Professor Alan Bogg, Professor Melanie Simms and Professor Simon Deakin gave evidence.

Dr Tidball, do you wish to make a declaration of interest now?

It may be that I do not ask a question, but for clarity, Professor Alan Bogg was my professor for labour law many years ago, and we were at one point work colleagues.

I do not know what the collective noun for professors is—a proliferation, perhaps. Anyway, could you please introduce yourselves briefly?

Professor Bogg:

I am Professor Alan Bogg, and I am a professor at the University of Bristol and a barrister at Old Square Chambers.

Professor Deakin:

I am Simon Deakin, and I am a law professor at the University of Cambridge.

Professor Simms:

I am Melanie Simms, and I am professor of work and employment at the University of Glasgow.

Q Good afternoon to the witnesses. You are professors of law, but we have heard from other witnesses that the Bill has a lot of holes in it and is very reliant on secondary legislation further down the track. Given that it is such a reforming piece of proposed legislation, do you believe it to be a good proposal, in terms not of its content but of the way you should go about making law?

Professor Deakin:

I would not say that it has holes in it. It is perfectly normal to legislate in this way and defer complex matters to regulations. As a potential Act of Parliament, it is no more or less complex than similar Acts that we have had in the past. Labour law has always been complex and very granular. There are many provisions in the Act that will take effect without the need for further delegated legislation, and there are quite detailed schedules. I do not have a problem with the way it has been drafted, but there are issues with its scope and coverage, which we might go on to discuss.

Professor Bogg:

It is a very ambitious piece of legislation, and it was delivered at lightning speed—in 100 days—which is an important part of the context. The collective labour law dimension of what is in the Bill is actually very simple. Much of it is in the form of repeal, and there are some proposals for tweaks to the existing structure. In terms of the collective dimension, I do not think the Bill has holes in it. It gives a tolerably clear indication of what the relevant provisions will look like and what needs to be done.

In terms of the individual provisions, it is fair to say that there is detail that needs to be worked out on day one dismissal protections and on guaranteed hours, but those are very complex issues and I do not think there is anything unusual about that. It is the beginning of a conversation, not the end of the conversation, and that is why we are here today.

Professor Simms:

I am not actually a professor of law; I am a professor of work and employment, and general employment relations. I am always interested in the system as a whole, and how law and the implementation of all kinds of other pressures collectively shape employment relationships.

I agree with my two colleagues that the Bill is a very useful starting point. Law can only ever go so far in determining the rules of the employment relationship. It will always rest on wider social systems, economic systems and so on.

Q I am sure you will have seen that the Regulatory Policy Committee has been quite damning of the impact assessments done on the Bill. You said that it has been delivered at lightning speed, so perhaps we should not be surprised that the impact assessments do not necessarily add up. How concerned are you on a point of law, or indeed a point of employment law, that legislation is coming through for which the impact assessments have been branded by a very well-respected independent body as “not fit for purpose”?

Professor Deakin:

The RPC said that about some of the impact assessments—it raised a red flag over some of them. They are concerned not so much with the legal drafting as with the economic effects of the law. The impact assessments are engaging in a cost-benefit analysis, which is attempting to put some numbers on the impact the law might have on the economy in terms of cost to employers and knock-on employment effects. Actually, they have quite a strict protocol to deal with. What counts as a cost is set out in some detail in protocols that we could discuss. For example, the cost to private parties—to employers—counts as a cost even if that is simply redistributing to households and to workers. From an economic point of view, we would be interested not so much in the private cost, but in the impact on the economy as a whole. Do these laws interfere with the way markets work? Are they going to lead to unacceptable costs, or will they produce countervailing benefits?

As a scholar interested in the economics of law, and having researched the impact of labour law, I was surprised by some comments in the RPC documentation. I was very surprised to read the RPC suggest that there may not be inequality of bargaining power in certain sectors, such as the public sector or transport, where there are very large employers, some of which are effectively monopolies. There will probably always be some inequality of bargaining power between individual workers and even smaller employers, but we have trade unions and collective bargaining because there is that inequality of bargaining power. The part of the Bill that addresses the ability of unions to organise, and to organise industrial action, in sectors where there are very powerful employers does seem to me to address a fundamental issue of inequality of bargaining power.

