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‘A New Deal for Working People?’: Employment Status, Qualifying Periods, and Labour’s Proposal

Expanding on Robert's comments in HR Grapevine, Robert Dunn explores some of the potential implications of Labour's recent policy announcement.

Robert Dunn is an Employment specialist. To view Robert's original comments, click here.

The Current Position

As it stands, everyone in England & Wales whom works, broadly fits into 1 of 3 groups. They could be an ‘employee’, a ‘worker’ or ‘self-employed’. These categories are far from clear cut, and are subject to a minefield of case law. Neither is it helpful that these categories can be defined differently, in different statutes.

(Very) broadly speaking though, they are:

  •  Employees - s.230(1) ERA 1996: These persons have a contract of service, express or implied. They are subject to control, mutuality of obligation, and must provide personal service;
  •  Workers - s.230(3)(b) ERA 1996: These persons have a contract for services, express or implied. They are should provide personal service, but may not have mutuality of obligation. These persons are categorised by their relationship of subordination to an employer, irrespective of what is on the face of their contract;
  •  Self-Employed: These persons are not subject to the subordination of a worker. They conduct business genuinely in their own right.

Different persons receive different employment rights, depending on which category they fall into. Crucially, rights also depend on one’s continuity of service. For example, employees require 2 years to claim unfair dismissal, or 26 weeks to complain that they have been subjected to a detriment for requesting training, pursuant to s.63(6)(d)(a) ERA 1996. Such qualifying periods are rife through employment law as we know it.

 

Labour’s New Deal

On 26th July 2021, Labour announced their ‘New Deal’, should they be elected in 2024. Essentially, they announced that they would:

  • Create a ‘unified worker status’. This would include employees, S.230(3)(b) ERA 1996 workers, and ‘those in bogus self-employment’;
  • Remove qualifying periods for employment rights, and give all such ‘unified workers’ ‘full employment rights from Day One’;

Proposals have clearly not crystalised yet, and the devil will of course be in the detail. However, this article seeks to explore some of the potential questions which arise, and the possible effects of such a proposal.

 

Discussion

From the perspective of those in work, this appears at first sight to be a positive proposal. Whilst employees already have access to ‘full employment rights’, the qualifying periods will be removed. Rights, such as the right to claim for unfair dismissal or claim paternity pay, would be available from the outset. No longer could a less-than-thorough disciplinary or redundancy procedure be applied just before an employee’s 2 years are up.

For many workers, the benefits are clear too. The weightier ‘employee’ rights would become open to them, and all without any qualifying periods. Labour have also announced that the requirement to earn £120 per week to access Statutory Sick Pay would also be removed, it being a quasi-qualifying period. The TUC estimate this would bring over 6 million additional workers within the sick pay regime.

 

The Key Questions

As ever with employment law though (and particularly employment status), the proposal also creates as many questions, as it does gives answers.

Firstly, the proposal fails to comment on other definitions of ‘worker’. For example, S.43K ERA 1996 gives an extended ‘worker’ definition, for those not falling within S.230(3)(b). This gives S.43K workers the right to claim for detriments arising from whistleblowing, and does not even require a direct contract with their ‘employer’; per HHJ Eady QC in Keppel Seghers UK Ltd v Hinds [UK EAT/0019/14/JOJ]. On the face of the proposal, S.43K workers are excluded. If so, what is the logical basis for there being no widening of their rights at all, but other workers receiving ‘full’ employment rights?

Secondly, there is the concept of the ‘bogus self-employed’. The inclusion of this concept, in addition to S.230(3)(b) workers, suggests it adds something more. However, it is entirely undefined. Moreover, key recent UK Supreme Court cases such as Autoclenz v Belcher [2011] UKSC 41 and Uber BV v Aslam [2021] UKSC 5, are aimed at focusing on the ‘reality’ of a relationship to determine whether individuals have been genuinely self-employed or not. Given the Uber decision, it is questionable whether this concept of the ‘bogus self-employed’ really widens the scope of protection at all. If it does, it would almost certainly lead to a further raft of extensive satellite litigation to determine where the new boundary would fall. If it does not, why has it been included in addition to ‘workers’?

Thirdly, that said, there may be concern for those whom are self-employed. These persons may well not want to be sucked into this ‘unified worker’ definition, given the control and potential tax implications it may have. As an example, many barristers work solely under a particular Chambers, whom provide them work, deal with any complaints against them, deal with their fees, and deduct payments for clerking and expenses. The relationship has features of subordination, yet most barristers would surely be loathed to fall under the definition of ‘bogus self-employed’.

Fourthly, there may be concern for workers. Some workers can pay tax as a self-employed person, and this could be threatened. Moreover, many workers enjoy the flexibility that a lack of mutuality of obligation, and perhaps control, brings. If employers are forced to give such individuals ‘full employment rights’, the additional cost may well discourage their employment in the first place. Is it worth employing a casual zero-hours worker on a temporary basis, if they can immediately resign and take you to the Tribunal for unfair dismissal? Further, if employers are forced to give such workers typical ‘employee rights’, there appears no reason not to then subject them to the additional obligations of an employee, and exert a greater level of control, subordination and mutuality of obligation on them. This will be unwanted by many current ‘workers’.

Fifthly, the proposal poses questions for other categories of persons. What about apprentices or probationary employees, for example? Such individuals having protection against unfair dismissal, or the right to claim sick pay or maternity pay, ‘from Day One’ may well impact the willingness of employers to take such persons on. And what about Agency workers? Whilst they may still not be the ‘worker’ of the end-user (unless S.43K workers are included), they would almost certainly have ‘full employment rights’ against the agency. That would have profound implications for recruitment agencies, and their profitability.

Sixthly, there is the impact upon Tribunals. It is difficult to see how providing millions more individuals with greater employment rights will not lead to more claims. No longer will a Tribunal have a lack of jurisdiction to consider an unfair dismissal complaint because a person is a worker, or does not have continuity of service. What is now the near instant rejection of an ET1 on those bases, would instead become a Preliminary Hearing followed by a 2-day Unfair Dismissal claim. There have also been soundings of the time limit for bringing most Tribunal claims, perhaps being extended to 6 months. Unless such proposals are accompanied by substantial investment in the Tribunal Service, it is difficult to see how this would not further worsen the case backlog.

Lastly, the impact upon employer HR teams seems mixed. There must be a practical ease, in understanding all those whom work for you are a ‘unified worker’ with all rights from the outset. Distinguishing between such persons and calculating continuity of service would fall away. That may though be outweighed by the impact of any increase in Tribunal claims.

 

Conclusion

The devil will of course be in the detail. 2024 is a long way away, and Labour still appear to have a long way to go in the polls to win in any event.

Either way though, the proposals are interesting and worthy of discussion. They challenge the current orthodoxy, and some may argue simply continue the movement towards greater protection for those in unstable work, that is evident behind cases such as Uber BV v Aslam. As highlighted however, they require substantial clarification and pose risks for the Tribunal system, employers, and those workers whom want to retain the flexibility and freedom that their current role brings.

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