My Lords, Covid-19 has highlighted many of the failings in the law of the workplace in the UK. Working people have found that their workplace rights have not secured their jobs, their incomes or their health. One particular injustice is that many hundreds of thousands have only very few of the rights that Parliament has legislated that employees must have, such as rights to the minimum wage and to unfair dismissal protection. This is because “armies of employers’ lawyers”, to use a phrase used by the Court of Appeal in one case, have constructed contracts that seek to categorise these workers as something other than employees. The proper interpretation of such contracts has provided meat and drink to lawyers and judges for decades. The Bill is intended if not to remove then at least to narrow the grounds of contention by unifying the classification of workers into a single status, subject to an important exception.
Let me deal with a preliminary point on my use of the term “worker”. There is a definition in the Bill but, for the purposes of my speech today, I use the term loosely and generically: I mean a person who works for a living. This is close to the generic meaning in international law as used by the International Labour Organization, the Council of Europe and the European Court of Human Rights. The current problem is that there are subspecies of worker and this gives rise to the injustice that the Bill is intended to cure. Each subcategory—I identify six—is entitled to a different set of statutory rights. That means that employers, understandably, have an incentive to downgrade the status of staff so as to diminish the rights that they enjoy and hence the costs inherent in the provision of those rights. By creating a single status, this possibility is removed. In consequence, the effect of the Bill would be to give entitlement to all statutory employment rights to all workers from day one of their engagement, although I would gladly accept an amendment to remove or reduce waiting time for rights to be effective, such as for unfair dismissal. The Bill does not affect rights, such as to holidays, that increase over time.
I have said that there is an important exception in the Bill. This is my first category. Those who are genuinely self-employed, in business on their own account, with their own clients or customers, will be unaffected by the Bill. These are, by and large, the professionals. Examples are the owner-driver of the London taxicab or Hackney carriage—“mushers”, as they are known in London—the self-employed painter and decorator, the jobbing electrician, the gigging musician, the novelist, the barrister, of course, and many more. Their status and their rights will be untouched by the Bill. Some of these professionals have established a personal service company, a PSC, through which they find it convenient to work. This is a limited company in which the professional or a member of the family is the major shareholder and director. The professional is the sole employee and is content that his or her rights as an employee are exercisable only against their own company. Such genuine PSCs, my second category, will also be exempt.
My Lords, I rise to support this Bill and applaud the noble Lord, Lord Hendy, for his excellent introduction. I must confess that I have paid attention to this Bill only because the noble Lord serves on the Delegated Powers Committee, of which I am chairman, and I have learned to respect his excellent contributions. I hope I do not do an injustice to his Bill today.
I take the view that there are only three types of employment: employer, employee and self-employed. I do not want to see any funny middle category created such as “independent worker”. We can all recognise genuine self-employed people—plumbers, joiners, electricians, window washers, et cetera—but we must ensure that businesses are not compelling individuals to set up these bogus personal service companies just to get round employment rights.
I go further than the noble Lord; I want my noble friend the Minister to consign the Matthew Taylor review to the dustbin. It is utterly irrelevant since breakfast—I mean Brexit—
It is irrelevant since breakfast as well, actually. It was based on the employment situation in this country in 2016. It is now all ancient history and I am delighted to see that the free market is driving up wages for those workers at the bottom end of the scale, whose skills are now in great demand—the lorry drivers, white van men, cooks and shelf fillers. I take particular delight that an HGV driver for Waitrose doing an essential job may earn more than a lawyer living off the misfortune of others—I make only a small apology to noble Lords and noble and learned Lords present.
Two weeks ago, I read an article in which a restaurant owner was saying that it was outrageous that he was now having to pay commis chefs—I understand that they are not French socialists but vegetable choppers— £11 an hour and asking what the Government were going to do about it. I hope that my noble friend will say, “Absolutely nothing”. The free market has been used for the last 20 years to keep wages down. Now it can drive up the wages of low-paid essential workers.
Some of the evidence to the Taylor review was spot on. Leeds City Region said:
“It is good jobs that matter—where people feel a sense of stability, have a say in the workplace, know that their effort is recognised and rewarded, have the skills to do the job but also to develop their own potential, and trust that they will be treated fairly. And most critically, that they are paid a decent wage for the work that they do.”