Elsewhere, the RPC asks for more evidence about asymmetric information and productivity. I thought the impact assessments were actually very good, in citing secondary sources on those very issues, and also balanced. They cited—I should declare an interest—work I wrote, but they also cited other work. You will see scholars cited in the impact assessments who have a less positive view than I do about the economic effects of labour laws. There are no citations at all in the RPC documentation. Now, that may be because that is not the job of the RPC. Fair enough, but I should have thought that the RPC request for more information and clarification from the Department for Business and Trade could quite straightforwardly be met.

Professor Bogg:

I support much of what Simon said. Focusing on the collective reforms, there has been scaremongering about re-unionisation of the economy and how radical this all is. You would think that we were going back to 1965 in terms of the reform of the strike laws, when actually we are probably going back to 2015 with a few tweaks. The minimum service levels framework is being repealed, but as far as I am aware it was never used. There was a prospect of its use once, but it was so inflammatory that the employer in the ASLEF dispute stepped back from using it. The Trade Union Act 2016 ballot thresholds will be repealed. In that context, and with a few proposed adjustments to strike law, this is not very radical. It takes the UK from a hyper-restrictive framework in comparative terms, to a restrictive framework in comparative terms. In terms of the overall international context, even if all of this makes its way on to the statute book, the UK will still have one of the most restrictive strike laws in Europe.

Professor Simms:

I could not agree more. It sets out an agenda that would be regarded as incredibly restrictive in many comparator countries. I think it is better than what we have at the moment, which is such a restrictive context particularly for trade unions and strike action. Concerns have been raised by the International Labour Organisation about the UK’s restriction on strike activity. In my judgment this, as drafted, does not take us fully into compliance even with some of the concerns expressed by the ILO—it is still incredibly restrictive.

Q My final question is off the back of that. On Tuesday, Mick Lynch—let us name him—told us that the Bill will lead to the re-unionisation of the economy. Is he getting overexcited?

Professor Simms:

We have to be realistic about the resource capacity of our trade union movement at the moment. There are certainly things in the Bill that will make life simpler for trade unions—not necessarily easier, but it will require less resource to, for example, organise for a ballot, or to organise a re-balloting during a period of industrial action. At best case, that frees up some capacity to get on with the nitty-gritty of representing workers in the workplace and solving workplace problems. I cannot prove that that is going to happen, obviously, but that is certainly more than possible. But will it free up sufficient capacity to try and organise in the breadth of the retail sector, for example—lots of small employers? Personally, I think that is unlikely. I do not think that the UK trade union movement has that resource capacity at the moment.

Professor Deakin:

Historically, what drives unionisation and strike levels is the economy. High inflation drives strike action and tends to drive union membership. Union membership, union activity and strike activity are highly sensitive to the wider economic context, which at the moment probably does not favour a massive increase in union membership. I would be very surprised if this particular measure moves the dial much on membership, and I do not think it will move the dial much on industrial action either.

What could happen, especially with the arrangements for sectoral pay bargaining, is that many workers, whether or not they are in a trade union, would benefit from sector-wide collective norms. That would be the case where the arrangements come in for two sectors that are mentioned in the Bill, and hopefully that is just the start. Other European countries and many countries outside Europe have sectoral collective agreements that, in effect, set a floor for an industry or sector. I am not sure whether you would call that re-unionisation, but I think the coverage of collective agreements is perhaps more important than simple membership, although unions depend on membership for their finances. The economic effects will turn very much on coverage.

Professor Bogg:

As I said, the reforms to strike law are fairly modest, and I think that is true of collective bargaining laws. There are two incremental nudges towards sectoral institutions in two sectors, and there are some very modest tweaks proposed to the statutory union recognition procedure—lowering the preliminary membership threshold, potentially, and removing the majority support likely threshold—but it is difficult to see. I do not know what re-unionisation means, I must confess, but I will be very surprised if you see a radical upsurge in union recognition as a result of these very sensible but cautious changes in the legislation.

Q Just to aid the witnesses, it was the shadow Minister who used the term “re-unionisation” in the evidence session on Tuesday, rather than one of the witnesses. That may be why it is not something that is particularly resonating with you.

