater flexibility to negotiate an employment relationship to meet their needs.’ What does this mean in practice? If a streamlined framework effectively means fewer rights, this will not help workers to negotiate an employment relationship to meet their needs; it will have the opposite effect. For example if the existing right to request flexible working is removed, then this will disproportionately affect working women, parents and carers. If these workers are then unable to effectively combine their caring responsibilities with their work, they may have to leave the labour market altogether, which is bad news for all parties; the government will lose tax revenue and may have to pay out greater benefits, the workplace and the economy may lose workers with considerable experience and valuable skills and the workers may be underutilised compared with their investment in education, skills and training and may face greatly reduced income and even struggle to maintain their families and those that depend on them. The TUC is concerned that paragraph 8 of the BIS paper appears to imply that the existing framework of employment rights can be divided into those that are fundamental and those that are not. The TUC does not endorse this approach and does not understand the basis for it. When considering any individual piece of employment regulation, it is essential that the original purpose for its introduction is considered. A need will have been identified at that time for that aspect of the employment relationship to be regulated – in other words a ‘voluntarist’ approach was not effective. Unless it can be demonstrated with supporting evidence that the need no longer exists then the presumption should be that the regulation is necessary. The BIS paper is correct to say that workers should be protected from unscrupulous businesses and that there should be a level playing field for competition between employers – and that is precisely why effective regulation is necessary. If existing regulation is weakened and minimum standards undermined then good employers who try to do the right thing, will be undercut by the rogues. Q4: where do the processes required by the rules hinder the outcome that they are seeking to achieve?The TUC has not identified any such examples. If respondents from the business community have identified specific concrete examples


then the TUC would be interested to see these and welcome the opportunity to respond, particularly if legislative changes are proposed as a result. Throughout the Red Tape Challenge exercise, the TUC has been concerned that many assertions are just that - assertions – not backed up by hard evidence. The reasons that a particular piece of legislation was introduced and the outcomes it is designed to achieve must be given primary consideration. If there are ways of simplifying regulatory requirements or making these more intelligible to both employers and workers without undermining the rights that they give effect to in any way, then that would merit consideration but the TUC is concerned that introducing changes to the ‘processes’ will be used to undermine the substantive rights.

6.1 The Employment Law Review: progress to dateParagraph 12 of the BIS paper sets out the Government objectives for the Employment Law Review as:Look again at what each policy is seeking to achieve to ensure that the requirements and burdens are necessary and appropriate for the outcome we want;

What is the ‘outcome we want’ that is referred to here? The outcome must include a strong framework of fundamental protections for all workers in the UK labour market and not seek to undermine the existing framework of rights. The use of the word “burden” is political; businesses have responsibilities and incur costs – they also enkoy profits from the work of their employees.Look at whether there are other ways besides regulation to achieve the same end that allow employers and staff to decide for themselves how to respond;

The TUC maintains that a strong regulatory framework is necessary to protect individuals at work. While good employers may already be operating to far higher standards than those set down by law, that is not true of all employers. The BIS paper in paragraph 16 recognises that some employers do ‘seek to gain unfair advantage by mistreating their staff’ and that the government has a role to play in enforcing fundamental employment rights. The reference to allowing ‘employers and staff to decide for themselves how to respond’ ignores the fact that early resolution of disputes within the workplace is already an option and one that trade unions assist in where they have a workplace presence, but where employers refuse to engage or have procedures in place to facilitate workplace resolution of disputes, workers and those that represent them need access to legal support in order to effectively protect workers. Without an effective framework of fundamental rights, workers are extremely vulnerable; any notion that with fewer Flexible, effective and fair? October 2011

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enforceable rights workers will have choices about ‘how to respond’ is illusory.Where the current rules need to be kept, simplify to make them easier to understand and follow;

The TUC supports better regulation and supports genuine simplification measures but reiterates the need to ensure that any attempts at ‘simplifying’ the current rules do not in practice mean the watering down of existing rights. The TUC expects that the Government will consult the social partners fully on proposed changes, so that those who represent vulnerable workers as well as those that represent business have the opportunity to respond. Make sure the right information and guidance is available, so that employers and staff are making informed decisions, not reacting to a misperceived sense of risk;

