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Employment Matters

Taylor made: the future of employment law?
Employment Matters

Employment MattersIssue 6 | July 2017

Date
28 July 2017

Will Winch Managing Associate

In October 2016, Matthew Taylor, the chief executive of the RSA and a former adviser to Tony Blair, was commissioned by the prime minister to conduct a review of modern employment practices.


Taylor made: the future of employment law?

This article was first published in The Law Society Gazette

In October 2016, Matthew Taylor, the chief executive of the RSA and a former adviser to Tony Blair, was commissioned by the prime minister to conduct a review of modern employment practices. He was asked to consider the implications of new forms of work, driven by digital platforms, for the field of employment.

The report, entitled ’Good Work: the Taylor Review of Modern Working Practices’, was launched on Tuesday. As the title suggests, it stresses the need for a focus on the market providing ’good work’, rather than simply jobs that make people cogs in machines. It sets out a number of ways in which this can be achieved, including ensuring that workers have the opportunity to progress in their careers, their health is looked after, and they have a good work/life balance. It stresses the need for workers to have a voice in the running of the business for which they work and encourages employers to use technology creatively for the benefit of their workforce.

A cornerstone of the report is that flexibility is vital for the modern economy, giving people the freedom to choose when to work and what work to accept. However, the report balances flexibility for workers with the risk of exploitation from unscrupulous employers.

Status

Over the years, three categories of employment status have emerged: employee; self employed; and, in between them, ‘worker’. These three categories are essentially points on a spectrum. Deciding which category is appropriate for a particular person can be very difficult, particularly with the advent of new ways of working: digital platforms facilitate the way in which short term work can be provided to individuals, so that it becomes very easy in theory to match supply and demand. As a result, the normal tests for employment status can be harder to apply.

The report has suggested that in order to identify when people become entitled the rights associated with a ‘worker’, the category should be renamed ‘dependent contractor’ if the individual is under the control of, and subordinate to, the employer. Apart from a re-badging, the difference between this and worker status is that the person supplying the labour may be entitled to offer someone else to do the work for them – which would otherwise have disqualified them from worker protection under the current rules. If this change is implemented, it will require a significant re-writing of the statute book to change all references to ‘worker’ to ‘dependent contractor or employee’. Employees are also workers by default – but they will not be both employees and dependent contractors.

In order to ensure that people are enjoying the rights to which they are entitled, the report calls on employers to provide workers with a statement on the first day of their employment which sets out their status and rights (extending the current requirement which only applies to employees), and suggests that the government should give clear guidance on how to determine status. Whether the government can do this in a way that will be practically useful for employers will, however, remain to be seen.

National minimum wage

The report has proposed that gig economy workers who make themselves available for work at times when there is very little work available should be paid on a ‘piece work’ basis that reflects their productivity rather than the time they spend on the job, providing that the employer provides information about the likely hourly wage available at the time the worker makes themselves available for work. This is already proving controversial. Unions and the Labour party have both condemned this as being a retrograde step, taking away the right to the hourly minimum wage. However, guaranteeing an hourly rate is likely either to lead to increased costs to customers to cover loss making periods, or a limit on the available supply of work when demand is low (neither of which fits with the current business models of many gig economy employers).

The report also suggests that a higher national minimum wage should be available to those working on contracts with low guaranteed hours.

Zero hours contracts and agency workers

Taylor has concluded that zero hours contracts and agency workers serve a useful function, but recognises that the system is being abused and some people are trapped in precarious jobs when they would rather be in secure work. He therefore has proposed that workers on zero hours contracts should be given the right to request to move to fixed hours, and employers should be transparent and publish figures about the number of requests received and granted. Similarly, agency workers should have the right to request a direct contract of employment if they have worked somewhere for a year. Whether a ‘right to request’ will be sufficient to eradicate exploitation is questionable.

Other protections

Some of the other notable recommendations of the report include: introducing further protections to zero hours workers who are pregnant or on maternity leave, as they are vulnerable to employers reducing their hours to zero without expressly dismissing them; a call for statutory sick pay to be universally available from the first day of employment; allowing holiday pay to be ‘rolled up’ into someone’s pay if they work irregular hours; making it easier for employees to accrue continuous service; and giving more support to self employed people.

Enforcement

The report has recommended that it should be free to apply to the tribunal for an assessment of an individual’s employment status. The report also says that when assessing an individual’s rights, the employer must prove that the individual is not entitled to the rights they are claiming, rather than putting the burden of proof on the employee. The report also calls for employers to be penalised if they are repeat offenders. It recommends that the process for recovery of unpaid awards should be simplified for workers, and employers should be named and shamed if they fail to pay. It also recommends that the enforcement powers of HMRC should be extended to include failures to pay holiday pay as well as sick pay and the National Minimum Wage.

Tax

In order to address the underlying forces shaping the market, the report concludes that it is necessary to find a consistent and equal way of taxing labour – at present, the self employed pay far less in tax than employees. Moves in this direction did not go down well in the last budget, so it could be a while before anything is done in this regard.

Implementation?

The extent to which the recommendations in the report will be implemented into statute remains to be seen. Theresa May said that she would consider doing so over the summer recess. Before the election, it was likely to have formed the basis of legislation for years to come. However, given the reaction from Labour and the unions, it may only become a ‘best practice’ guide for employers in the gig economy. As Matthew Taylor said, everyone will have their own view; no one will agree with every word.