I want to ask you in particular, Professor Deakin, about the impact of the regulations on increased productivity and innovation—the general economic benefits. Do you think that that will have a positive impact on such issues?

Professor Deakin:

I think so. The evidence internationally is that there is a strong correlation between stronger labour protection and both productivity and innovation. I think that sentiment in the research community has shifted very much in the past 20 years. That is partly because we have better data and probably better methods. Certainly, a generation ago, the World Bank was quite hostile to the idea of labour law and said that labour laws, in aiming to help workers, might harm them. That, however, is no longer the World Bank’s position. The World Bank has said that there can be too little labour law in an economy—too little protection for innovation and productivity.

Of course, productivity has many causes, and the way we regulate labour is only one issue. If we are talking about labour law, though, these reforms are essential to help improve the productivity position. Will this law on its own lead to an improvement in UK productivity? Not necessarily, because that depends upon how we regulate other areas of the economy, and that is affected very much by the way corporate governance works and also by training and other aspects that are not all covered by the Bill. But is this Bill essential in the area of labour law for improving economic performance? Absolutely. Does it go in the right direction? Yes, it does.

The research we have done in Cambridge, which I mentioned in my written evidence, shows that, on average, strengthening employment laws in this country in the last 50 years has had pro-employment effects, for various reasons. That is, as I said in my notes, not a predication or a forecast, but historically in this country, stronger labour laws are not associated with unemployment.

Professor Simms:

Could I chip in as well and emphasise the point that Simon has just made about skills and training? Skills and training of managers—the professionalisation of managers—and of our workforce are really crucial ways of shaping productivity and innovation. They intersect very strongly with some of the issues in the Bill.

In general, the push to professionalise management of work—the managerial decisions—is a really important part of that more complex story that Simon has just spoken to. The signals through the law, but also through other areas of policy, to managers, organisations and employers about the professionalisation of their management are a really important thing that the state can do to support that general up-tick in productivity and innovation in general.

Professor Bogg, do you want to add anything?

Professor Bogg:

I am just a simple lawyer; I would not like to offer any views on the economics of it all. I will defer to my expert colleagues.

Q I am a simple lawyer, too. Could I ask you, Professor Bogg, how you feel the fair work agency will help improve the employment landscape?

Professor Bogg:

This is really the most critical point of all. We can enact shiny rights and put them on the statute book, and if they are not enforced, there is not much point to the entire exercise. What will be critical is the proper resourcing for a new body. The right direction of travel is for that to occur through a new agency, rather than having to co-ordinate across different agencies. I think that will make things more efficient.

It is also important that the employment tribunal system is properly resourced. I saw the welcome announcement that the time limits will move from three months to six months, in line with the earlier Law Commission recommendation. As the Lady Chief Justice said, the rule of law costs money in order for it to be done properly, so the tribunal system will have to be properly resourced. There needs to be a commitment to a principle of effective access to dissuasive remedies. That is absolutely central to all of this working or not working.

Professor Simms:

Can I pick up on the enforcement case? It is important for the Committee to properly understand that the organisations that will be merged into a new agency have had to cut back, to some extent, on their advice and guidance to employers and employees because of the challenges of resourcing over the last years. They still work in those spaces, but they cannot do it at the scale that they have previously—ACAS in particular. Re-resourcing that expertise to support both employers and workers’ unions to make good decisions that never become a breach of any rights is really important.

Professor Deakin, anything to add?

Professor Deakin:

Enforcement is really critical. We do not have an effective enforcement regime in this country. Recent research on the minimum wage, for example, shows that on the whole, employers that do not comply with it can actually save money by not doing so. They are rarely punished, fined or required to pay wages back in a way that even covers the gains they make by not paying the minimum wage. We are not effectively prosecuting minimum wage breaches. We treat breaches of the criminal law involving theft in a supermarket, for example, and in other contexts extremely seriously. We do not treat wage theft with anything like the same seriousness.

There are hardly any company director disqualifications in cases of non-payment of the minimum wage. The message being given, or the one that has been given, is that compliance with the legal obligations is in some sense optional, and not complying can be profitable for firms. We are not the only country in that position. It is also an issue in the United States.

