Written submission from the Work Rights Centre (ERB0008)

WORK RIGHTS CENTRE - EVIDENCE SUBMISSION

Employment Rights Bill – evidence to the House of Commons Business and Trade Select Committee

November 2024

Contents

Executive Summary

Question 1 – Does the Employment Rights Bill adequately safeguard the workers it seeks to protect?

Question 2 – Are there weaknesses or loopholes in the Bill that could be exploited or have unintended consequences?

Question 3 – Are there areas of employment law not covered by the Bill that weaken workers’ protections?

Question 4 – Can the measures in the Bill be adequately enforced? What are the barriers to setting up a Single Enforcement Body (Fair Work Agency) and how can these challenges be overcome?

Executive Summary

Question 1 – Does the Employment Rights Bill adequately safeguard the workers it seeks to protect?

1. As we suggested in our initial reaction to the legislation,[1] the Bill provides a tentatively positive framework for upgrading the employment rights of workers in the UK. One the one hand it is the “most significant shift in UK employment law in the last 50 years”.[2] To the extent that it purports to benefit all workers, the safeguards introduced in the Bill will have a widespread positive impact on the UK’s labour force.

2. However, it is clear that another intention behind the Bill was to tackle “insecure work”, a point raised in the government’s Plan to Make Work Pay document.[3] On this point, the Bill is arguably weaker and at times fails to identify the existence, needs and priorities of the most vulnerable groups of workers, namely migrants, those employed on fixed-term contracts, and the non-unionised. 

3. Migrant workers are especially vulnerable, particularly those arriving to the UK under the work-sponsorship system (whereby their continued employment and lawful immigration status is tied to an individual employer licensed by the Home Office) who are susceptible to insecure and exploitative work.[4] Workers’ multiple dependencies on employers in this context allows for a “proliferation of abuses, from non-payment of wages, to overwork, and sexual assault amongst a litany of other labour and criminal law violations”.[5]

4. For example, quarterly intelligence reports from the Gangmasters and Labour Abuse Authority (GLAA) have in recent times consistently identified foreign nationals as being the most common potential victims of modern slavery and human trafficking for labour exploitation, particularly in sectors like social care, horticulture and hospitality.[6] It is important to understand that these cases sit at the worst end of the “continuum of exploitation” – a model that understands labour exploitation as a continuum of experiences ranging from “decent work through to minor and major labour law violations, all the way to severe exploitation, including human trafficking”.[7] Similarly, GLAA intelligence pictures have consistently identified that the most common vulnerability factor among potential victims of forced and compulsory labour in the UK is the work-sponsorship system.[8]

5. To this end, the Bill struggles to interact with the wider ecosystem of forces that drive standards of work for migrants down and that make the identification and resolution of grievances for migrant workers more difficult. This submission identifies both weaknesses and omissions in the Bill that will have a tangible impact on migrant workers and ultimately create a greater divide between them and other workers in the labour market.

Question 2 – Are there weaknesses or loopholes in the Bill that could be exploited or have unintended consequences?

6. Yes. Though the government has promised to consult on the appropriate timeline for unfair dismissal probationary periods, the Bill is silent as to whether these will be proportionate to the length of workers’ contracts. This is a particular issue for those employed on fixed-term contracts, who make up about 5% of all working people in the UK and about 12% of black employees.[9] We are concerned that a failure to make probationary periods proportionate in these cases might entrench racial inequality at work that the government promised to otherwise address.[10]

7. Another point on unfair dismissal probationary periods is its potential to exclude migrant seasonal workers who arrive to work in UK horticulture under the Seasonal Worker visa from full protection. These workers arrive to work for a maximum period of six months after which they are required to return to their country of origin as part of a “cooling off” period. A nine month probation period, as expressed by the government to be its preference, would therefore completely prejudice workers’ ability to ever access full protection from unfair dismissal (with some limited exceptions like automatically unfair dismissal cases).

