What the new Conservative government means for employers

Siobhan Bishop: Welcome to our podcast on what the new Conservative government means for employers. In this podcast, we will be looking at the issues employers will face as a result of the new Conservative government. We will discuss some of the key changes that will affect employers such as what is coming down the tracks in relation to trade unions, zero hours contracts, employment agencies, tribunal fees and whistleblowing.

I would like to introduce Martin Chitty, a partner in the Employment & Equalities Team and also Emma Hine, an Associate in our team here at Wragge Lawrence Graham & Co.

Martin, we heard in the Queen's speech that the government will introduce legislation to reform trade unions and protect essential public services from strike action. What is the rationale behind this?

Martin Chitty: Before the election there was a lot of coverage and a lot of political posturing, frankly, about the need to make strike action in certain sectors more difficult.

The most obvious example, perhaps in London, is extended strike action by the RMT in reliance on relatively small turnouts in ballots. So essentially you've got a very small proportion of the total workforce bringing their colleagues out on strike and having a disproportionate impact, and the government has been very clear in saying that this is not, from their point of view, philosophically acceptable.

They want to change the balloting system and they want to make it necessary for unions to get a more substantial turnout and a more obvious number of voters out there supporting the action.

Siobhan: So, what will this reform mean in context?

Martin: At the moment, any strike action by a union, which is a protected action, has to be supported by a majority of those who vote from the right constituency, and the constituency is the people who are going to be called out to take part in the industrial action.

And, going forward, the government have said that they want to make it more difficult, to impose a higher hurdle, before that action can be protected. Part of the rationale for that is that the government say that, in order to ensure the ambition of prosperity, the general economy has to be disrupted as little as possible by strikes and particularly by ill-supported strikes which do not have a mandate, really, democratically, for the action which they take.

Now, as you will see, the changes that they are proposing to make will impose on the trade unions a hurdle which they have got to get over which is significantly different to the hurdle which MPs face and that is a point which will be made repeatedly as the politics of this unfold.

In any sector at the moment, it is simply majority vote - more of those vote in favour than vote against - and there are going to be two changes. The first of those changes applies in all sectors of the economy, and it is going to be that more than 50% of those who can vote, will have to vote. Ok. So the minimum threshold will be fifty plus one and more than half of those have to support the action.

In the public sector, or as the government have said in the Queen's speech, in areas providing public services, there is going to be a different threshold. So, not only is it more than 50% have to vote, but more than 40% of those who can vote will have to vote in favour. Now that, on the face of it, doesn't sound too difficult - only 40% of those who can vote have to vote in favour but, in practice, the turnouts in these ballots are extremely small, as low as 10% on some occasions. So, what this will necessitate is much greater turnout by union members.

But, I think, the issue here is quite challenging and it's the law of unintended consequences that we might see. What seems quite likely is much greater trade union activism to mobilise the membership and those who might take part in order to ensure that the vote actually gets to the right level. So people will, in fact, be more committed because they have engaged in it rather than being passive, if you like, knowing that a relatively small group of activists are going to be sure that the ballot succeeds.

Other issues to think about here are what does 'public services' actually mean? The government have talked about health, education, transport and fire and you could easily insert the names of specific trade unions in place of those. But there are large sectors of the economy where there are people not employed in the public sector, but who are responsible for delivering public services, care being a primary example of that.

So, when we see the legislation, and there is nothing yet drafted in an outline form, we will have to consider very carefully how that's actually going to work in practice because there will be many private sector employers who will need to think carefully about whether they are caught by this or not, and the same, of course, goes for the trade unions.

Siobhan: Thanks, Martin. That's really interesting, especially the part about unintended consequences and certainly one to watch down the track. Moving on now to employment agencies. What changes are we looking at in that area?

Martin: The government has outlined a new immigration bill, which is quite wide-ranging, and is designed, in the government's words, to protect the interests of hard-working, British families, and a couple of points arise immediately for employers.

In terms of agencies, if you use an agency to recruit, they will be required to ensure that jobs are advertised in the UK, in English, rather than simply advertising jobs abroad. The argument here being that it is necessary for them to do that in order to ensure that they are recruiting from within the British workforce, or at least those who are already here.

Siobhan: Thanks, Martin. I'm now going to bring in Emma, who is going to talk about zero hours contracts to kick off. So, this was clearly a hot topic during the election campaign, and what can we expect to see from the Conservatives going forward?

Emma Hine: Well, I think we can certainly expect to see some form of change but it may not be as dramatic as what we could have seen had, for instance, the Labour government been in power, as they were calling for the abolition of zero hours contracts. In actual fact, a lot of the steps the Conservatives are proposing to take in relation to zero hours contracts had already been mapped out under the previous coalition government.

Now, the Conservatives don't view zero hour contracts in themselves as necessarily a bad thing because they recognise that they offer flexibility for both employers and workers alike. Rather, what they say is that it is the misuse of these zero hours contracts that is the issue.

Now, two key issues with zero hours contracts which were originally identified by the previous coalition government, and it looks as though the Conservative government will be taking these forward, are in respect of exclusivity clauses which are in zero hours contracts. Now, these are clauses which prevent workers from working elsewhere and also the lack of transparency that there has been with zero hours contracts. So, what we're talking about here is the fact that previously there has been no legal definition of exactly what a zero hours contract is.

Now these two issues have now been addressed in the new Small Business, Enterprise and Employment Act which was passed just before Parliament's dissolution, prior to the general election. Now, the relevant sections in this Act are already in force and they actually came into force on 26 May. So, what we now have is a ban on exclusivity clauses in zero hours contracts, and we also have a definition of zero hours contracts in the context of the exclusivity clauses.