How can anyone disagree with a word of that? The Taylor review had a chapter called
“key labour market challenges ahead”,
identifying poor wage growth and poor productivity. That was in 2017. Now wages and productivity are increasing rapidly, which means that companies will be forced to end the abuses of the so-called gig economy and fake self-employment status. There was only one item in the Taylor review that was accurate, the comment that
My Lords, before the next speaker, I should say that we need to try to keep to the advisory speaking time, because otherwise it cuts into the Minister’s summing up at the end.
My Lords, I strongly support this Bill and, slightly to my surprise, I agree with almost every word the noble Lord, Lord Blencathra, just said. That indicates the recognition of the injustice and confusion that the present situation causes.
First, like the noble Lord, Lord Blencathra, I strongly refute the suggestions that the complexities of defining what is clearly a worker simply reflect or facilitate changes in the labour market or, alternatively, changes in technology or worker expectation. There is absolutely no reason why the gig economy, the digitalisation of so many jobs or changes in standard hour expectations and flexibility requirements of individual workers in companies should require multiple definitions of what a worker is and multiple statuses of what they are entitled to. An individual usually sells their labour subject to the direction of a single employer. An individual may have multiple clients, but there is usually a de facto employer and a de jure employer, whether that is a stand-alone company or an agency. Those workers should, therefore, have the same rights and protections, and indeed the same access to employment tribunals.
Secondly, this Bill discriminates between workers who are essentially in the same situation. Its prime purpose is to resolve that anomaly, discrimination and injustice—and, indeed, that confusion for employers and the courts. The distinction between “employee” and “worker” must be abolished. In terms of protection and entitlement, there should be no distinction.
But that is the easy part. As my noble friend says, there is also the situation of certain agency workers and, particularly, of bogus self-employment. Whether you work for a single employer, several employers, an agency, a labour-only subcontractor or a gangmaster, you should have equivalent rights as a worker—or as an employee, as in the current situation. Whether you are a traditional bogus self-employed person like many in the construction industry used to be, on the lump, a single-client owner-driver or a new-fangled self-employed person in the gig economy, you all deserve the same equivalent protection and rights. The Uber cases clarified some of this; this Bill, I hope, generalises it. But I also hope that it will go further in practice. It will clarify the law and make it easier and more straightforward for employers. Frankly, it will also allow more equitable raising of taxation, thereby helping the Government in their current difficulties.
My Lords, I thank the noble Lord, Lord Hendy, for introducing this important Private Member’s Bill, which seeks to clarify in law the definition of “worker” and “employee” in the Employment Rights Act 1996 and the labour relations Act 1992. The world of work has changed considerably since these two pieces of legislation were passed in the 1990s and is set to change even more radically in the coming years.
We know that, under the current legal definitions, someone deemed to be a “worker” is not entitled to the same level of employment rights as an “employee”. Specifically, entitlements such as sick pay, maternity and paternity leave, and protection against unfair dismissal, among other things, are not legally enforceable for those defined as workers. Throughout my working life I have worked as an advocate for the rights of older people, yet much of my volunteering work has been trying to help young people. These two groups are often the most vulnerable in employment, both being overrepresented in unemployment or precarious work statistics. Updating these legal definitions will give both these groups greater legal protection in employment.
Although I support the Bill in principle, it also needs to be understood by the trade unions and others that we cannot turn back the clock, as the world of work is changing fast. One positive of technology has been the ability for greater flexibility in work, something that often suits employers and employees. Often this flexibility comes with trade-offs where the frameworks used in the past are no longer appropriate, such as inflexible rostering systems. An example of this is Uber drivers, who haveexpand-col3 flexibility to decide when to work—something that suits the drivers and the company. Trying to impose older models of employment practice on this model will not work. Instead, we need to seek new ways to ensure that these workers still have some income protection if they cannot work due to sickness.
My Lords, it is a pleasure to speak in this Second Reading debate on a Bill which is so urgently needed to create fairness and coherence for workers.
