Status of Workers Bill [HL] - Second Reading

– in the House of Lords at 10:06 am on 10th September 2021.

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Lord Hendy:

Moved by Lord Hendy

That the Bill be now read a second time.

Photo of Lord Hendy Lord Hendy Labour

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.

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.

Photo of Lord Blencathra Lord Blencathra Chair, Delegated Powers and Regulatory Reform Committee, Chair, Delegated Powers and Regulatory Reform Committee 10:16 am, 10th September 2021

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—

Noble Lords:

Hear, hear!

Photo of Lord Blencathra Lord Blencathra Chair, Delegated Powers and Regulatory Reform Committee, Chair, Delegated Powers and Regulatory Reform Committee

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

“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.

Photo of Baroness Bloomfield of Hinton Waldrist Baroness Bloomfield of Hinton Waldrist Baroness in Waiting (HM Household) (Whip)

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.

Photo of Lord Whitty Lord Whitty Labour 10:22 am, 10th September 2021

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.

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.

Photo of Baroness Greengross Baroness Greengross Crossbench 10:26 am, 10th September 2021

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.

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.

Photo of Baroness Blower Baroness Blower Labour 10:30 am, 10th September 2021

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.

Photo of The Bishop of St Albans The Bishop of St Albans Bishop 10:33 am, 10th September 2021

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.

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.

Photo of Lord Monks Lord Monks Labour 10:37 am, 10th September 2021

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.

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.

Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative 10:40 am, 10th September 2021

My Lords, it is a pleasure to take part in this Second Reading. I congratulate the noble Lord, Lord Hendy, on his Private Member’s Bill and the way in which he introduced it. It is high time that clarity was brought to this area, and the Bill brings that clarity.

I shall focus on a particular category that I will be speaking on at a later stage of the Bill; I hope that the noble Lord, Lord Hendy, will welcome that. That is the situation for unpaid interns, those who are asked to give of their labour for zero pay, a pernicious practice that persists and, unfortunately, has been only exacerbated over the Covid crisis. Here are some of the statistics: 83% of college students say that they have had to undertake unpaid internships, and 52% of university students. Even more worrying, 62% of young people said that they have had to undertake unpaid internships for longer than four weeks, and a shocking 16% of young people said that they have undertaken unpaid internships for more than six months.

Social mobility is yet another casualty of the Covid pandemic. The statistics tell their own story. We are in the midst of a skills crisis, yet companies are still asking people to give of their labour for free. If the individual wants to bring a case, the onus is on them to bring that case. As well as supporting the Bill, I urge all noble Lords to get behind the hashtag #payinterns. It is not just a question of social mobility; we can do so much using all the powers of social media.

Wilberforce brought an end to and slammed the door on slavery in the 19th century. The national minimum wage came in in the 20th century. How can it be that, in 21st-century Britain, the fifth-largest economy on the planet, we still allow unpaid internships to persist? I ask my noble friend the Minister whether he believes that we should bring forward legislation to end unpaid internships, and whether he sees the Bill of the noble Lord, Lord Hendy, as an opportunity to extend that possibility.

Unpaid internships, begone; underpaid workers, receive proper pay; underpaid employment, begone. This Bill brings clarity to an area urgently which has needed it for decades. I urge all Members to support it and give it swift speed through the Lords. It is not a question of party politics; it is a question of economic, social and psychological benefit. It ties in to the Covid build back; it ties in to the levelling-up agenda; in short, it is about making Britain work better for all.

Photo of Baroness Donaghy Baroness Donaghy Chair, EU Services Sub-Committee, Chair, EU Services Sub-Committee 10:43 am, 10th September 2021

My Lords, I congratulate my noble friend Lord Hendy on his Private Member’s Bill, and on making the issues so clear and understandable. When I chaired ACAS, it was a humbling experience to listen to the helpline and see the reality of how human beings can be treated in the UK.

I shall concentrate on why the Bill will be good for employers and government revenue. When I was invited to employers’ groups during my time at ACAS—I accept that they were the conscientious employers and probably at the better end of the labour market—they wanted fairness and a level playing field, not to be undercut by less scrupulous employers. They wanted clear guidance as to their obligations and responsibilities.

If we could deal with bogus self-employment in the construction industry, referred to by my noble friend Lord Monks, we might get a more settled workforce, encouraged to improve their skills and report health and safety incidents. If workers have no job security, they are unlikely to report dangerous work practices on the Friday, to find they have no job on the Monday.

I had the privilege to serve on the Personal Service Companies Select Committee, under the exemplary chairmanship of the noble Baroness, Lady Noakes. The committee expressed its concern that individuals working through personal service companies might not be aware that they had forgone at least some level of employment protection and benefits to which they would be entitled if they were in conventional employment. As my noble friend Lord Hendy said, the real employer is insulated against any responsibility whatever for their rights.

