Time to change the legal assumption: companies should be under more pressure to actively prove their model is one of self-employmentby Frank Field / November 23, 2017 / Leave a comment
Speaking on the steps of Downing Street for the first time as Prime Minister, Theresa May promised to address the “burning injustice” endured by too many in Britain. She pledged her government would stand up for the many against the interests of the privileged few. There can be few areas in this country where there is a more urgent need to tackle injustice and inequality than the world of work.
One of the central assumptions of the fine legal tradition in this country is that the parties to a contract, or a dispute, should be put on as equal a footing as possible. Much of our law is about exactly that: defending the rights of the ordinary individual, the “little guy,” against the narrow interests of the “privileged few.”
The current situation however is reversed. The new employment class in the gig economy means that individuals are left to take on the whole industry. An unacceptable burden is placed on individual workers to address poor practice through an expensive and risky court case, while the companies themselves operate with relative impunity.
The Director of Labour Market Enforcement David Metcalf recently told the Work and Pensions committee, of which I am chair, that with current resources, employers can expect an inspection of their labour practices once every 500 years. On this timescale the last case would have happened at the Reformation! This is hardly a great deterrent, especially when firms will face only paltry fines if they are found to be breaking the law. Restrictions on class actions and the absence of higher penalties for widespread or repeated abuses by the same employer mean companies can just sit back and wait to see whether individuals are willing to take all the risks of pursuing their rights.
“We should not be in a position where a willingness to exploit your workforce—and the UK taxpayer—is a competitive advantage”
This week, we published with the Business, Energy and Industrial Strategy Committee a report with one central proposition. There should be a legal assumption of “worker by default, until proven otherwise,” for companies with substantial dependent workforces currently labelled as self-employed. This would shift the burden and risk back where it should be. Companies would be required to provide basic safety net standards of rights and benefits to their workers—and rightful contributions to our welfare safety net through National Insurance and the workplace pension—or prove that their model of work is genuinely one of self-employment. We should not be in a position where a willingness to exploit your workforce and the UK taxpayer is a competitive advantage.
There can be no encroachment on the National Minimum Wage or National Living Wage, in law or practice. Workers should never be faced with a choice between not working, or working for below minimum wage. Companies cannot take on all the risks and none of the benefits of flexibility: they should either guarantee hours that reflect the periods worked each week, or compensate workers for uncertainty. The law must be clarified also to protect those who want the full flexibility of genuine self-employment, to allow entrepreneurs to work in the ways that serve them best.
A proper approach to enforcement would push the burdens of responsibility and liability back up the supply chain, but the enforcement agencies urgently need more resources to root out bad practice. Significant increases in the fines for offending employers would create the win-win of a greater deterrent effect and generating extra revenues for further enforcement action. Companies that flout the law, and those that tolerate exploitation, should be “named and shamed.” Enabling enforcement bodies to issue heftier punitive fines for noncompliance would also help ensure that the risks of being caught outweigh the gains companies stand from illegal pay and practices. Concentrated “deep dives” in industry sectors and geographic areas, where there is evidence of abuse, should become a regular part of the enforcement armour to protect vulnerable low paid workers.
“Companies that flout the law, and those that tolerate exploitation in their supply chains, should be ‘named and shamed’”
Mention of raising revenues for the Treasury, for enforcement, of shifting the burden of liability and responsibility, can invoke the grim spectre of new reams of red tape, stifling entrepreneurial spirit. The reality is business has nothing to fear from our proposals. Quite the reverse—the draft Bill we published this week with the BEIS Committee would put good business on a level playing field, not being undercut by bad business. A legal framework that enables a genuinely flexible labour force will benefit workers, consumers and businesses.
It is time to close the loopholes that allow irresponsible companies to underpay workers, avoid taxes and free ride on our welfare system. The Budget yesterday was a missed opportunity, but in a hung parliament, with all eyes on Brexit, making time to allow two cross-party select committees to legislate to end the mass exploitation of ordinary, hard-working people offers the prime minister a golden opportunity to begin to fulfil her promise.