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Clause 23 - Employee owners

Part of Growth and Infrastructure Bill – in a Public Bill Committee at 12:45 pm on 6th December 2012.

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Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills) 12:45 pm, 6th December 2012

That is a critical point, which I think the chief executive of Sainsbury’s was making when he responded to the Chancellor’s statement on employee owners. He said that the reputation of business had been damaged because of the current economic crisis and that the potential was for decent employers to be damaged even further by use of such schemes and people being offered cash to sell their rights. What happens if a pay rise, promotion or any other aspect related to an employer-employee relationship is conditional on changing to an employee owner’s contract?

No one will decide to leave an employment—perhaps having worked there for a considerable amount of time—on the basis of being moved on to a different contract. If people have been in a particular employment for less than 24 months, they will have no protection against unfair dismissal in any case, unless there is a discriminatory or whistleblowing element. There is a real issue about being able to switch people on to such contracts when that is not clearly voluntary, if attached to another part of the relationship. The Opposition cannot emphasise enough, and I continue to state, that the proposal is not only bad for employees but catastrophic for employers if they get it wrong. There is no clear policy on offering such an arrangement to all staff, and there is a risk of it giving rise to discrimination claims, which are costly.

Any lawyer in the City or, to return to Canary Wharf—at the moment, the Minister’s favourite location in London—the many lawyers there that deal with the relationship between employee and employer in private business might have legal advice sought from them by someone who loses a job over such an arrangement. I suggest that any legal officer worth the fee likely to be earned on such a case would run a double-track tribunal with a discrimination case at the same time. That is the only protection left, from day one, that an employee can take forward. If people refuse to go on to that kind of contract or there is a relationship breakdown with the employer, the only option left open to the employee is to attempt a discrimination or whistleblowing case. Surely that is bad for employers in this country, potentially to put them at that risk.

If we set aside all the legal issues that might arise from the schemes not being voluntary, it is important that anyone who wishes to enter into one of those  complex contracts should be given the appropriate advice. Amendment 106 merely asks the Government to install in the Bill a mechanism that allows employees, at the employer’s expense, to seek some guidance and advice from a legal or other work-place representative, to ensure that they fully understand the consequences of entering into one of those complex arrangements. Section 203 of the Employment Rights Act 1996 imposes minimum independent legal advice requirements on the surrender of unfair dismissal rights. The shorthand for that was “compromise agreement advice”, although of course they are now called settlement agreements, and the key element was a written agreement upon which the employee has received advice from an insured independent legal adviser. That adviser may only be a lawyer, certain trade union officials or certain advice centre workers, as we suggest in our amendment. There is no provision for that in the Bill, so the unscrupulous nature my hon. Friend the Member for City of Durham mentioned earlier could come into play.

Will the Minister tell us who he will consult on the guidance when putting this scheme together? Will employers have to refer prospective employees to where they can seek advice if they decide to go down this route? How will the Government enforce this? If there is no proper enforcement mechanism, it cannot truly be voluntary, because, as the right hon. Member for Hazel Grove is probably just about to tell the Committee, the employee must have some kind of insurance. The only way it can truly be voluntary is if an employee can turn down the offer of an employee owner contract without any consequences for their relationship with their employer. Unless that is guaranteed in the Bill, we could be going down a very dangerous path.