8. For those on the visa, even a probationary period that is deemed proportionate to their six month period of work in the UK can be circumvented – for example, there has been an increase in concerns related to productivity targets on farms, of which there is no specific regulation, and its use as potentially arbitrary grounds to dismiss workers prematurely.[11] In addition, these workers are generally not unionised and often do not have representation throughout the disciplinary process to challenge unfair dismissals. The Director of Labour Market Enforcement[12] and the Independent Chief Inspector of Borders and Immigration[13] have previously identified that horticulture is a high-risk sector for labour market non-compliance. The Migration Advisory Committee and other NGOs/institutions[14] have identified that seasonal workers coming to the UK are particularly susceptible to exploitation due to the nature of the work in often isolated rural areas, frequently with little or no English. In this context, we recommend that the Bill excludes qualifying periods in their entirety for migrant seasonal workers on the Seasonal Worker visa to recognise (1) the time dynamics of the visa and (2) the specific vulnerability of seasonal workers in the labour market.

9. Another weakness is in Chapter 2 of the Bill concerning the Adult Social Care Negotiating Body. The Body only mandates trade unions and persons representing the interests of employers as members of the new Negotiating Body. This is unlikely to be a sufficient proxy for the interests of migrant workers. Foreign nationals represent as many as 32% and 29% of care worker and senior care worker job roles in England respectively,[15] and yet unionisation in the social care sector is generally poor – around one in five of all care workers/senior care workers are members of a trade union and staff association.[16] With no representation for migrant workers’ interests specifically, there is a danger that any agreements reached by the Body are presumed to be exhaustive and to have resolved issues that migrant workers have experienced. Contrary to the ambitions of a Fair Pay Agreement in the social care sector, this in turn could result in a two-tier set of rights. For this reason, Section 29(3) of the Bill should be amended to allow interested parties such as groups of migrant workers or their representatives to apply to join the Adult Social Care Negotiating Body as members.

10. Finally, it is worth noting that the Bill and the upgrade in rights that it purports to give is inherently linked to definitions around worker status. For example, it is a pre-condition of all the new rights that the individual is a “worker”.[17] Yet the topic of single worker status is being tackled by way of later consultation. This may pose an issue as “boundary manipulation” between the different categories of worker statuses could be used to circumvent increased protections.[18] Issues like false self-employment may become more prevalent as a result. Though not a change to the Bill itself, we recommend that the consultation on single worker status be launched as soon as possible so as not to undermine the Bill’s contents.

Question 3 – Are there areas of employment law not covered by the Bill that weaken workers’ protections?

11. Yes. For example we have previously argued that a legislative gap in the Statutory Maternity Pay (SMP) rules excludes lower-paid pregnant workers from access to SMP.[19] If a pregnant worker earns less in the “relevant period” before birth because they have been off sick or working fewer hours due to pregnancy-related illness, they can receive a reduced amount of SMP or none at all. This is potentially discriminatory.

12. The SMP rules have previously been changed to allow for flexibility in other situations - e.g. furloughed workers during Covid were assessed for SMP on the basis of what they would have earned in the “relevant period” before birth, rather than furlough pay. Similarly, the calculation of notice pay is based on a reference period (generally 12 weeks before the notice period starts) that excludes time spent not working/ill.

13. A similar system needs to be instituted for SMP. The Bill should be updated to include a provision that amends the Statutory Maternity Pay (General) Regulations 1986. This amendment should allow for flexibility regarding the calculation of normal weekly earnings during the relevant period e.g. by allowing the weeks a pregnant worker was sick/worked fewer hours to be left out or to be substituted with other periods.

14. Another omission is the lack of measures to enhance workers’ access to remedy. Even where an employer is found to have behaved unlawfully, workers can be denied access to remedy because company officers refuse to comply with Employment Tribunal orders or due to illegitimate phoenixing (where companies are closed and declared insolvent to avoid paying debts, only to be reopened under a different name).