The remaining issue is that there are a number of ways in which unscrupulous employers can get around the ban by, for instance, providing for a limited amount of certainty to workers, for instance, by giving them an hour's worth of work per week. There is also nothing to stop the unscrupulous employer from punishing a worker, for instance, by reducing the number of hours that they offer to that worker or even dismissing them.

Now, the government did recognise this and has provided measures in the Act which provide for the Secretary of State to tackle anti-avoidance through regulations. No regulations are yet in force but we do have draft regulations which are currently in circulation. Now, in essence, what they currently plan to do is to widen the ban on exclusivity clauses in zero hours contracts to include contracts which do not guarantee the worker with a specified minimum income. These are referred to in the Act as 'prescribed contracts'.

The draft regulations are currently silent on how the minimum income will be calculated and we do expect there to be further consultation on this. What the draft regulations do currently say is that they expect that there will be an upper limit to the threshold. Currently, workers being paid £20 or more are expected to fall outside of the regulations.

The draft regulations also provide for zero hours workers to claim compensation in the employment tribunal if they do suffer detriment. So, at the moment we have the ban but we are still waiting on the anti-avoidance measures to come in force.

Siobhan: Okay. There was another pretty significant change that the coalition government introduced and that was the introduction of employment tribunal fees. What can we expect in that area going forward?

Emma: In terms of employment tribunal fees, the government has actually, in the last couple of weeks, just announced that they do intend to review these to consider how effective the introduction of fees has been in meeting the original behavioural and financial objectives, whilst also maintaining access to justice.

It appears to be of little coincidence that this has also been announced at the same time as UNISON is currently going before the Court of Appeal to argue that they are a barrier to justice. The review will also consider how effective the current fee remission system has been. Now, it is expected that completion of this review will take place later in the year and it is likely that consultation will follow on from this. Our guess, at the moment, would be that employment tribunal fees are here to stay but what we could perhaps see is some room for fees to be lowered.

Two other areas which are relevant to employment tribunals and procedures that were included in the Small Business, Enterprise and Employment Act were the enforcement of employment tribunal awards and COT3s, and also the changes to limit the number of postponements which will be available to the party in proceedings.

Now, although the section in the Small Business, Enterprise and Employment Act which deals with the enforcement of employment tribunal awards and COT3s is not yet in force, when it is, it will require the employer, if they were served with a penalty notice by an enforcement officer, to pay 50% of the sums owed, subject to a minimum of £100 and a maximum of £5,000. There will also be a 50% reduction for early payments.

Now, the other change that has been brought in the Small Business, Enterprise and Employment Act which is in force, is to limit the number of postponements available to a party in proceedings. It will also require the employment tribunal to consider making a cost order or a preparation of time order for late applications. Now, the draft regulations, which are in circulation, currently provide for two postponements, with a further only being granted in exceptional circumstances, and they also require the employment tribunal to consider making a costs or preparation of time order where an application is made within seven days of the hearing. We will have to wait and see whether these draft regulations and proposals set out within these make it into the final versions.

Siobhan: Thanks. And the final politically interesting area we want to look at is that of whistleblowing. Emma, can you talk about the recent changes there?

Emma: There is no doubt that whistleblowing is a hot topic and particularly in light of the Mid Staffordshire NHS Trust fiasco and the financial crisis there is no doubt that the government has been under a lot of pressure to take action in respect of these. Now, over the past couple of years, there have been a number of changes to whistleblowing laws. For instance, we have seen the introduction of the public interest requirements and also the removal of the good faith requirement from the test for a protected disclosure. But an additional concern that has been raised through the consultation process which has not yet been addressed relates to prescribed persons.

Now, helpfully, BIS have produced a list of those prescribed persons and bodies and who these are and they are available online. The issue that was highlighted through consultation was the lack of consistency in the approach that has been taken by prescribed persons in relation to disclosures and also concerns by whistleblowers that the disclosures were not being investigated.

So, new provisions have been inserted into the Small Business, Enterprise and Employment Act which will empower the Secretary of State to make regulations which will require prescribed persons to produce an annual report on the disclosure of information that have been made to them by workers.

Now, the detail of what will be included in these reports will be set out in draft regulations which have not yet been finalised as, indeed, these sections of the Small Business, Enterprise and Employment Act are not yet in force.

A last minute addition to the Small Business, Enterprise and Employment Act, which was actually inserted as a result of the review by Sir Robert Francis into whistleblowing in the NHS, was a protection for NHS applicants. Now, what there is now is legislation in force which gives the Secretary of State the power to make regulations prohibiting an NHS employer from discriminating against an applicant because it appears to that NHS employer that the applicant has made a protected disclosure. This legislation is now in force but we are still waiting on the detail which we expect to be contained in the regulations which are not in force.

Siobhan: Thank you very much to Martin and to Emma. We have also covered two of these issues in more detail in previous podcasts. The first one is on trade union issues, trade disputes and strikes and what steps employers can take to deal with these issues and the link to that is on the website.

The second is looking at the psychological aspects of whistleblowing, in particular, what encourages a person to either blow the whistle or not blow the whistle and the steps organisations take to respond to these issues and that podcast is in conjunction with Dr. Mike Drayton, a clinical psychologist. The link to that podcast is also on the website.

And, finally, if you have any queries regarding any of the topics that we have covered today, Emma or Martin will be delighted to hear from you.

Thank you.