Were the Government concerned about the Select Committee’s work? The Treasury Minister refused point blank to attend the committee, despite requests from the noble Baroness, Lady Noakes. In the seven years since the report came out, things have got worse. The right reverend Prelate the Bishop of St Albans referred to lost revenue to the Exchequer. The taxpayer is subsidising the payroll bills of the unscrupulous employer.

The noble Lord, Lord Callanan, has written that the

“three-tiered Employment Status structure provides the right balance for the UK Labour Market”.

It certainly does not provide any balance for women, the BAME community, the disabled and those seeking job security. Self-employment can be brilliant for those who want it, but 1.85 million so-called self-employed earn less than the national minimum wage, more than half of them women. The Government have said that bogus self-employment should be determined by individual cases at employment tribunal. That is all very well, but it comes over as a bit cynical, given the backlog of cases at employment tribunals and their geographical inaccessibility. There is no fairness or justice here.

Finally, the extreme flexibility in the labour market can come back and bite the economy. The shortage of HGV drivers will lead to distortions in pay and conditions. A care worker who decides to work in a supermarket or a warehouse will not help the hundred thousand vacancies. It leads to low skills, low expectations and little loyalty. There is a chance to build and progress in the Bill, and I urge the Government to accept it.

Photo of Baroness Wheatcroft Baroness Wheatcroft Crossbench 10:47 am, 10th September 2021

My Lords, I welcome the Bill and thank the noble Lord, Lord Hendy, for presenting it in such an effective way. The law can sometimes be an ass and, looking at the distinctions which currently exist in employment law, you can hear it braying. It is time for change. That in 2021 our law still preserves the right of businesses to treat those who labour for them in the way that 19th-century mill owners did is something of which we should all be ashamed. It was in 1819 when the cotton factories Act was passed, and among its provisions was that workers had to be nine years old. We have moved on from there, but nowhere near far enough. At that stage, mill owners argued that any changes to the labour laws would hit productivity and increase prices. What they meant was that they would lower profits. We need businesses to make profits, but not through unfair exploitation of labour. We should have moved on to something much better than that.

In fact, though, the problems are still huge. The Joseph Rowntree Foundation found in 2017-18 that 4 million workers lived in poverty, and half of the workers living in poverty were in full-time employment. Nobody can sit in this Chamber and feel comfortable with that statistic. The way things still work in far too many businesses is that companies pay their chief executives and other top staff huge salaries, and pay generous dividends to their shareholders, yet many of their workers are having to claim universal credit. How can that make sense? The taxpayer is subsidising the chief executive’s salary and the dividends. I find that very hard to justify.

We need businesses to compete fairly, and some of them are cheating—there is no other word for it—by taking on people on terms that they will not even understand. How many people really know the difference between being an employee and being a worker? It is a totally bogus distinction. Those companies are out to defraud the country and to defraud their competition, and we must stop them being able to do that. This Bill is a wonderful way to do it.

The Bill also plays absolutely into the levelling-up agenda. It must be fair to make sure that workers who provide their labour do so on equal terms unless they choose to be fully self-employed. I absolutely respect and applaud the right of some people to be self-employed. If you work from home and are self-employed, why not live somewhere in the sun, as many youngsters are now deciding to do, and be in charge of your life, with the work/life balance that you want? But not many people can afford that sort of luxury. They want the security of full-time employment, albeit with flexible hours. If we believe in compassionate capitalism, that is what we should guarantee. I have heard many speeches this morning that I am sure will have swayed the Minister, but I look forward to hearing how, if he does not support the Bill, he can justify that.

Photo of Lord Browne of Ladyton Lord Browne of Ladyton Labour 10:51 am, 10th September 2021

My Lords, I too commend my noble friend Lord Hendy on bringing forward this Bill, on his excellent introductory speech, on the very accessible briefing that he provided to us all in advance, which I found really valuable, and consequently on providing the opportunity to debate this important issue. I am pleased to stand here able to say that every speaker before me, from all sides of the House, has supported this Bill. It urges me to remind the Minister that in 1998, when I came into Parliament, the Conservative Party was on the wrong side of history on the national minimum wage and kept me up all night on many occasions trying to defend the indefensible. I urge him not to get on the wrong side of history on this and have his Government tarred with that brush, because at some point in the relatively near future they will have to backtrack, as they have done already.

