A new Employment Status: Employee Shareholders

In a proposal that, according to the TUC, “defies logic” the government is pressing ahead with a proposal to introduce Employee Shareholder status in October 2013, under clause 27 of its Growth and Infrastructure Bill.

Under this proposal, participating employees are to receive shares with a minimum value of £2,000 in return for giving up a range of statutory employment rights including:

• The right to claim unfair dismissal (excluding automatically unfair and discriminatory dismissal);

• The right to a statutory redundancy payment;

• The right to ask for flexible working;

• The right to ask for time off to train; and

• Employees wishing to return early from maternity or adoption leave will be required to give 16 weeks’ notice instead of the usual 8 (See Chapter 8: Maternity leave).

The shares can be in private limited companies, for which there is no external market on any subsequent sale. Regulations are to be published explaining how shares are to be valued. There are limited tax exemptions.

In April 2013, the proposal — opposed by 92% of all respondents to the public consultation — was comprehensively rejected twice by the House of Lords.

The proposed new status, although supposedly voluntary, is viewed as a charter for bullying bosses, since employees, particularly those with long service, are likely to be pressured into accepting shares to give up their rights. The proposal is also viewed as a way of enabling employers to buy out employment rights cheaply at the start of employment relationship rather than in a more expensive settlement agreement at the end.

Two concessions were made following defeat in the House of Lords. The first is a seven day “cooling off period” and the second is a requirement for independent legal advice. Both developments are likely to make this new employment status extremely unattractive to most small to medium sized employers.

As the TUC notes: “Employment rights should not be for sale. Employers do not want to buy them, and employees will not want to sell them. What is worse is that it’s only real practical use is as a tax dodge”.

For a critique of the proposal see Justice Deferred, a critical guide to the Coalition’s employment tribunal reforms by Renton and Macey, published by the Institute of Employment Rights.