The TUC believes that access to clear and concise information and guidance and knowing where to find this is vital both to employers (especially small employers who do not have access to the in-house HR expertise that many larger businesses have) and to workers, particularly the most vulnerable workers and those who do not usually have access to union support and representation in their workplace. The TUC welcomed the establishment of the Government Pay and Work Rights Helpline and the work undertaken to publicise this, but believes more needs to be done to raise awareness of existing rights and responsibilities and to assist the smallest businesses to understand the legal framework and comply with it. This is the most effective way of tackling misperceptions about ‘red tape burdens.’Look at how we have implemented EU directives, seeking opportunities to consolidate and challenging where UK regulation has gone beyond what was required by Europe;

The TUC is concerned by claims that UK implementing legislation has ‘gold plated’ EU Directive requirements and does not agree that this is the case, rather that there may be instances where the UK legislation fails to implement EU Directives adequately. Where there is “gold plating” it is often a result of lobbying by business to ensure that EU law fits the UK system, for example in several health and safety measures.Seek opportunities to rationalise existing legislation and support the development of modern workplaces.

Any attempt to ‘rationalise’ existing legislation must not weaken or remove existing protection for workers. Safeguards should be built into any proposals to rationalise the current legal framework of employment protection. Modern workplaces should ensure that workers are treated with fairness, dignity and respect, that employers Flexible, effective and fair? October 2011

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and workers alike are aware of their rights and duties towards each other and that rights are enforceable backed by a strong legal framework. The modern workplace of the 21st century should not resemble that of the 19th.Paragraph 13 of the BIS paper states that, ‘Businesses have told us time and again that they feel that they have no rights.’ This is not a description that the TUC and affiliated unions that represent workers across the country in many different sectors recognise. It is certainly not consistent with the substantial increase in employment that ran parallel to the modest re-regulation of the labour market during the last decade (as demonstrated by the Chart on page 3 of the BIS Flexible, effective and fair paper). The fact that BIS launched the Employers’ Charter in January 2011 shows that the Government acknowledges that business already has much autonomy and discretion in managing staff. For example, to take the most common reasons that a business may consider shedding staff – issues of conduct, capability, business restructuring and redundancy situations, these are all potentially fair reasons for dismissing staff under the existing law on unfair dismissal (ERA 1996 s98 (2)) and provided that an employer follows a fair process and acts reasonably in dismissing, they have nothing to fear from the law. Being dismissed is a huge blow for any worker, and in particular being dismissed on grounds of conduct or capability, which can severely damage future employment prospects. It is only right therefore that employers are not allowed to act arbitrarily and have to consider carefully the decisions they make and whether these are justifiable. Far from businesses not having any rights it is very often workers who have few rights and current government policy is exacerbating this. The Government decision to increase the qualifying period for unfair dismissal from one to two years effectively denies employees the fundamental right to challenge arbitrary dismissal in the first two years of employment.Moratorium on new legislation: The Government has established a moratorium on new legislation from April 2011, setting out the presumption that start ups and businesses with fewer than 10 employees should be exempt from new domestic regulation for three years (paragraphs 15 and 16 of the BIS paper deal with this). The rationale for this moratorium is that it will help to ‘increase the confidence of fledgling firms to grow and take on new staff.’ However, the TUC believes that there are more fundamental constraints on business growth and expansion currently reflecting the poor prospects for the UK economy in the immediate future. By establishing a threshold of 10 employees for this moratorium, the government may inadvertently discourage firms from expanding beyond 10 employees and thereby stifle growth. Flexible, effective and fair? October 2011