Perhaps my noble friend Lord Hendy would not have had to do this had Theresa May not lost office before she was able to fulfil her Government’s commitment of 2018 to legislate in this area, or if Boris Johnson had not broken his promise to bring forward an employment Bill, set out in the December 2019 Queen’s Speech, no less. Clearly, the Government understand this problem and the implications of it for millions of hard-working people. Why else would they have set out plans in the December 2019 Queen’s Speech to introduce an employment Bill, among other things, to tackle it? Instead, they chose to leave workers’ rights behind, not only by leaving this out of the most recent Queen’s Speech but by backtracking altogether, with the Minister outlining the Government’s new belief, as my noble friend Lady Donaghy said, that the current system

“provides the right balance for the UK labour market”.

The experience of the most important element of that market, the labourers, is that this is not true. If the Minister intends to deploy this argument in a response of resistance to my noble friend’s elegant solution, please will he not just reassert it but direct us to the evidence that supports it. It is directly contrary to the reasoned analysis, conclusions and recommendations of the Taylor review, published in 2017, and the consultation on employment status, run in 2018, which in turn led to the May Government’s commitments.

Like other noble Lords, I am grateful for the briefings that I received from the Library, the IER and the TUC, not to mention from my noble friend Lord Hendy. They are redolent with evidence of injustice and potential and actual abuse, which demands redress. In the current context, if the pandemic has taught us one lesson, it is the importance to well-being, to productivity and consequently to the economy of people feeling safe, secure, and valued in their work. My noble friend made this very point, but with respect, it was expressed better by Andy McDonald, who in July wrote:

“Millions of workers have had no access to statutory sick pay, both worsening the impact of the pandemic and exacerbating financial insecurity. In-work poverty is the highest it has been this century, with one in six working families on the poverty line. Approximately 3.6 million people are in insecure work, meaning they don’t know when they will work or how much they will earn … Throughout the pandemic, the devastating consequences of unsafe working conditions, financial insecurity and the lack of a strong worker voice have made the need for urgent change clear.”

However, the pandemic has also seen us adapting to new flexible ways of working. I accept that we need a system which allows this flexibility. None of us is arguing against that. As other noble Lords have made clear, the Labour Party supports the creation of a single status of worker, to ensure that all workers receive the rights and protections that Parliament has said that employees should have. My noble friend’s Bill offers a solution that is entirely consistent with that ambition. I fully support it. I have no doubt that in its later stages there will be debate about the finer details. I look forward to further education on those details. If we can get this Bill right, which we should be able to do, many fewer people will have an experience of work that is challenging to their well-being, mental health and productivity, and consequently, to our economy.

Photo of Lord Moylan Lord Moylan Conservative 10:56 am, 10th September 2021

My Lords, I rise with considerable trepidation to disagree with the noble Lord, Lord Hendy, on a matter of employment law in which he is such an expert whereas I am not even a lawyer. I had not expected to find myself in disagreement with everyone who has spoken so far, but I have genuine concerns about this Bill.

I start with a small technical issue which I may well have got wrong; the noble Lord may correct me. It seems to me that someone who is serving as a non-executive director of a company or a public body, as I do on the Ebbsfleet Development Corporation, would be caught by this Bill and effectively have to be made subject to a contract of employment, thus becoming an employee of the body that they were meant to be supervising. I cannot imagine that was the noble Lord’s intention and I may well have got it wrong; it is a point that can be dealt with at later stages of the Bill. I use it to illustrate the fact that the argument for this Bill, that the current situation is messy, with four, five, six, seven or however many different statuses you count for people who work, fails to recognise how messy and complicated real life actually is. If anything, to catch up with the modern labour market, this Bill would create more categories rather than trying to reduce them, in effect, to two or, at maximum, six, depending on how you cut the noble Lord’s cake.

On the point about changes in the labour market, I was very comfortable to hear what the noble Baroness, Lady Greengross, had to say, because we cannot go back to looking at the labour market in terms of a monolithic industrial market from the 1960s and 1970s, with a small number of large employers and a very large number of more or less substitutable industrial workers. Yet that seems to be the sort of lens through which this Bill is being looked at.

I am surprised that so far in the debate there have been no comments about the effects on employment, particularly youth employment, that this Bill might have. We may all be assuming that the very welcome consequences for the labour market of Brexit, mentioned by my noble friend Lord Blencathra, and rising wages and tightness of labour markets, will mask any of those effects, so that, net, we will see very few, but none the less, we must factor that in. It is very surprising that nobody has mentioned it.

My next point is slightly more difficult and is about the dignity of work. If work is one of the curses we take from our expulsion from the Garden of Eden, the dignity it can confer on humanity is part of that recompense. There are many people in this House—I am one of them and I venture, without absolute certainty, that as a practising barrister the noble Lord, Lord Hendy, is another—who have been what he would regard as genuinely self-employed for much of our lives. We have not had the protective benefits of a contract of employment, but nor have we had the downsides: that is, being told what to do, having a boss and having people who now take it as their responsibility, in some cases, to decide what you can do in your private life and your social media. But we decide and assume that this is what other people want and would benefit from.