As the TUC has said, our legal framework for workers’ rights is not fit for the 21st century. Indeed, it has not really been fit since well before the turn of this century. My noble friend Lord Hendy has outlined with clarity and precision the aim and intention of the Bill, which would of course leave unaltered the arrangements for those who are genuinely self-employed on business on their own account, either through a genuine personal service company or as professionals. However, it would address the situation of so many workers who find themselves in so-called self-employment—bogus self-employment—which leaves them with none of the statutory rights, such as they are, enjoyed by employees.
In the context of building back better, in the period beyond the worst phases of the pandemic—which is where we hope we at least find ourselves—we must surely want to ensure that all workers are entitled to at least the minimum wage, paid holidays and protection from unfair dismissal. Building back better must also of course mean building back fairer. The Status of Workers Bill would give millions of workers in insecure and precarious situations across England, Wales and Scotland greater rights by the creation of this single-worker status and equivalence therefore with employees. The claim is sometimes made—as has been referred to by other noble Lords—that bogus self-employment is about flexibility for the worker. Unscrupulous, bad employers might well make this case, but good employers can and do negotiate flexible working arrangements without recourse to eliminating workers’ rights. That should be the position for all workers.
Much more can and should be said about the range and number of workers—the TUC calculates 3.6 million—whose working lives would be improved by the Bill. I look forward to speaking during the later stages of its passage through this House and I offer it my full support.
My Lords, I too congratulate the noble Lord, Lord Hendy, on tabling this Private Member’s Bill. It echoes the Judaeo-Christian teaching that workers deserve proper remuneration, and I support it.
I recognise that there are many advantages in having a flexible labour market which allows for individuals to tailor their work to their lifestyles. However, I and I know many others take issue with those times when employers curtail other people’s rights in an exploitative manor to reduce benefits costs. The Taylor review’s suggestion of replacing the category of working with a more positively defined “dependent contractor” was a positive step in preventing companies from unscrupulously categorising an employee as a worker while elevating the bogus self-employed into this category along with the increased rights it affords and the national insurance contributions that would accompany it.
When I read the very helpful brief from the House of Lords Library, I was struck by the estimates that bogus self-employment and the savings companies make by not paying national insurance probably result in the Government losing about £7.8 billion annually in national insurance contributions. While that is a guesstimate, it raises prescient questions about whether strengthening employment laws could raise some of the shortfall in national insurance that the Government hope to receive by means of their proposed 1.25% levy. Has the Treasury undertaken any internal economic modelling on the potential tax benefits in national insurance contributions of introducing a more clearly defined category of dependent contractor?
Of course, many of those who find themselves in the bogus self-employed category have been elevated to worker status on a case-by-case basis. However, the problem is that the legal onus is on those workers, in very precarious situations, to prove that they warrant those rights rather than on the immensely well-resourced companies. I therefore welcome the provisions in the Bill that place the duty to demonstrate that an individual is not an employee or worker on the company, not on the worker themselves. Shifting this responsibility—this legal duty—on to the employer is morally better than placing a burden on the least resourced to pursue legal recourse.
My Lords, I add my congratulations to my noble friend Lord Hendy on both his excellent preparation of the Bill and the clear presentation of it that he has made. This is a horrendously technical area that has become more complicated over the years, and clarifying and simplifying it is in everybody’s interests. A Bill along these lines should have been in the Queen’s Speech but for some reason or other it has been omitted, despite promises from the top of the Government that they would “protect and enhance” workers’ rights post Brexit. As we wait for the Government to act, my noble friend Lord Hendy is doing their job for them; I hope he will get an appropriate vote of thanks for doing that and that the Government will follow the advice of the noble Lord, Lord Blencathra, embrace his Bill and get on with it.
According to the TUC, as the noble Baroness, Lady Blower, just said, 3.6 million people are in some kind of insecure work. They could be on zero hours, on temporary or seasonal work or classed as self-employed, and in all these categories they often earn less than the minimum wage. They need levelling up, and an end must be made to the four different statuses of categories of working people.
I first came across part of this problem in the 1970s, when labour-only sub-contracting became the norm in many parts of the construction industry. Regular employees were reclassified as self-employed, and unscrupulous employers—in the end followed by those who wanted to do the right thing but who were being undercut—led the way in avoiding national insurance, PAYE administration, employment rights, pensions entitlements and training obligations. Bogus self-employment drove out regular contracts of employment. Older Members here will recall the practice being termed the “lump”.