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Employment Tribunal proposals: Paragraph 16 of the BIS paper says that ‘the business community have consistently told Government that their biggest headache is the employment tribunal system.’ Just because some employers do not like the Employment Tribunal System (ETS) does not mean that the system is wrong or inefficient. The Government has not put forward any convincing evidence to support its proposed changes to Employment Tribunals. It is likely that those employers who complain most vociferously about the ET system are those that have findings against them and those who have not adopted fair workplace procedures. In the TUC response to the BIS ‘Resolving Workplace Disputes’ consultation we outlined evidence from BIS own research series which did identify a correlation between case outcome and satisfaction with the ET system overall. Published findings from the Survey of Employment Tribunal Applications 2008 Report (Employment Relations Research Series No. 107) concluded:

‘The outcome of the case drove satisfaction with the ET system for employers, with employers involved in cases in which the claimant was unsuccessful at the tribunal were more likely to be satisfied with the ET system in general (79 per cent) than those in which the claimant was successful at the hearing (61 per cent).’

The TUC responded fully to the Government’s proposals for reform of employment law and Employment Tribunal procedures as set out in the BIS ‘Resolving Workplace Disputes’ consultation paper. The key points raised in our response remain valid and are repeated here; ‘The TUC is firmly opposed to the extension of qualifying periods for

unfair dismissal claims. This will increase job insecurity, encourage unfair treatment in the workplace and discourage employers from managing performance effectively. There is no evidence to support the assertion that changes to unfair dismissal law will act as a driver for growth or job creation or will reduce the overall workload for Employment Tribunals.

The proposal is likely to be discriminatory against younger workers, black workers and those from ethnic minority communities and against female part-time workers.

The TUC is firmly opposed to the introduction of fees for Employment Tribunals. Fees would price working people out of access to justice; seriously deter individuals from enforcing their rights; and impact disproportionately on low paid and disadvantaged groups, including women, black and minority ethnic communities, and disabled workers.

The TUC calls on the Government to carry out a fuller Equality Impact Assessment on the proposals contained in the consultation document and in particular those relating to the extension of the qualifying period for unfair dismissal and proposals to introduce fees for Employment Tribunal users.


The TUC supports the principle of extending Acas pre-claim conciliation (PCC) services. However, there is a serious risk that PCC proposals as currently framed could damage the impartiality of Acas by requiring conciliators to advise on the merits of a claim and on complex jurisdictional issues including employment status.

The TUC recognises that it takes too long for many Employment Tribunal claims to reach a hearing. In our view, the Tribunal System is under-resourced to deal with its current workload and there is a shortage of Tribunal Chairs who are specialists in employment law.

Steps could be taken to improve the efficiency of the Tribunal process including by extending the role for Case Management Discussions (CMDs).

The TUC would also welcome improvements in the enforcement of multiple equal pay cases, for example through the use of the CAC to determine claims.

However, the TUC is seriously concerned that many of the Government’s proposals for reforming Employment Tribunal procedures are heavily weighted in favour of employers and are likely to restrict access to justice.

The proposed increases in the caps for deposit orders and costs awards will be used by employers to deter individuals from enforcing their rights.

Extended powers for Tribunal Chairs to strike out applications, without the need for a hearing or the opportunity for parties to make representations, threaten natural justice.

The TUC is also firmly opposed to proposals for Tribunal Chairs to sit alone in unfair dismissal cases.

The TUC supports proposals for the imposition of automatic penalties for employers who breach an individual’s employment rights. However the increased sanctions should be paid directly to claimants rather than to the Exchequer. Penalties should also be automatic in all circumstances.

The TUC does not support proposals for linking annual increases for compensation or statutory redundancy pay (SRP limits) to CPI rather RPI which will reduce the value of these benefits in real terms over time.’