I regard this as essentially a backward-looking Bill that does not embrace changes in the labour market and makes rather patronising assumptions about what is good for other people that we would not accept. I hope that we can reflect on that, consider whether it should proceed and how it might be amended in future to remove those objections.

Photo of Lord Sikka Lord Sikka Labour 11:00 am, 10th September 2021

My Lords, I congratulate my noble friend Lord Hendy on this much-needed Bill. He has my full support. It seeks to modernise employment law—something the Government have failed to do, despite numerous promises. It would give millions of long-exploited gig workers greater rights, including a statutory minimum wage, statutory sick pay, statutory paid holidays, maternity and paternity pay, protection against unfair dismissal, minimum notice periods for ending employment and much more. As other speakers have pointed out, it would also improve the collection of income tax and national insurance contributions as well.

The Bill is more than just a piece of employment legislation; it is a bedrock for rebuilding our society by improving workers’ rights and, with it, the distribution of income and wealth to lift millions out of misery. Zero-hours contracts and fake self-employment have been used to reduce workers’ share of GDP, in the form of wages and salaries. It now stands at around 49.4%, compared to 65.1% in 1976. This rate of decline is unmatched in any other industrialised nation and must be reversed. This Bill provides small beginnings for that.

Some 14.5 million people, including 4.3 million children, live below the poverty line. It is a serious indictment of our society that people in employment have to rely on food banks. Eight in 10 people claiming universal credit are in work or looking for work. Too many find it difficult to pay their rent and their energy, water and broadband connection bills. Millions of schoolchildren go hungry. Children living in poverty are more at risk of being exploited by or becoming victims of criminal gangs.

The current pandemic has shown that thousands of people have died because they lacked access to good food and housing and could not take time off for emergencies. Employment rights are the key to addressing so many of our social problems. Improving the employment rights of just one person improves the quality of life of the whole family. It reduces chances of homelessness and improves possibilities of nutritional food. Greater worker rights reduce anxiety and insecurity, which improves mental health and reduces pressure on social care, the NHS, GPs and the healthcare system. Greater worker rights reduce pressure on the social security system, so fewer people will need social security benefits. Better distribution of income flowing from better employment rights lifts people out of poverty permanently.

The Government have a history of opposing emancipatory change in employment laws and elsewhere, but I hope they will curb their instincts and support the Bill for the enormous social benefits it will bring.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green 11:04 am, 10th September 2021

My Lords, it is a great pleasure to follow the noble Lord, Lord Sikka, and to offer the Green group’s support for the excellent Bill introduced by the noble Lord, Lord Hendy, which he so clearly and powerfully outlined. I was standing in this very spot yesterday, speaking in the debate on the £20 cut to universal credit. As many speakers highlighted then, the majority of people affected by that are in work. The fact is that we have created a legal framework in the UK in which work very often does not pay.

The noble Lord, Lord Blencathra, in offering his very welcome and perhaps slightly surprising support for this Bill, gave some anecdotes about where he has seen wages rise in response to a shortage of labour supply. That is true in some parts of the country, for some kinds of jobs, but there are still many parts of the country where that is not the case and where we see a situation in which people are forced into any job they can find, at any wage rate.

In his introduction, the noble Lord, Lord Hendy, said a simple definition of a worker is a person who works for a living. Of course, we have a society at the moment where people are forced to do that or starve, and we do not regulate that work to ensure that it gives people decent conditions. If we had a universal basic income society, which gave people a genuine choice about whether to engage in employment and on what terms, we would be changing the balance of power in that relationship on an individual basis. But that is not where we are: we have benefits that apply high levels of conditionality, so people are forced into exploitative jobs. That is where we are now, and the Bill would go some way towards addressing that situation.

One of the other things that workers can do, sometimes under extreme difficulty, is organise and get together. In contemplating this Bill, I thought back to various picket lines I have been on, particularly with the Independent Workers’ Union, the IWGB, with cycle couriers, who are the kinds of people who have worked for the same company, sometimes for decades, under extremely insecure conditions. Back in 2015, I was on a picket line with some who had not seen their pay rise in 15 years. I am not talking here about rises in real levels; I am talking about pounds and pence—people paid the same money over 15 years, unable to raise it. That is the situation we have now.

I will focus particularly on the construction industry because, both in your Lordships’ House and in society in general, there is very little awareness of the extreme precarity and forced fake self-employment circumstances in which 60% of manual construction workers find themselves. Now, my father was a builder; I know something about what life is like in the building trade. It is hard and still terribly dangerous, and I echo the comments of the noble Lord, Lord Whitty, about our utter failure to regulate so many aspects of employment, not just wages and conditions. The comments of the right reverend Prelate the Bishop of St Albans highlighted the way in which we have put so much pressure on workers to negotiate with their employers in conditions of extremely unequal power, knowledge and resources, and so are forced into unfavourable situations.