15. Access to remedy has been a consistent issue. In a survey of Employment Tribunal Applications, 37% of claimants did not receive the money they were owed in 2012. This figure was 28% in 2017 with a decrease likely being influenced by the introduction of tribunal fees.[20] Since 2016, an employer who fails to pay can be subject to a penalty payable to the Secretary of State if the claimant completes and enforcement form and they can also be publicly named (the Penalty Enforcement and Naming Scheme).[21] However, in 2023, it was revealed that not a single employer had been named since 2018 (despite 3,713 notifications of non-payment).[22] It was also revealed that, on average, more than 50% of employers fail to pay all or any of the money won by claimants 28 days after being given a warning notice through the Scheme.[23] Even where the penalty amounts are paid, this money goes to the government rather than the claimant.

16. On phoenixing, measures like the Economic Crime and Corporate Transparency Act, which strengthens the powers of Companies House in respect of fraudulent activity, are insufficient because they do not hold individual actors sufficiently accountable. It is often individuals who use company structures to obfuscate access to worker remedy through the moving of funds that could otherwise be frozen or used to pay back workers. Our recommendation is to use and adapt the existing wording in Section 105 of Bill (which concerns joint liability for company officers for offences relating to the system of labour market enforcement undertakings introduced by the Bill) to ensure that where workers cannot obtain remedy from their employer (a company), company officers who are found to have connived or consented to the issue, or contributed to it due to neglect, can be held jointly liable for the payment of associated tribunal awards or settlement amounts.

17. Finally, though not an aspect of employment law per se, the lack of complementary reforms to the work-sponsorship system means that migrant visa workers will not be empowered to access the Bill’s upgrade in rights in practice. The reforms required in this context focus on addressing the power imbalance between migrant workers and their sponsoring employers. We’ve previously argued that this could involve an overhaul of the work-sponsorship system in its entirety (moving away from a model where workers need to be sponsored by an individual employer) or changes to the existing system (giving workers more time to change sponsors in-country, allowing them to work freely in between finding a new sponsored job and a new status for exploited migrant workers to continue their stay in the UK lawfully, take up work without restriction and access remedy).[24] Without an appreciation of how immigration rules currently hinder migrant visa workers from accessing their rights, the Bill will fail to meaningfully benefit this cohort.

Question 4 – Can the measures in the Bill be adequately enforced? What are the barriers to setting up a Single Enforcement Body (Fair Work Agency) and how can these challenges be overcome?

18. To answer this question, we must understand how employment rights are enforced. At an individual level, broadly workers can enforce their rights by raising grievances with their employer or bringing a claim in the Employment Tribunal. At the state level, multiple agencies like HMRC, GLAA, the Health and Safety Executive and even the police enforce rights through punitive (fines, penalties etc.) and non-punitive (communication and engagement with employers) measures.[25]

19. For the measures in the Bill to be enforceable at the individual level, the government must focus on how it can encourage workers to access their rights in practice. The obvious place to start is complementary measures to increase the availability for legal advice services. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) and its restriction of access to legal aid has been devastating for the advice sector, with cases dropping from almost a million in 2009/10 to just 130,000 in 2021/22.[26] LASPO has also restricted the availability of legal aid for employment matters to discrimination cases which has stifled the ability of workers to access good quality advice. This advice gap has resulted in a reduction of specialist advisers across the country,[27] meaning people are having to increasingly rely on less specialist advice clinics e.g. as many as 64% of university law schools were undertaking pro-bono advisory work in 2020, an increase of 23% since 2000.[28]

20. Similarly, the government must make sure that the Employment Tribunal has the capacity to deal with the Bill’s planned upgrade of employment rights. The Bill’s economic impact assessment suggests that there could be an increase of 15% in “individual enforcement” – meaning an additional 15,000 early conciliation notifications to ACAS, 4,750 more ET1 cases and 875 cases which require judicial time such as a hearing.[29] This comes in the context of increasing backlogs in the Employment Tribunal which have worsened this year.[30] The Employment Tribunal system must be properly resourced to deal with this additional demand and to complement the work of the new Fair Work Agency, to which we now turn.