Default Retirement Age: the TUC welcomes the abolition of the DRA with effect from October 2011. The TUC has long considered the DRA to be an unfair anachronism in modern workplaces as staff, and most good employers, welcome a more flexible approach to retirement. Abolishing the default retirement age will help people retire at a time that suits both them and their employer and the growing number of people working past 65 shows that many people are keen to stay in work and have a lot to offer employers. However, many others are forced to continue working due to poor pay and lack Flexible, effective and fair? October 2011

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of a decent pension, illustrating the urgent need for better pension provision in the private sector.The TUC and the Charted Institute for Personal and Development (CIPD) have recently published guidance for staff and employers on managing age in the workplace, which offers best practice guidance on working without a retirement age.Managing sickness absence: The TUC is represented on the advisory group for this Review and is feeding in its views through the group.Medium-term plans for the Employment Law Review

The BIS paper reiterates the medium term plans for the Employment Law Review:

National Minimum Wage

The TUC believes that the National Minimum Wage (NMW) is well-conceived and well-executed piece of employment law, in that its application is relatively simple and certain. Changes to the NMW are well-founded on the evidence gathered by the Low Pay Commission (LPC), where the input of employers’ organisations and trade unions is matched by that of leading pay academics and it generates clear benefits for workers, employers and Government alike. The net result is that there is no obvious ‘fat’ to trim. Indeed, BIS has held the NMW up as an example of good regulation.

Nevertheless, the TUC has asked the LPC to check again that the provisions for treating “output only” workers differently are still justified. Our concern is that we have recently seen rather more abuse of these provisions than we have been able to find proper use. If these provisions can no longer be justified then they could be removed as a simplification measure. However, the TUC would argue that this is a matter where the LPC should weigh the evidence carefully to ensure that removal would not leave law-abiding employers at a disadvantage.

Protections for working people during restructuring and outsourcingThe TUC will participate in any forthcoming review of TUPE rules and the consultation periods for collective rights. These rights provide vital protections for employees who are affected by restructuring or outsourcing and often face income and job insecurity.

The TUC does not agree that the rights operate as a barrier to restructuring. Rather they facilitate restructuring in a manner which safeguards employment levels and the terms and conditions of affected staff and avoids potential disputes. The rights play an Flexible, effective and fair? October 2011

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important role in maintaining trust amongst remaining employees. As a result, they contribute to the operational effectiveness of restructured businesses.

The requirement on employers to consult with recognised trade unions or workplace representatives on collective redundancies are beneficial for employers, employees and the wider economy. During the recession, some private sector employers have worked closely with trade unions through the consultation arrangements to identify ways of avoiding redundancies and to enable the businesses to retain skilled staff. As a result, businesses are better placed to respond to any future upturn in demand.

Any reduction in the length of the consultation period would limit the opportunity for trade unions and employers to explore alternatives to redundancies. This is likely to lead to unnecessary job losses and will have a negative impact on welfare costs and household income. The TUC will therefore resist any proposal to reduce the consultation period from 90 days to 30 days.

The TUPE Regulations ensure that the workplace representatives for affected employees are informed about potential transfers and consulted about related measures. They also safeguard the pay and conditions of staff who are transferred and limit the ability of existing and future employers to take a selective and potentially discriminatory approach to which staff are transferred. The Regulations have also played an important role in avoiding competition between contractors on the basis of lower pay and conditions.

However it is a matter of serious regret to the TUC that the TUPE Regulations do not provide protection for new employees hired to work on outsourced services. There is a wealth of evidence which demonstrates that outsourcing has a detrimental impact on workers’ conditions of employment in the longer term and this has serious long term impacts on service quality. The issues are particularly significant where public services are contracted out. The removal of the Two Tier Code is likely to amplify these problems.

The TUC recognises that the scope for weakening collective redundancy and TUPE protections is extremely limited given the requirements of EU law. Instead we believe that a future review be enhanced to ensure that future contracting out and restructuring does not result in increased unemployment, a diminution in employees’ pay and conditions or a growth income inequality.

Proposals to make the right to request flexible working a ‘lighter-touch’ process. The TUC has already responded on this point through its response to the Government’s Modern Workplaces consultation. In answer to Flexible, effective and fair? October 2011

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whether we would support the proposal to replace the statutory process for the consideration of flexible working requests with a Code of Practice, the TUC response stated: ‘we cannot support the proposal without more detail about the form and content of a proposed statutory Code of Practice and reassurances that the procedural rights that parents and carers currently have will not be diminished in any way. The statutory process is all some employees have to fall back on when trying to get a fair hearing for their request. Without it, managers may be more dismissive of a request, for example, rejecting a request as set out in a written application without taking the time to discuss it with the employee, outlining their concerns and exploring ways in which current work organisation could be altered to accommodate it or an alternative arrangement could be agreed upon that met the needs of both parties.