Finally, I will pick up on the point from the noble Baroness, Lady Wheatcroft, who, as other Peers have said, stressed how exploitative, unscrupulous companies are then advantaged against those that might want to be or are doing the right thing. We are talking here about some of the largest multinational companies in this land, which behave differently in other nations but exploit the workers of the UK.

Photo of Lord Davies of Brixton Lord Davies of Brixton Labour 11:09 am, 10th September 2021

My Lords, I join in the tributes to my noble friend Lord Hendy for introducing this Bill. I am also honoured to follow distinguished colleagues from the trade union movement who set out so clearly why this Bill is required.

I support this excellent and essential Bill, but I will refer specifically to what it will do to end what I call pensions arbitrage—there is always a pensions angle. My noble friend identified the different categories of worker. It is important to recognise that they accrue different pension rights. This problem is recognised. The OECD, in the latest edition of its regular report on pension trends, Pensions at a Glance, concluded:

“The emergence and expansion of new forms of work has amplified the pension issues related to non-standard work, especially among low-income earners.”

It is correct to say that we cannot turn back the clock on the development of pension trends, but new forms of work must not leave people worse off in retirement.

In the UK, the issue is mainly about automatic enrolment, which is broadly seen as a success, but one of its deficiencies is that the self-employed are excluded. It is a live issue; considerable thought and attention are being given to the knotty problem of how you automatically enrol self-employed people. The process of automatic enrolment depends in practice on there being an employer but in reality, most of the problem with automatic enrolment and the self-employed, as identified by my noble friend, is bogus self-employment. My belief is that, by sorting out bogus self-employment, many workers will end up with a better pension in retirement. There is a direct connection between the conditions at work and the incomes people receive in retirement. I urge noble Lords to support the Bill for a range of reasons, but improving pensions is key.

Photo of Lord Balfe Lord Balfe Conservative 11:12 am, 10th September 2021

My Lords, I think that as the last Back-Bench speaker, I am the last of the people to congratulate the noble Lord, Lord Hendy, which I warmly do on this excellent Bill. It is significant that, with just one exception, it has received support from all parts of the House. I add to that support.

In particular, I draw attention to the fact that the way the Bill is determined and done will stop employees being able to enter into bad situations where their employers do not pay national insurance and, as the noble Lord, Lord Davies, just mentioned, pension contributions. In so doing, they are of course putting a charge straight back on to the state. National insurance and pension contributions, if not paid, will end up being the state’s liability, so it is in the interests of the Government, of whichever party, to close these loopholes. This very well-thought-out Bill does exactly that.

I have a couple of questions. One is for the Labour Front Bench. Does the Labour Party support this Bill? Will it carry on supporting it? I have lived through a lot of opposition and I am well aware of parties taking the easy opposition position of saying, “Oh yes, we support it”, but I would like to have it on the record from the Labour Front Bench that they support the Bill.

Even more so, I hope that the Government will look at ways they can support the Bill and its aims and help to get it through this House. As we all know, getting a Bill from Second Reading to the end of its passage is an enormously difficult procedure. It does not work very often in this House. We will need a lot of good will and help. I am sure that the noble Lord, Lord Hendy, will be willing, in so far as compromises or amendments are needed that strengthen the Bill and maybe change it slightly, to give them his full support. They will certainly have mine.

My final point—I have said this many times—is that we have to stop regarding the rights of workers as the sole province of one political party. Workers in trade unions and outside them support all the political parties of this country—the major ones, but also the Greens, Plaid and the like. We have to start looking at labour legislation much more directly, rather than saying, “Oh, it’s from the noble Lord, Lord Hendy; he’s Labour, therefore we oppose it.” We have to start saying, “What does this legislation actually do?” From reading the Bill, it benefits workers of all political persuasions, all nations and all parts of this country. We owe it to all those workers to pull together and do the best for all of them.

Photo of Lord Etherton Lord Etherton Chair, Charities Bill [HL] Special Public Bill Committee, Chair, Charities Bill [HL] Special Public Bill Committee 11:16 am, 10th September 2021

As Master of the Rolls, I presided over the Court of Appeal hearings in the Uber case and its predecessor, the quite well-known Pimlico Plumbers. Our judgments were upheld in the Supreme Court. It is my experience in those cases that has led me to agree with and to support the Bill, in particular the designation of a single status for employees and workers. The specific problem that arose in those two cases, as many Members of the House will appreciate, was that the contractual documents of engagement presented the arrangement as one of self-employment, but that did not fit the facts on the ground.