Variations on the “lump” have now spread well beyond construction, not least into sectors defined as the gig economy. It can even be found in the NHS and in public services; the Finance Sub-Committee of this House has been finding out about the role of personal service companies, which has led to all the problems with the loan charge. A major tax-evasion operation has been under way, and so far we have not got to grips with it. The Bill could be a contributing factor in helping that.
20 of 47 shown
The Bill is intended to stamp out abuse of these first two categories. It will therefore regulate my third category, bogus self-employed workers. These are workers whose arrangements are dressed up to look as if they are self-employed, but who are in reality employees. Unless they challenge their status in successful litigation, they are not entitled even to the national minimum wage or paid holidays—not even some health and safety protections. Bogus self-employment is rampant in the construction industry but by no means confined to it. Drawing the line between bogus and genuine self-employment is not easy, but the courts will be aided by the Bill placing the burden of proof on the employer who claims that the relationship is genuine.
The Bill will also regulate my fourth category: those forced into PSCs. This is where a worker is told by the real employer that if she wants to work, she must set up a personal service company to make a commercial contract with the real employer to supply her services and to make a contract of employment with herself. This contrivance is often arranged by the employer. On the face of it, the worker has full employment rights, but only against her own personal service company; the real employer is insulated against any responsibility for her rights. Such abusive PSCs are common in parcel delivery, construction and many other sectors. I will not dwell on the technicalities, but the Bill endeavours to draw a clear line between the genuine and the abusive PSC.
The fifth category are the so-called limb (b) workers. The term derives from the definitions in Section 296(1)(b) of the Trade Union and Labour Relations (Consolidation) Act 1992 and Section 230(3)(b) of the Employment Rights Act 1996. These are workers who have a contract but not a contract of employment. They are a subspecies of the self-employed. They get only some of the rights that employees have—for example, the national minimum wage and paid holidays. They do not get protection against unfair dismissal, parental leave and so on. This is the status that the Uber drivers achieved in their Supreme Court victory earlier this year. Limb (b) workers are common in food delivery, taxi driving and other service industries.
Finally, there are the employees. They are entitled to all the statutory rights that Parliament has provided, so long as they have been employed for long enough.
The Bill takes up issues identified in the Matthew Taylor report some years ago, but by proposing a single status it goes beyond Matthew Taylor’s recommendations. I wanted to give your Lordships a sense of the scale of the problem, but the statistics are limited. What can be said is that at present there are about 28 million employees, a figure that includes the single employees of up to some 700,000 personal service companies. In addition, there are just under 5 million self-employed, but the statistics do not distinguish between those who are limb (b) workers, those who are bogus self-employed and those who are genuinely self-employed. What is clear is that the number of those in PSCs and self-employment is proportionately greater and growing faster than elsewhere in Europe.
Though some opportunistic employers will not welcome the Bill, it would in fact benefit employers generally by preventing greedy or uncaring employers from undercutting good employers who are prepared to confer full employment rights on their staff. It would also stop the worst employers free-riding on the rest of us by using categories for their staff that avoid payment of national insurance, tax and pension contributions. The Bill is obviously intended to benefit workers and I am pleased to say that it is supported by the Trades Union Congress. It will, if passed, extend employment rights to hundreds of thousands who do not currently enjoy them. It will protect those who already have such entitlement from the danger of being degraded, downgraded to or undercut by workers with fewer rights.
I have one last point. Employers often try to persuade workers of the benefits of a lesser status on the basis that it provides flexibility for the worker, but this is a false argument, since legal status has nothing whatever to do with whatever flexibility employers confer on their workers. That flexibility can just as easily be enjoyed by employees if the employer is prepared to concede it. If the Minister supports the Prime Minister’s avowed levelling-up objective, here is a measure that he can and should support. I beg to move.
“we have to examine why, with employment levels at record highs, a significant number of people living in poverty are in work … if they have no guarantee of work from week to week or even day to day, this not only affects their immediate ability to pay the bills but can have further, long-lasting effects, increasing stress levels and putting a strain on family life.”
Again, who can disagree with that?