However, we can do more. We can certainly resource the inspectorate. In my note, I suggested that we can also facilitate collective remedies in addition to individual employment tribunal claims. It is difficult for an individual to take a claim to a tribunal, and it can also be costly for employers, who will, in many cases, have to organise a legal team to fight a case, and they will not get their costs back. It seems to me that neither side is necessarily happy with the way the employment tribunal system is working.

I believe that collective remedies, particularly through arbitration, which can be brought by trade unions—hopefully in future to the Central Arbitration Committee —are more effective than individual claims in many cases. It is not just a question of resourcing the new fair work agency. I think there should be a greater role for collective arbitration, and in my note I made some suggestions based on precedents from the 1970s, which could easily be used again.

Q Interestingly, earlier today, the Resolution Foundation mentioned that small businesses without HR departments will struggle without clearer legislation and guidance if the Bill is passed. Many retail businesses in my constituency are closed because of flooding this week, so we had a lot of time to discuss the Employment Rights Bill while scrubbing floors. People from those businesses joked that they would not be able to understand it. They also saw themselves in lengthy tribunals, with the tribunals not sitting. Of course, a lot of their employees are not unionised. A huge percentage of the population, especially in rural areas, have no union representation. Both sides are in a difficult situation. Are there elements of the Bill that lack clarity and that will lead small businesses into trouble and, therefore, their employees into difficulty? Or is that something that should be picked up elsewhere?

Professor Deakin:

There is a difference between a complex measure, written initially for lawyers to implement, and communication about that measure once it is enacted. I believe that the essential changes being made by the Bill can be effectively communicated. However, I entirely understand the problem faced by many smaller firms, which often lack resources when confronted with a legal claim. They may be able to take out insurance to cover their costs, but often it is the time spent in dealing with the dispute that is the real issue. I researched that about a decade ago, but I do not think the issues have changed. Often, litigants—claimants—feel unhappy about the way the employment tribunal system is working. Employers also often feel unhappy, even if they win a claim. Since that time, there has been an enormous growth in delays before employment tribunal claims are heard. It is an important issue.

Communication from the Department to all employers will be essential. However, I also think that there is scope for collective remedies, and to reassure smaller enterprises that other firms are complying with the law, so they do not feel under that much pressure not to comply because they see other employers not complying. I very much hope that we are moving towards a system of labour law in which we need less enforcement and litigation, with an inspectorate that is trusted by both sides. Countries such as Japan and Sweden, for example, have extremely low litigation rates. That is partly because they have highly effective inspectorate systems, and also because employers of all sizes have come to accept the importance of labour standards.

Professor Simms:

I think that returns us to my point about the importance of agencies such as ACAS being able to advise in a way that is accessible. ACAS runs a free-access telephone service to support anybody with a problem at work, whether that is a small business owner or manager, or an individual employee. That kind of service, which people can use to ask questions, is an incredibly important part of any change. We know that a lot of the enterprise agencies also offer a similar kind of support. It is those support mechanisms, as well as the communication, that I think are really important. Just because the law is complex does not mean that we have to explain it in a complicated way.

Professor Bogg:

These are real concerns, and they obviously need to be taken seriously. I can see that the day one dismissal protection may well cause real anxiety for small firms. I think the point has been made that you would not expect a small business owner to look through the Employment Rights Bill. I was up at 5 o’clock this morning feverishly sweating as I read my way through it, and it would not be reasonable to expect people without legal qualifications to do that. What will be crucial in later phases of this roll-out is having guidance, such as codes of practice, that are written in accessible ways for employers to be able to do the right thing, which most employers actually want to do. I think that is really important.

The area that will require a little bit more thought is the guaranteed hours provisions, which are complex. Some of that complexity is inevitable because this is a fiendishly difficult issue, given the range of different contractual arrangements that we have in labour markets, but I do not think that is beyond the bounds of smart legislators dealing with this as it goes through the process.