The problem was exacerbated by the fact that the documents were drawn up, particularly in the Uber case, by banks of lawyers, in that case lawyers in both the United States and Holland. I personally found it almost impossible to understand exactly what was being said in the documentation. It led, in the Uber case, to a division of view and a 2:1 decision. My view, which was upheld in the Supreme Court, was that the Uber drivers were workers, but it meant that one had first to try to understand literally pages and pages of legalese, which was well beyond the competence of any ordinary member of the public or, I would say, any non-lawyer, and many lawyers as well.

This type of difficulty has led to the necessary invention of a principle peculiar to such situations in labour relations, whereby one can look through the terms of a contract to try to understand what the actual reality is on the ground. This is not good for the law. One of the crowning glories of the law in this country is its certainty, which rests on contract. There are very limited circumstances in which one can ignore the terms of a contract, whether fraud or sham or whatever it may be.

The situation that has arisen, which can give rise to, as in those cases, very long, extremely difficult and expensive hearings, is that you are effectively left looking at the contract but ignoring it where you think it ought to be ignored. This leads to unfairness, a lack of certainty in expectations, unfairness on the worker or expensive and protracted litigation. For those reasons in particular I support the Bill and I hope others will too.

Photo of Lord Bassam of Brighton Lord Bassam of Brighton Shadow Spokesperson (Digital, Culture, Media and Sport) (Sport), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade) 11:20 am, 10th September 2021

My Lords, I rise from the Labour Benches to support this excellent Bill from my noble friend Lord Hendy and to congratulate him, as all others in the House have, on his excellent and forensic introduction of it. It is, as one noble Lord described it, a very elegant solution. I say to the one dissenter in the House this morning, the noble Lord from the Conservative Benches, that he should probably have a discussion with the noble and learned Lord, Lord Etherton, having heard what he said to us about the state of the law in its current form.

It is unacceptable that millions of workers face insecure employment with low pay, few rights and few protections. The fact that this particularly affects key workers, whose efforts have got the country through the pandemic, is even more distressing. As we have heard today, around 3.6 million workers are in insecure labour. Employers are increasingly scheduling and cancelling shifts at short notice, and 84% of zero-hours contract workers are offered work at less than a day’s notice. Some 15.6% of caring and service workers are insecurely employed, and disabled workers, women and black and minority ethnic workers are all more likely to be in insecure labour too.

How can it be right that so many people face such insecurity? How can it be right that, as we have heard today, so many workers in the UK live in poverty and on poverty wages propped up by universal credit? How can it be right that this situation exists? How can the Government claim to be at the helm of a functioning economy when the existence of food banks has, sadly, become the norm throughout the UK? This insecurity is bad for working people, damaging for the economy and, as we have seen through the pandemic, devastating for public health.

This insecurity stems directly from the statute book. Even the Government recognise this, or seemed to, and had promised to bring forward an employment Bill, but that promise, like many others, has been broken with the legislation seemingly dropped from the Queen’s Speech earlier this year. Perhaps the Minister can explain whether that Bill will ever see the light of day, let alone be introduced to Parliament.

Turning to my noble friend Lord Hendy’s elegant solution, his Bill seeks to fix flaws in our current law where separate employment statuses exist, such as employee, limb (b) workers and the bogus self-employed. Each of the three existing categories has separate accompanying protections with qualifying periods for rights such as statutory maternity, adoption, paternity and shared parental leave. There have been many cases where employers actively exploited the separate categories by falsely putting workers in a category with fewer rights.

For example, concerns have been raised for many years about the extent of bogus or false self-employment in the gig economy where individuals are registered as self-employed although they should qualify for employee or worker status. As we have heard today, this was seen in Uber v Aslam, where Uber drivers argued that they were workers while Uber maintained that they were self-employed contractors. This unfairness must end and all workers must receive the proper rights and protections.

Therefore, we on these Benches support this legislation to create a single status of worker. It would replace existing employment categories and remove qualifying periods for basic rights and protections to give workers day-one rights in the job. This would ensure that all workers receive rights and protections, including statutory sick pay, national minimum wage entitlement, holiday pay, paid parental leave and protection against unfair dismissal. It is important to stress that those who are genuinely self-employed would retain their status as being self-employed.

Does the Minister agree that this would be a positive step forward, or does he believe that, as he recently said, a three-tiered employment status structure provides the right balance for the UK labour market? If it is the latter, can he explain what he means by the right balance? I think the House deserves to hear an answer to that. It is a question that many have asked.

We need to tackle working arrangements that leave millions without a regular wage, key rights and important protections. Workers should and must receive them from day one of their employment, and that is what a Labour Government would do and what this Bill seeks to do. Can the Minister really be on the side of the worker if he opposes this legislation?