Agreement is often reached on flexible working through discussion and compromise and we believe this would be difficult to achieve, and achieve in a fair way, without a requirement to hold a meeting at which the individual could be accompanied by a union workplace representative or colleague. It is also important that there is a requirement upon the employer to hold the meeting at a time that the employee’s chosen companion is available and that the employer’s decision following the meeting is provided in writing and that there is an opportunity to appeal the decision. Safeguarding these basic procedural steps to ensure a fair hearing is particularly important given that an employee only has one opportunity a year to make a request.

If reassurances were given about maintaining the statutory procedure, we would be supportive of having a statutory Code of Practice to accompany it as we recognise that beyond the minimum procedural safeguards there are issues which employers would benefit from further advice and guidance on such as, how to handle requests for temporary variations in working arrangements or trial periods without making a permanent change in the contract.’

Discrimination awards: The BIS paper reiterates the Government’s intention to consult on discrimination awards later this year and the TUC will respond to this. However, the TUC believes that the Government’s scope to make changes is effectively curtailed by existing EU equality Directives.

Enforcement: ensuring a level playing field for workers and employersFlexible, effective and fair? October 2011

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Q5: What criteria should determine which rights are directly enforced by Government and which by the individual?

The TUC welcomes the statement in paragraph 19 of the BIS paper that ‘The Government is clear that employers who are determined to operate outside of the law should not be allowed to undercut their legitimate competitors by exploiting their workers. It is essential that the most vulnerable workers, those most likely to be exploited by unscrupulous employers are effectively protected.’

The Government has a vital role in determining the boundaries of lawful and unlawful behaviour; the government should be aware that any moves to water down the existing framework of fundamental employment protection, could in effect legitimise exploitative behaviour, by removing the taint of illegality (and the sanctions that accompany it). Far from restraining unfair competition, this could encourage it and lead to a levelling down of employment standards in the workplace.The TUC believes that an effective enforcement framework is an essential component of any system of regulation.

In our view, the following principles should underpin the UK enforcement system:

Enforcement agencies should have adequate powers to be able to undertake proportionate and effective enforcement action

Penalties for breaching Regulations should be set at a level which encourages compliance with employment and safety standards

Enforcement agencies should have increased resources for intelligence- led investigations and inspections to ensure that rogue employers are deterred from breaching the law due to the risk of enforcement action being taken.

Adherence to such principles is essential if workers are to be protected and a level playing field is to be created ensuring good employers are not undercut by the rogues.The TUC recognises that the current enforcement landscape has developed over time in response to different social and economic problems. However, we do not believe that this means the current structure is not relevant or necessary for current purposes. Research undertaken by the TUC in recent years, including the findings of the Commission on Vulnerable Employment revealed that the principal problems facing vulnerable workers continue to be:

underpayment of the NMW; non-payment of wages;


being required to work excessive hours; losing out on holiday entitlement and not receiving holiday pay; being required to pay for work finding services or to overpay for

transport services; being housed in sub-standard conditions; lack of transparency of employment condition and lack of awareness of employment rights.

The statutory enforcement agencies are currently responsible for enforcing the law in most of these areas, the main exception being statutory holiday rights. There is no evidence that the social and economic risks which led to the establishment of the enforcement agencies have diminished. Rather the contrary is true. Research undertaken by the Low Pay Commission and the recent EHRC Inquiry into the meat processing sector reveal extensive non-compliance with employment standards and widespread victimisation of low paid and vulnerable workers. If the role of the statutory agencies were reduced such practices are likely to become more commonplace.Research by the Commission on Vulnerable Employment and Citizens’ Advice also reveals that vulnerable workers are extremely reluctant to complain about mistreatment in work or to take claims to Employment Tribunals due to the fear of losing their job and their home or of being victimisation at work. Such workers rely on the ability to make anonymous complaints to enforcement agencies. Others are simply unaware of how to complain and therefore rely on intelligence-led investigations and enforcement. The TUC is therefore concerned that one of the objectives of the review will be to enable vulnerable workers to use the Employment Tribunal system to enforce their rights. The proposed introduction of fees for Employment Tribunals will also further deter workers from making claims.

The TUC therefore believes that it is vital for the State’s involvement to continue in all the areas where it currently has an enforcement function. The TUC recognises that the different enforcement agencies have varying powers and can impose differing penalties. It would be welcome if the review of enforcement agencies led to the upgrading of the enforcement system so that all agencies


have the same powers and penalties at their disposal including naming and shaming, criminal prosecution and civil penalties. The TUC also believes there is a strong case for the extension of the GLA licensing model to other sectors of the economy, including construction and social care. This view was supported by the Donaghy report: One Death is too Many – Inquiry into the Underlying Causes of Construction Fatal Accidents and Home Affairs Select Committee 2009 report on Trade in Human Beings. The ability of the GLA to conduct pre-licensing audits and to revoke licences where employment, tax and housing laws are breached has played a vital role in raising standards in the agriculture, food processing and shell fish industries. It is vital therefore that the current licensing system is not simply retained but also extended.The TUC believes that the current framework of agencies helps to ensure improved enforcement. For example, the ability of the GLA and EAS to investigate and take enforcement action relating to NMW payments supports and complements the work of the HMRC NMW enforcement team. EAS and GLA inspectors will often inspect workplaces and sectors not reached by the HMRC NMW enforcement team. The TUC would be seriously concerned if the review led to any diminution in the scope of enforcement undertaken by the State or in the powers or penalties available to any of the existing enforcement agencies. Such reforms would lead to the mistreatment of vulnerable workers; increased non-compliance with the law and unfair competition for good employers.The TUC agrees that the establishment of the Pay and Work Rights Helpline has assisted workers and employers to access the enforcement system. In our view, further measures should be adopted to enable more co-ordinated and joint enforcement action by the enforcement agencies. In particular, the remaining legal barriers which prevent agencies from sharing intelligence once formal investigations have commenced should be removed. This would mean that enforcement agencies can take joint enforcement action where inspectors from just one enforcement agency have inspected a workplace. Such measures would increase efficiency and would also ensure that employers who breach multiple employment laws receive appropriate penalties. Finally, however, the TUC believes that the current enforcement system is significantly under-resourced. Recent cuts in funding mean that enforcement agencies are less able to respond to complaints and to undertake intelligence-led investigations.


The TUC is concerned that the reference in paragraph 23 of the BIS paper to ‘leaving those who are better able to look after themselves to seek redress through the employment tribunal system’ could imply a reduction in the enforcement role of the government and the enforcement agencies. The TUC would not support such a change and believes that the role of the existing enforcement agencies is vital to the effective enforcement of workplace rights. The TUC is particularly concerned about any proposal that will require more people to look to the employment tribunals to enforce their rights given the proposal to introduce fees for bringing a claim to tribunal and potentially a further fee to progress the case to full hearing. In paragraph 20 of the BIS paper, the employment tribunal system is referred to as ‘accessible’ and it is essential it remains so. The TUC believes however that the Government’s forthcoming proposals on fees will undermine accessibility of the ET system and effectively ‘price out’ some low paid and unemployed claimants from being able to enforce their rights.

The union roleThe TUC welcomes the Government’s recognition of the role that unions can and do play in enforcing rights and resolving workplace disputes. Paragraph 27 of the BIS paper in particular acknowledges the role that unions and community groups play in reaching the most vulnerable workers and the TUC has experience of reaching out to vulnerable workers through the work of the Union Modernisation Fund for example. There is also academic evidence that demonstrates the positive role that unions play in the workplace and shows that the number of ET claims submitted against unionised businesses is far lower than from those that do not recognise a union.


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