I cannot resist the temptation of having three professors in a row in front of us. If you could make one change to the Bill, what would it be?Q

Professor Simms:

We were warned about this question, and I am going to be very cheeky and ask for two. First, I think a clear and proactive right to strike and join a trade union would go a long way to bringing us into line with many of our comparator countries. I also have some concerns about the negotiating bodies, which really look quite like pay review bodies at the moment, rather than free collective bargaining between the parties deciding their own issues and what works for them. Those are the two areas I would focus on.

Professor Deakin:

I would make a change on fire and rehire. I think that the provisions on unfair dismissal are helpful but will not address the problem of collective agreements being undercut. At best, at the moment, the remedy for an unfair dismissal is almost certainly going to be compensation, when what is needed is a mechanism to embed terms and conditions going forward. The Department is consulting on reforms to the interim relief procedure, but I would go further. I think there has to be a change to the remedy for unfair dismissal so that the previous terms can very clearly be reinstated. At the moment, it is not possible to enforce a reinstatement order. You have to go to the county court even for compensation, but in the case of a reinstatement order, the employer can resist it and just pay compensation.

In my opinion, there should be a collective arbitration mechanism. The Central Arbitration Committee should have the power to reinsert terms and conditions for the affected categories of workers, and that would be true of the persons hired, if that happens to replace those who have been dismissed. That mechanism existed under 1970s legislation and would provide the kind of collective remedy that we have just been discussing. It would be important for stabilising terms and conditions in labour markets and avoiding the need for individuals to bring complex claims before employment tribunals. I also have ideas about zero-hours contracts, but you said just one.

Professor Bogg:

I have said that I think enforcement is the critical dimension of the conversation about all of this Bill. One specific change that I think would be valuable is to remove the presumption that collective agreements are not legally enforceable. That puts the UK in an almost unique position in the world. One aspect of the P&O Ferries scandal that is not often discussed is that there were collective agreements in place, but because of the statutory presumption that they were not legally binding, P&O Ferries was able to put the collective agreements in the bin. I am not saying that I would mandate them to be legally enforceable, but I would remove the statutory presumption, which would give a signal to the parties that they could make them legally enforceable. I think that would bring some real value to the enforcement dimension of UK labour law.

Q I thought that I would quickly clear up the disagreement that seems to have broken out between the two sides of the Committee, so I have gone through the record of Tuesday’s session. Paul Nowak said:

“It is very likely that we will see increased unionisation as a result of the Bill”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 67.]

and Mick Lynch said that the Bill will mean that “many workers”—more than 50%, he hoped—

“are covered by collective arrangements in one form or another.” ––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 62.]

That is up from 22% today. So I think it is fair to describe that as re-unionisation. I do not really understand why the Labour party would be so ashamed of doing such a favour for the Labour movement, of which it is a part. But anyway, you just mentioned P&O. I just wanted to ask you, who did you think was right about P&O? Was it the Transport Secretary or the Prime Minister when he slapped her down for criticising them?

Professor Deakin:

I am not sure I quite understand the question.

It is about employment rights. We have been discussing P&O throughout the whole—

If nobody wants to answer the question because you don’t know the answer, that is fine.

Professor Deakin:

I can tell you what I think about P&O.

Q Okay, you don’t want to answer that; I will ask another one.

One of my concerns about labour market regulation relates to the use of substitution clauses by firms like Amazon and Deliveroo, where they give a licence to a courier and the courier is then entitled to share that licence with others. The expectation is that responsibility for checks for things like the status of the substitute, in terms of whether they can work legally and so on, and responsibility for the pay that will be provided to that person, all lies not with Deliveroo or Amazon, but with the person that they have contracted with in the first place. That is not dealt with in the Bill at all; I think it should be. Can you expand on that, please?

Professor Deakin:

Of course, the issue of employment status has been deferred, has it not, to a consultation? But unless a way is found to include workers like the Deliveroo workers within the scope of protective labour law, the proposals to improve collective bargaining rights and many other rights will just fall away. Large businesses like Deliveroo, I would say, need workers; and if our labour law system cannot describe those workers as protected by one means or another, there is a clear defect in it.

