UK Employment Law Alert | January.08.2015
The key ideas that make up the Small Business, Enterprise and Employment Bill 2014-15 (the "SBEEB") were announced with great fanfare in the Queen's speech in June 2014. Problems with enforcing tribunal awards? We'll fix that! National Minimum Wage not being taken seriously? No problem! Zero Hours Contracts? Easy! But does the current draft of the SBEEB, which reached the committee stage in the House of Lords on 7 January 2015, achieve what was promised, and what impact will it have on your business when it becomes law in the next few months? We discuss the SBEEB's employment provisions, and what this means for your business, below.
Zero Hours Contracts ("ZHCs") have been all over the news for quite some time now. This includes the revelations that Sports Direct workers on ZHCs who were excluded from the 2013 bonus payout have brought contractual claims against the company in an attempt to recover what they believe to be their fair share. Current estimates suggest Sports Direct could face a bill of up to £4m for this treatment.
So what's being done about ZHCs? They aren't being outlawed altogether, but the Government has exclusivity clauses in ZHCs firmly in its sights and intends to make them unenforceable under the SBEEB. This means that as an employer you would be unable to require the worker to be ever-available to you regardless of whether you want them to work or not.
Unfortunately there are employers who still don't pay their workers the National Minimum Wage ("NMW") of £6.50 per hour. Not to mention the thorny issue of engaging unpaid interns.
Currently the financial penalty for failing to pay workers the NMW is subject to a cap of £20,000. The new provisions in the SBEEB, however, mean that employers who breach the requirement to pay NMW could face a potential financial penalty of up to £20,000 per worker who has not been paid their statutory entitlement to the NMW. This marks quite a shift, and will send out a strong message to all those out there not taking the NMW seriously.
There is still time for unruly employers to get their houses in order: the increased fines will only apply to pay reference periods that commence after the SBEEB's new provisions come into effect (expected to be after the General Election).
So what's the catch? Well, first HMRC have got to catch the employers at it and, whilst there has been a renewed focus on naming and shaming those in breach of NMW requirements, there's only so much the powers that be can do without the assistance of whistleblowers and industry tip-offs.
The SBEEB will include a new provision enabling the Secretary of State ("SoS") to make regulations that require "prescribed persons" to produce annual reports of the disclosures of information made to them by whistleblowers (without identifying the workers or employers concerned).
The Government is seeking greater transparency, particularly in the healthcare and financial industries, and believes a reporting process could provide reassurance to whistleblowers that disclosures are being investigated and that action is being taken. There is also an argument that a reporting process would help develop greater consistency in approach across regulators to whistleblowing claims and related investigations.
The current legislation does not impose any obligations on prescribed persons to take action, having received a report from a whistleblower. The Government thinks that a new reporting requirement may encourage prescribed persons to act.
Whilst the amendment has been broadly welcomed by interested parties, such as Public Concern At Work, there is some scepticism about how much a reporting requirement would actually achieve. Information received by prescribed persons is likely to be limited, in particular given that (a) most whistleblowers go to their employers in the first instance, and (b) referrals from Employment Tribunals ("ETs") will remain voluntary.
Another unfortunate, but perhaps unsurprising, feature of modern day employment law is the volume of ET awards and settlements that go unpaid. This is of even greater concern following the introduction of tribunal fees for claimants last year, who now have to pay these fees, meet their legal costs, and still take the high risk of not receiving their award if they win.
The SBEEB will address this problem with the introduction of financial penalties for non-payment of awards. In the new procedure the non-paying party will be sent a "warning notice" by an "enforcement officer". This will explain that they have 28 days to put right the non-payment or make appropriate representations regarding their non-payment or ability to pay.
If the warning notice expires without receipt of payment of the award/settlement, a "penalty" notice" will be issued. This notice will require payment of a penalty to the SoS of up to 50% of the unpaid sum (subject to a minimum of £100 and maximum of £5,000). This must be paid within 28 days. Like parking tickets, if the employer pays the amount owed and the penalty within 14 days, the penalty will be reduced by 50%.
It is currently not clear whether the penalty will be sought through the ET or civil courts, and this will have an impact on cost, with civil courts likely to be higher. The SBEEB also fails to address what is thought to be the root cause of the problem, namely employers in financial difficulty; requiring further payments to be made by employers/respondents who have already run out of money isn't going to be much use to claimants. The Government has said it will produce further information on whether penalties received will go towards unpaid awards; we would hope it would, for obvious reasons!
So how much will these changes affect your business? Unless you frequently find yourself before an employment tribunal, don't pay NMW, currently utilise ZHCs or tend to garner a lot of whistleblower attention, the answer is "not much"!
As was largely expected, ZHCs have been the employment focus of the SBEEB, and there is keen interest in how the ban on exclusivity clauses will play out in those industries that rely on ZHCs. If this means you and your business, it's an issue you should take seriously; we recommend you seek specialist employment advice and establish a suitable alternative that works for you and your employees.
However, the SBEEB is aimed at real problems within the employment sphere, and so may lead the way to further reforms in due course. Once enacted, the new Government can take stock of whether or not the measures are tackling the problems identified (we predict largely not), and the way may be paved for further, stronger reform.
The Small Business Enterprise and Employment Bill reached the committee stage in the House of Lords on 7 January 2015. Track its progress here.