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Mr Callaghan was robust when giving evidence about whether these contracts are voluntary. He is a very senior partner who told us that he deals particularly with the high-growth technology businesses that the measure is designed to be used by. Not only was he robust about the voluntary nature, but the Under-Secretary of State for Communities and Local Government, was equally robust in his response to Mr Callaghan when he said that he did not think that these contracts were optional. The phrase that it is
“only optional to the extent that eating and drinking are optional” is a good way of putting it.
The Chancellor called it
“a voluntary three way deal” and yet it is unclear what measures will be taken to prevent employers abusing the scheme, such as by dismissing an entire work force and imposing the contract as new terms and conditions on re-engagement. That goes back to some of the concerns we had about the holding companies and subsidiaries. There is no reference to safeguards, such as compromise agreements or a requirement for independent legal and/or financial advice, for employees thinking about going down this route.
There is a connection between this measure and some of the clauses in the Enterprise and Regulatory Reform Bill, because the new settlement agreements allow for an employer and an employee to have a combination of without prejudice, protected conversations about certain aspects of their employment relationship that cannot then be used for unfair dismissal. While compromise agreements were used when a dispute was in place, settlement agreements can be used where no dispute is in place. An employer and an employee can have a conversation about moving someone from a normal employment contract on to a new employee owners contract under the guise of a settlement agreement, without having any of that independent legal or financial advice put alongside it. That is a real danger. I am sorry to mention cocktails with my hon. Friend the Member for North Tyneside here, because I know espresso martinis were her certain favourite last night—I am bringing back all those memories already—but this cocktail of changes to the Enterprise and Regulatory Reform Bill alongside some of the changes in this Bill have to be taken into account so that we can look at how it impacts together.
There is no genuine choice over whether to sign up for fewer rights at work, if the employer decides to move employees on to employee owner contracts. Employers would be free to decide to employ all new recruits on employee owner contracts, and individuals would have no choice but to contract out their basic employment rights if they want that particular job. We can see the number of people—particularly young people—who are unemployed in the current economic climate. If a job is advertised as an employee owner-only job, any perfectly reasonable person would deduce that that is no longer voluntary. Yes, that young person could decide that they do not want to apply for that job. Alternatively, they could apply for a job on the understanding that it is not an employee owners contract, but it could come forward as such and that voluntary element would be taken out of it.
There will be nothing to prevent employers from threatening existing employees that they will only retain their jobs if they agree to sign new employee owner contracts. That could be done through a process of collective redundancy discussions with trade unions and the like. If existing employees refuse to agree to the new contracts, what is there to stop rogue employers dismissing them and offering them reinstatement on new employee owner contracts? If the employee refused, it may be difficult to convince an employment tribunal that they had been unfairly dismissed. In any event, they would have lost their job and their livelihood in the process. There seems to be no provision to protect an employee who is offered employee ownership but does not want to accept it.
For the agreement to be truly voluntary, the employee needs to have a right to refuse the employer’s offer, with protection against unfair dismissal and detriment, equivalent to the protection given to an employee refusing to sign an opt-out from the 48-hour working time directive. Are the provisions to be introduced at a later stage in the Bill’s progress?