There are various ways to get to that point. They do not all turn upon the definition of worker, or the use of a substitution clause to get you outside the scope of the current law. In some cases, and in some countries, independent contractors are protected by labour law rights, even if they do not count as employees. In our past, homeworkers who might have employed other people had legal rights under labour laws. So this issue absolutely has to be addressed. I understand it is out for consultation. Many of the measures contained in the Bill would not be effective, unfortunately, if this issue was not grappled with.

Professor Bogg:

In the situation that you have just described, I think part of the driver for the use of substitution clauses is that they are used to avoid employment status. So in any review of employment status, a key thing that will need to be addressed is the problem of substitution clauses as a way of avoiding either employee or worker status. There is quite a simple way to do that, which is to treat personal work as an indicative rather than a conclusive factor, because it then just drops back into the range of things that the tribunal will look at.

In a situation where a large company is relying on wilful blindness to avoid responsibilities under migration rules or under health and safety legislation, there is a very simple response, which is to impose criminal liability on large corporations that try to rely on wilful blindness to avoid obligations in primary legislation. That is a very straightforward way of tackling an abusive avoidance of rules that are very important to enforce.

Q You have mentioned where the Bill places the UK internationally in terms of strike law. Where do you think the Bill broadly places the UK compared with other developed nations, when it comes to the level of employment rights?

Professor Deakin:

If we take the whole of individual employment law, for example, the Bill will bring us closer to the OECD average, but there will still be various respects in which we would not be as protective of individual rights as other countries, especially when they relate to remedies for unfair dismissal. Enforcement could be made much more effective, but there is no doubt that the Bill brings us closer to the OECD norm—and not just there: many countries in east Asia and other parts of the world will have labour law systems that are at least as protective as ours. So it is a corrective.

On the other hand, I emphasise that UK employment law has never been as deregulatory as US law has, for example. We are not in a situation, as US unions and US workers are, of starting from scratch. We also have a history of labour law that we can build on. That makes it easier to think of this as the first step in a rolling programme that will effectively restore us to where we were before the 1980s. In the 1970s, more than 80% of workers in this country were covered by a collective agreement. Union membership was around 55% or even 60%, but coverage was over 80%. We had a very progressive employment protection law at that point.

Going back further, we were the first country not just to industrialise, but to have modern factory legislation. We now know that the implementation of the Factory Acts led to not just protection and things like the weekend, but improved productivity. This history is important for us.

Professor Bogg:

This Bill seems as radical as it does only because the baseline is so low, and it is very important to keep that in view. Let us assume that this Bill is not enacted—if you look at the OECD countries, we are the fifth least regulated on dismissal protection out of 38 countries, and we are the third least regulated on hiring on temporary contracts. That is where we are in OECD terms, so the measures on dismissal protections and guaranteed hours will push the UK back into an intermediate position in the OECD. I do not think the Bill marks any kind of revolution just yet; it just pushes the UK back into the mainstream of other civilised OECD countries with employment regulation that works effectively.

Professor Simms:

To return to enforcement, the challenges of both individual and collective enforcement in the UK at the moment really do add extra difficulty. Not only do the rights not exist in general—there are relatively few rights in general—but they are very difficult to enforce.

Q We have heard from each of you about what you would ideally like to see in the legislation. One thing we have heard is that it is going either too fast or too slow for businesses. What are your thoughts on how much time will be required for businesses and employees to be ready for this legislation?

Professor Simms:

Clearly, there will be a period of adjustment. The Chartered Institute of Personnel and Development, which represents human resources specialists in the UK, has indicated that a period of 12 to 18 months would probably be a sensible adjustment period. Business and managers in the UK tend to want to conform to whatever employment rights and regulation there is. The challenge is communication, and communicating clearly in a way that then allows them to access knowledge, skills, training and development for their capacity to do those things. It will take time—it always does—but the general trend, certainly over my lifetime, has been that where new rights have been introduced in this area, most UK companies want to come into line as promptly as they reasonably can. We are talking not decades.

Professor Deakin:

I think it would be really important to build a consensus on this issue, because what can be achieved in this Bill will begin a process that will have to be rolled out further if we are to have a modern system of labour market regulation, and that will require cross-party consensus. I very much hope that that will be possible.

I am sorry; we do not have time for any more contributions, but thank you for your attendance.