21. There are a number of barriers to establishing an effective Fair Work Agency that must be dealt with. The first relates to ensuring that the Agency’s work is led by worker experiences and voice. Much like the Adult Social Care Negotiating Body, the Advisory Board to the Secretary of State/Fair Work Agency that the Bill envisages makes no room for migrant worker representation specifically. This makes little sense considering the government has acknowledged that migrant workers are often at the sharp end of the continuum of exploitation. The new Advisory Board must also allow interested parties such as groups of migrant workers or their representatives to apply to join.

22. Another issue is funding – the International Labour Organisation (ILO) recommends that the optimum benchmark for labour inspectors should be around one labour inspector for every 10,000 workers.[31] The UK has lagged well below this benchmark, with 0.29 inspectors for every 10,000 workers, and below other developed status including France, Norway and Japan.[32] The Department of Business and Trade previously argued to the Modern Slavery Act Committee 2015 that “if you include ACAS and employment tribunal funding, it is not perhaps as clear-cut a picture as the ILO figures that have us [the UK] below that level”.[33] This is an incorrect characterisation, as the funding of labour market enforcement (conducted by the state) is separate to the funding of the ACAS and tribunal system (which is a forum for individuals to enforce their rights). They are complementary but ultimately separate enforcement avenues that must both be resourced properly. We recommend that the government funds the new Fair Work Agency to the ILO standard and keeps the position under review as the size of the labour market fluctuates. Alternatively, this funding requirement could be written into the Bill to ensure consistency moving forward.

23. In addition, ensuring that migrant workers actually engage with the new Fair Work Agency will be key to its success. An issue for workers when deciding whether to report a labour market offence will be the extent to which reporting risks their lawful immigration status in the UK (or is perceived as risking it). Data relating to migrants’ immigration status has previously been shared with the Home Office,[34] and joint or simultaneous inspections have been conducted with Immigration Enforcement.[35] This has been an issue with the previous labour market enforcement bodies, who have consequently lacked upstream intelligence and reporting from migrant communities and victims of labour exploitation.[36] To remedy this, the Bill must include specific provisions that prevent the sharing of workers’ immigration status with the Home Office. The Modern Slavery Act 2015 Committee recently recommended that the government should establish protocols for secure reporting pathways to limit labour market enforcement from sharing migration status with immigration enforcement.[37] Secure reporting pathways are also a feature of labour market enforcement in other countries such as Brazil, the Netherlands and U.S.A. [38]

24. Even beyond migrant workers, who face distinct risks when reporting an employer, it is essential that the Fair Work Agency earns workers’ trust. In our experience, simply asking people to report wrongdoing by their employer is not enough, particularly when they fear that reporting will lead to retaliation (in the form of lost employment, or lack of references). To earn vulnerable workers’ trust and encourage reporting, the Agency should have a transparent Client Charter that sets out what workers can expect from the Agency. At a minimum, this should include details of: how reports will be investigated, what happens to the data workers share with the agency, how the Agency will mitigate the risk of retaliation by the employer  and, perhaps most importantly, what remedies and compensation workers can access after they make a report. 

25. Finally, at an operational level, the Fair Work Agency must be able to efficiently deploy its resources. To do this, it must utilise a mix of proactive and reactive inspections (the ILO recommends a ratio of 60:40 here) and should have a number of localised hubs to deal with local issues and provide an access point for workers in all regions of the UK.[39] Similarly, Citizens Advice have argued that the new Agency must be able to sanction the use of its own enforcement powers (rather than having to apply to a court) and provide formal routes for frontline organisation to share intelligence and expedite cases of wrongdoing.[40]