An End to Bogus Self-employed Status – Parliament Notes 2

We have mentioned before in this magazine the work of the Institute of Employment Rights (IER).  The Labour Party Green Paper: New Deal for Working People, is the outcome of discussions with the Power in the Workforce Taskforce chaired by Andy McDonald MP, with legal assistance of John Hendy QC and Prof Keith Ewing, both of IER.  It reflects many proposals by IER, in particular their Manifesto for Labour Law.

John Hendy is at the moment leading a bill starting in the House of Lords, entitled Status of Workers, which aims at doing away with bogus self-employed status, (the status of ‘workers whose arrangements are dressed up to look as if they are self-employed, but who are in reality employees’) and ensuring that all workers—who are not genuinely self-employed —have employment rights against unfair dismissal etc.  At the moment ‘they are not entitled even to the national minimum wage or paid holidays—not even some health and safety protections.’  Lord Hendy says: ‘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 full name of the bill is A Bill To Make provision for the creation of a single status for workers by amending the meaning of “employee”, “worker”, “employer” and related expressions in the Trade Union and Labour Relations (Consolidation) Act 1992, the Employment Rights Act 1996 and cognate legislation; and for connected purposes. 

https://bills.parliament.uk/publications/41688/documents/331

Here is the beginning of Lord Hendy’s speech on 10th September.  It is exceptionally readable, clear and straightforward.

‘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.’

Read on at: 

https://hansard.parliament.uk/Lords/2021-09-10/debates/848C0DC3-749F-4167-BFB4-545BA3821E30/details#contribution-152B77AF-3D3A-452D-99DE-713BE930C0B2

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s