It is clear that we need to go much further than this Private Member’s Bill. That is why we are calling for additional rights and protections for the genuinely self-employed, including statutory sick pay, the right to flexible working for all workers as a default, the right to switch off from work outside working hours and new rights to protect workers from remote surveillance. Do the Minister and the Government support those proposals? Does the Minister now see the need for a full and broad-based employment Bill to be introduced as soon as possible? Does he see protections for workers as part of the levelling up agenda? The noble Lord, Lord Holmes, and many other noble Lords today clearly do.

We need a new deal for working people, and my noble friend Lord Hendy’s proposals in this Bill should be front and centre. I hope that the Minister and the Government agree. We will be listening very closely to his reply.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 11:25 am, 10th September 2021

My Lords, I congratulate the noble Lord, Lord Hendy, on securing a Second Reading for his Private Member’s Bill. I thank all noble Lords who have contributed. We had contributions from all sides of the House, except, surprisingly, from the Liberal Democrats. We had no contributions from the Liberal Democrat Front Bench or Back Benches. Perhaps it is a subject that they think is not so important.

Let me begin by recapping how our current employment status framework operates. Individuals’ employment rights are determined by their employment status. Employment status is based on the nature of the relationship between an individual and the person for whom services are provided. In the UK, there are three employment statuses. Is “statuses” a word? I think it is. Employees are entitled to all rights, subject to qualifying periods, and have responsibilities towards their employer. Limb (b) workers—which I realise is an unusual term but is how they are defined in legislation—are entitled to only some rights but have increased flexibility with more freedom over when, how much and where they work. Self-employed individuals generally have no employment rights but have complete flexibility in their work since they are in business for themselves. Agency workers can have any of the employment statuses I have described, but they benefit from additional protections under separate legislation.

I agree with many of the points made by my noble friend Lord Moylan and believe that our three-tiered employment status framework provides the right balance for the UK labour market by allowing flexibility, for both employers and individuals, while ensuring workers have fundamental protections, such as entitlement to a national minimum wage and the right to holiday pay.

Turning to the contents of the Bill, I understand that the noble Lord, Lord Hendy, introduces this Bill to ensure that vulnerable workers are protected from exploitative practices. The Government share his concerns, which were also expressed by a number of other Peers including the right reverend Prelate the Bishop of St Albans, and it is clear that everyone deserves to be treated fairly at work and rewarded for their contribution to the economy, in terms of both fair pay and fair working conditions. However, the Government do not believe that this Bill is the best way to achieve this goal. I believe that creating a single worker status would inevitably stifle the flexibility and dynamism of the UK labour market when it is most needed to help the economy recover from the pandemic.

As the noble Baroness, Lady Greengross, observed, the world of work is changing. Recent case law, such as the Uber Supreme Court judgment—I listened with great interest to the excellent contribution to the debate by the noble and learned Lord, Lord Etherton—has acknowledged that those who work in less conventional ways, including gig workers, can work flexibly and have fewer responsibilities to their employers and still be entitled to a number of important rights.

I believe that, rather than protecting vulnerable workers—here I disagree with the noble Lord, Lord Hendy—removing the limb (b) worker status may create a bigger cliff-edge between a single worker status and self-employed status. It could introduce a stronger incentive for businesses to opt for self-employment models, potentially even leading to a number of current limb (b) workers losing entitlement to employment rights rather than gaining more, and I am sure that that was not the noble Lord’s intention.

However, the Government recognise that it can be difficult to determine the employment status of some individuals with less traditional employment relationships, including in the gig economy. As the noble Baroness, Lady Donaghy, said, individuals need to understand their rights. We will continue to consider options to improve clarity around employment status, engaging externally with interested parliamentarians and across government on how best to address those issues in a post-Covid scenario.

Finally, I remind noble Lords—in particular my noble friend Lord Blencathra, who asked about this—of the number and range of actions the Government have taken, and are committed to take, to protect vulnerable workers while maintaining the flexibility of the labour market. Our comprehensive economic response to the pandemic has protected something like 14 million jobs and people through the furlough and self-employed schemes at a cost of £88.5 billion.

We took action to make sure that workers on zero-hours contracts have not been stopped from looking for or accepting work from another employer, and banned the use of exclusivity clauses in zero-hours contracts to give workers more flexibility. When parliamentary time allows, the Government will also bring forward a measure to request a more predictable contract to give qualifying workers greater certainty around their hours and income.

We will extend the permissible break in continuous service for employees from one week to one month. This measure will make it easier for those who have intermittent or flexible working patterns to access employment rights and will deter businesses from engineering breaks in employment to deny individuals important employment rights.

I will respond directly to the point from my noble friend Lord Holmes of Richmond about unpaid interns. The existing legislation and enforcement are sufficiently robust to ensure that workers undertaking work experience or internships should get the national minimum wage. If anyone thinks they should be getting the national minimum wage and are not receiving what they are entitled to, they can complain to HMRC or call the ACAS helpline; complaints are anonymous. I hope that deals with the point made by my noble friend.