Way back in 2017, the review wondered why, with employment at record levels, so many people in work were in poverty. I think that we now have the answer, which has revealed itself over the last few months. While we had 2 million to 3 million cheap EU workers, companies could get away with zero-hours contracts, minimum wage and sometimes not even minimum wage, as we have seen in Amazon warehouses, Deliveroo, Uber and others, which have been committing flagrant abuses of workers’ rights by calling them self-employed. I am completely in favour of flexible working hours—after all, we have it here on a daily basis—but people on flexible hours must have proper legal contracts setting out those hours and their terms and conditions of employment.
Let us stick with employers, employees and genuine self-employed. Let us see wages and productivity rise. I say to restaurant owners, supermarkets and others, “Dry your eyes”—there is no God-given human right that we must have cheap takeaways or cheap eating-out food. If we cannot get strawberries from Morocco, iceberg lettuces from Spain or avocados from Brazil at Christmas—I am almost finished—then too bad. That will be a small price to pay for the huge benefits of the poorest in society earning more. Pay your staff whatever it takes, with proper contracts which may have flexible hours. Train up apprentices and raise prices accordingly. Food is already too cheap in this country for the vast majority of people; if those on low wages are paid a proper wage, they will be able to afford any increase in food prices.
Finally, why should I as a Conservative support this Bill? I believe in caring capitalism and a fair day’s wage for a fair day’s work. After the Prime Minister’s announcement this week, I think that we are all a bit pink on this side now. I wish the noble Lord success with his Bill.
Bogus self-employment undermines not only workers but the genuine self-employed—and, indeed, the tax authorities. The proposed “dependent contractor” would not really clarify that issue. Most of those who might be so designated are workers by any other test and should be entitled to the full rights.
Finally, to make the Bill work and to ensure that all workers in the economy, however they are currently designated, have similar rights and expectations, we need proper enforcement. One of the problems of the labour market in this country is that there are multiple agencies responsible for different parts of different sectors and different aspects of the employment situation. They range from obvious agencies such as the HSE and the gangmasters licensing authority—I was the Minister who set that up—right through to the Pensions Regulator and the DVLA for drivers. We need a fully fledged employment inspectorate backed by an employment tribunal which should be free at the point of access.
I hope that the Bill goes through its subsequent stages and passes, but I also hope that it is accompanied by a rationalisation and an increasing effectiveness of the enforcement aspect.
Another definition that is not addressed in the Bill, but in my view is also out of date, is “pensioner”. While the Equality Act banned discrimination against older workers in 2010, people over the state pension age are defined as “pensioners” and are all too often not treated equally to other workers. With 1.28 million people over 65 still working in the UK, categorising people in this group as “pensioners” is both outdated and wrong. They should be called “older workers” and treated as workers.
Technology change, longevity and changes in attitudes have seen a radical shift in how people work—something which has increased considerably during the pandemic. Until the Summer Recess, the House of Lords showed leadership in this new way of working through hybrid proceedings, although sadly we have reverted to the old way of working for now. The way people work is changing fast, and we must adapt to this. Updating the legal definitions used in employment legislation is an important part of adapting to this inevitable change.
The CBI’s response to the consultation on employment status tried to defend these practices by highlighting that 53% of workers in the gig economy said that they were very or fairly satisfied by their work. That brings to mind some of those early-19th-century pamphlets which sought to claim that many slaves loved being in servitude. Just over 50% is not much to brag about, and, having tried to find the levels of UK job satisfaction in the rest of the population, which seems to be about 60% to 70%, the message is that gig workers have a much lower job satisfaction than other workers in the UK.
I hope Her Majesty’s Government will work with the Bill so we can see a new definition of dependent contractor or something else similar that deals with the current ambiguities and the problems they create. I believe this measure will end practices that exist within the UK labour market, and I give it my support.
Exploiting the gaps between those classed as employee and those classed differently has become an unattractive feature of our labour market in this country. Although Matthew Taylor’s report is now out of date in certain areas, and I would have liked him to have gone further, he did a job in bringing a lot more people’s attention to the problem. It is time to put an end to those practices. They are a blot on our landscape, and the Bill can help consign those practices to history. I hope the Government will give it a fair and supportive wind and that this House sends its smartly on its way today.