Employment Rights Bill

Committee (7th Day)

Clause 34: Extension of regulation of employment businesses

Amendment 146

146: Clause 34, page 60, line 2, at end insert— “(A1) After section 5(1)(ec) of the Employment Agencies Act 1973, insert—“(ed) requiring employment businesses participating in employment arrangements to be subject to a licensing authority nominated by the Secretary of State.””

My Lords, it is a pleasure to begin this Committee day on the Employment Rights Bill. This is probably the most straightforward of the amendments I have on the Order Paper this afternoon; it simply seeks to bring clarity, consistency and fairness to this whole area. What does the amendment do? It simply states that employment businesses participating in employment arrangements must be subject to a licensing authority.

The fairness this brings is across both employment businesses that operate in this country and those that may be outside this country but involved in employment arrangements in this country; thus a licensing authority would bring them into the same regime as businesses in this country. It also reflects the situation in other sectors of the economy, so it has an element of consistency and is thus easily understandable to people who come to this from other domains within our economy. It is simply a question of clarity, consistency and fairness in employment businesses. I beg to move.

My Lords, I am quite concerned about this amendment, although I rarely disagree with my noble friend Lord Holmes of Richmond. I am just concerned about the number of agencies or government bodies that keep being created. We already have considerable regulation in this country; I am not convinced that this will add value. Although I recognise the reasons why my noble friend put this forward, I hope he might reconsider tabling it again on Report, if he was so minded.

My Lords, I start by saying how pleased we are to see my noble friend Lord Holmes of Richmond in his place. I had the privilege of moving his previous amendments in his absence, but we are delighted to see him back with us and I thank him for proposing this important amendment.

The way my noble friend did it was very welcome because, at the heart of his speech, was a recognition that the labour market—especially the supply of temporary and agency workers—has to be fair and transparent. He used those particular words and stressed their importance. I agree with him that it is essential that all companies involved in these arrangements operate under the same clear set of rules. Too often, we see instances where umbrella companies or certain intermediaries do not meet the standards expected of traditional employment agencies, whether on pay, workers’ rights or transparency. This inconsistency undermines the integrity of the labour market and can put vulnerable workers at risk. Licensing could, in theory, help address this by ensuring that any business participating in employment arrangements meets minimum standards and is subject to proper oversight.

However, as my noble friend Lady Coffey stressed, the amendment raises some other important questions. Clause 34 broadens the definition of “employment business” to encompass a range of activities connected to supplying workers who are employed by one party but work under the control of another. This means that the regulatory net will be set much wider than before, potentially to cover businesses beyond traditional recruitment agencies.

Moreover, it is worth considering whether the same objectives could be achieved through improved enforcement of existing regulations rather than by introducing a new licensing framework. In this Chamber, we have to weigh carefully the costs and benefits, particularly to smaller businesses that may struggle with additional compliance burdens. We must also consider the impact on businesses and the wider economy. Many employment businesses operate with tight margins; for them, licensing means added costs, added paperwork and longer lead times to launch new services or respond to labour demand.

My Lords, I thank the noble Lord, Lord Holmes of Richmond, for his amendment concerning the licensing of employment businesses. I join the noble Lord, Lord Hunt, in saying how nice it is to see him in his place this afternoon. I share the privilege that the noble Lord, Lord Hunt, noted as I responded to the amendments that were tabled in the name of the noble Lord, Lord Holmes, and these were on important issues that he was right to raise. As the noble Lord, Lord Hunt, said, these are around fairness, transparency, equity and the problems that some less than scrupulous umbrella organisations and employment agencies currently raise in the market. He is not raising unimportant issues.

As the noble Lord, Lord Hunt, has already noted, through Clause 34, the Government have sought to amend the definition of “employment business” in the Employment Agencies Act 1973, so that it includes the concept of employment arrangements. This expanded definition will capture so-called umbrella companies and place them in the scope of regulation. As your Lordships know, employment businesses are subject to regulation through the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which were enforced by the Employment Agency Standards Inspectorate and subsequently will be enforced by the new fair work agency that Part 5 of the Bill creates.

The Government acknowledge that the current regulations are not appropriate for application to umbrella companies so, following consultation, we will set out a new regulatory framework that will apply to umbrella companies. In our view, these regulations are the most proportionate way of reducing non-compliance in the umbrella company market, without introducing a new regime that would add complexity for business. The creation of a licensing authority at this time would therefore not be appropriate. I am happy to say that on this rare occasion, we share the concerns of both the Opposition Front Bench and the noble Baroness, Lady Coffey, from whom we heard earlier on this amendment.

My Lords, I thank all noble lords who contributed to this short debate. I listened very carefully to the Minister, and I am extremely grateful to my noble friend Lord Hunt for his comments. His drafting pen is always both sharper and smarter than mine, and we all benefit from that. I thank him for moving my amendment on Monday in my absence, and I thank the noble Viscount, Lord Colville, for doing so on a previous group. I accept the comments at this stage and am very keen to see what might be possible between now and Report. But, for now, I beg leave to withdraw the amendment.

Amendment 146 withdrawn.

Clause 34 agreed.

Amendment 147 not moved.

Amendment 148

148: After Clause 34, insert the following new Clause— “Definition of AI System(1) For the purposes of this Act, “AI System” means an engineered or machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as content, predictions, forecasts, recommendations, or decisions influencing real or virtual environments. (2) AI systems may operate with varying degrees of autonomy and include use of algorithmic techniques such as natural language processing, large language models, multi-modal models, machine learning, speech or image recognition, neural networks, deep learning, or decision trees.”Member’s explanatory statement This amendment clarifies the definition of an AI System within the context of employment rights as an engineered system generating outputs from inputs using algorithmic techniques.

My Lords, first of all, I must make my apologies that this is my first contribution to the Bill. I have waited until day 7—I am not quite sure that that is entirely my fault—but it is a pleasure to speak in this group, particularly as I know that the noble Lord, Lord Holmes, is on the same page, even if he has put forward a different set of amendments.

In moving Amendment 148, I will also speak to Amendments 149 and 150. I hope that these amendments are of interest to the Committee; they are certainly close to my heart. They address the profound and rapidly evolving impact of artificial intelligence systems on the modern workplace. Reports by the Institute for the Future of Work and the All-Party Group on the Future of Work paint a clear picture: the wide spread of AI at work is transforming lives and livelihoods in ways that have plainly outpaced or avoid the existing regimes per regulation. The impact of AI will be profound and, although there are potential benefits, there are also significant risks or impacts on employment rights and conditions in the workplace. We must make sure that AI benefits are realised but also that the detriment is avoided.

As the All-Party Group on the Future of Work found, there is an urgent need to bring forward robust proposals to protect people and safeguard our fundamental values in the workplace. Existing regulatory frameworks are strained. Technical approaches commonly deployed before deployment of algorithmic systems are often inadequate. That is why a systematic framework for accountability is urgently required.

The workplace AI risk and impact assessments—WAIRIAs, as we have coined them—proposed by these amendments, are intended to provide such a framework. As the Institute for the Future of Work and others have argued, mandating such regimes of impact assessment is a practical response to a deficit of responsible foresight.

It is important for WAIRIAs to be made a legal requirement and for accompanying guidance to be issued to outline a framework. Amendment 148 defines what constitutes an “AI System” in this context as: