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Wednesday, 01 May 2013 13:39

Employee Shareholder Status: the choice you donít want to be given

Written by  David Renton
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At a time when employment law is changing, rapidly, for the worse, it is only right to report (critically) on a modest victory. For several weeks, the House of Lords and the House of Commons have
been batting back and forwards between each other rival version of "employee shareholder" status, previously known as "employee ownership", ie the scheme unveiled at last year's Tory party conference by George Osborne, under which employees on joining a company would be required to assign various employment rights, including their right to claim unfair dismissal, in return for a small amount of shares in that company.

Yesterday (24 April), in order to bring to an end a series of defeats in the House of Lords, the government introduced an important concession into the Growth and Infrastructure Bill and the House of Lords voted to accept the scheme (having previously rejected it twice).

How the scheme will work is now as follows: an employee will only shed their unfair dismissal rights if, prior to entering into a contract, the employee has received advice from an independent advisor. Further, the employer will have to pay the costs of that advice (this puts on a statutory footing what was previously merely the common industrial practice that employers pay for employees' advice on whether or not to accept the terms of a settlement agreement on dismissal).

My fellow employment blogger and barrister Daniel Barnett concludes that "Doubtless unions will now start charging fees for advising on employee shareholder status, and look for those fees to the employer." If the unions can only manage to do what is good for them, he will be proved right.

The above concession needs to be set in the context of other concessions made by the government (not merely on whether the shares will be taxed; which is what the government has been emphasising), including that any social security claimant who refuses an offer with employee shareholder status will not forfeit their benefits, and existing workers will be protected from any detriment if they refuse an invitation from their employer to switch to an employee-shareholder contract

The essential idea of employee shareholder status Ė that an employee should assign their most important workplace protection at the start of an employment contract, as a condition of being allowed to work at all, in return for shares of modest value that it may be wholly impractical to redeem Ė remains wholly malign. What these concessions represent is at least an admission that it would be wrong to make workers at the start of the contract be subject to this bad bargain covertly. Workers are going to be given a choice. The best hope is that sufficient numbers of people choose no, so that the whole scheme becomes unworkable...

David Renton

David Renton

Garden Court Chambers 

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