In conclusion, I thank the noble Lord, Lord Hendy, for bringing the Bill to the House and enabling this debate. I have not been convinced that the Bill is the right solution to further protect those in insecure work, but the Government will continue to take steps to protect vulnerable workers where needed, including through the forthcoming Employment Bill.

Photo of Lord Hendy Lord Hendy Labour 11:32 am, 10th September 2021

My Lords, I am grateful for and humbled by the support around the House for the Second Reading of the Bill. I am grateful to all speakers who have contributed, particularly the noble Lord, Lord Moylan. Were it not for him, the heroic defence of the current situation by the noble Lord, Lord Callanan, would have stood alone.

It will be understood that I mean no disrespect by not summarising the elegant arguments put forward both for and against the Second Reading of the Bill, but I will take up just a couple of points. First of all, I would like to say how grateful I am for the support of the noble Lord, Lord Blencathra, and his reference to caring capitalism. Personally, I prefer caring socialism, but caring capitalism appears to be an achievable aspiration that is appropriate to aim for with this Bill.

I am grateful to the noble Baroness, Lady Greengross, for pointing out the particular vulnerability of young workers and older workers, and to the right reverend Prelate the Bishop of St Albans for expressing Christian support for the Bill and drawing to our attention the benefit to the state in increased tax and national insurance that would follow from the adoption of the Bill—a point reiterated by the noble Lord, Lord Balfe.

The noble Lord, Lord Holmes, raised a point about unpaid interns. I looked again at the Long Title of my Bill, and unfortunately I do think I would be able to persuade the authorities to include an amendment that dealt with unpaid interns—but I completely agree with him that unpaid internships should not be permissible except as a certified part of a formal educational course.

I loved the reference by the noble Baroness, Lady Wheatcroft, to the current law as a braying ass. That is a phrase I shall remember and cherish. She reminded us of the continuous struggle over centuries for the dignity and rights of workers to be protected by statute. This Bill is simply the latest attempt to achieve that.

The noble Lord, Lord Moylan, made an important point about the status of directors. Currently, directors may or may not be employees. Indeed, under this Bill they may or may not be workers; it will depend on the arrangements. I would be happy to accept an amendment to clarify the status of directors, but I am not prepared to accept Uber drivers having their contracts rewritten to make them all directors of some fictional Uber company. The noble Lord, Lord Moylan, pointed to the messy complexity of real life, but the noble and learned Lord, Lord Etherton, for whose judicial support I am grateful, pointed out that the messy complexity is in fact created by the state of the law and the exploitation of it by employers’ lawyers.

I indicated that I was not going to deal with those who kindly supported this Second Reading, but I must just mention my noble friend Lord Davies of Brixton’s intervention drawing attention to the way the Bill would protect pensions. The noble Lord, Lord Balfe, also drew attention to the fact that the protection of workers ought to be a cross-party issue; I agree with him on that.

The opposition to the Bill from the noble Lord, Lord Callanan, really boils down to an assertion that the current state of the law provides the right balance, which no other speaker apart from the noble Lord, Lord Moylan, accepts. He says that is based on the preservation of flexibility and the fundamental protections that currently exist for workers. So far as flexibility is concerned, I am afraid I cannot understand why it can be said that flexibility depends on the absence or restriction of employment rights. Flexibility is perfectly possible with full employment status and the rights that go with it. There are thousands, tens of thousands, hundreds of thousands—if not millions—of workers on flexible contracts who are still employees, so that argument simply does not hold water.

As for fundamental protections, I regard one of the protections of workers to be a right to complain if they are, or believe themselves to be, unfairly dismissed. I have not heard a justification for delivery riders such as those employed by Deliveroo, or the Uber drivers the noble and learned Lord, Lord Etherton, spoke about, being denied the right to make a complaint to a judicial authority that their engagement was unfairly terminated.

I did a case in the Court of Appeal a few years ago concerning a lap dancer, Quashie v I forget the name of the nightclub that engaged her. She worked three nights a week, week in, week out, over a period of years. An allegation was made that she was in possession of drugs; her engagement was instantly stopped. We tried to bring a claim for unfair dismissal but were met with the argument that she was not an employee but an independent contractor. We lost in the employment tribunal and won in the Employment Appeal Tribunal. Unfortunately, we lost in the Court of Appeal because of the complexity of the current law, as explained by the noble and learned Lord, Lord Etherton. I turn back to the fundamental point: why should she not have the right to say, “This allegation was false and unjustified, and my termination is unfair”?

In conclusion, I thank all noble Lords who have contributed to the debate.

Bill read a second time and committed to a Committee of the Whole House.