Employment law under a new Conservative Government
As we get closer to a general election, there is a strong possibility that the country will soon have a Conservative Government for the first time since 1997. The last Conservative administration transformed both collective and individual employment law over the course of its 18 years in power. In this article, we consider those areas of employment law on which an incoming Conservative Government might focus. We look at the indications about Conservative policy in these areas, and at how easy it would be for a new Conservative Government to change the current rules, and the mechanisms that it might use.
On this
page:
Primary or
secondary legislation required?
Europe and the social chapter
Equality law
The Equality and
Human Rights Commission
Trade unions and
industrial action
Individual
employment rights
The national
minimum wage
Conclusion
Primary or secondary legislation required?
One factor that would be important to a new Conservative Government is whether or not a particular change would require primary legislation: an Act of Parliament. Because any new administration has a large number of potential Acts competing for parliamentary time, changes that require extensive primary legislation are unlikely to be made early in a new Government's first term.
However, many important areas of employment law can be amended by secondary legislation - statutory instruments - which take up very little parliamentary time and can be implemented relatively quickly. This article, therefore, pays particular attention to areas likely to chime with a Conservative Government's overall agenda that could be implemented through secondary legislation.
Europe and the social chapter
A key feature of the last Conservative Government's approach to employment rights was its consistent opposition to employment law measures being introduced by the EU - culminating in the Government obtaining an opt-out from the social chapter of the 1992 Maastricht Treaty. As a result, the UK was not obliged to implement the Directives on European Works Councils, parental leave, part-time working and fixed-term employees subsequently agreed by the other member states.
It should be noted that the Working Time Directive (93/104/EC) was adopted under health and safety provisions agreed under the Single European Act of 1986, and measures such as the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794), and the requirement now found in s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 to consult employee representatives in cases of collective redundancy, were the result of other early EU Directives. Equal pay, pregnancy rights and sex equality were also the subject of extensive early EU legislation implemented in the UK.
The opt-out from the social chapter was brought to an end by the Labour Government when it came into power in 1997, and the Treaty of Amsterdam agreed in 1999 contained a new social chapter that applied to all member states and also covered the earlier employment-related Directives agreed by the UK pre-Maastricht. The new social chapter Directives were implemented by the UK in 1999/2000.
Since then, the flood of legislation from Europe that some commentators had predicted has not materialised, although the Information and Consultation Directive (2002/14/EC) was adopted in 2002 and the Temporary Agency Work Directive (2008/104/EC) was adopted in 2008, and must be implemented in the UK by November 2011.
Measures based on European Directives cannot easily be amended, or avoided, by an incoming Government. In practice, domestic legislation has tended not to go beyond the minimum measures necessary to implement the relevant Directive and could not be significantly amended without considerable risk of infraction proceedings in the European Court of Justice.
One of the few areas in which employee rights in this area go beyond the minimum required is the annual leave provisions in the Working Time Regulations 1998 (SI 1998/1833). Under reg.13A, workers are entitled to an additional 1.6 weeks' leave on top of the four weeks required by the Working Time Directive (now 2003/88/EC). It is, however, unlikely that a new Government would want to cut holiday entitlement as one of its first measures.
There would nevertheless be considerable pressure within the Conservative Party for the scope of EU competence in these areas to be addressed. The Conservative manifesto for the 2009 European elections promised that "the restoration of British control of social and employment legislation will be a major goal for the next Conservative Government". However, such a change would require an amendment to the Treaty, which would have to be ratified by all member states. With the Lisbon Treaty still not ratified almost two years after it was agreed, it is difficult to see how a change such as this could realistically be achieved, particularly during a first term.
Equality law
Following the Treaty of Amsterdam, equality law is also largely governed by Europe. However, the Conservatives have not been hostile to equality law in the way that they have to many of the other social measures contained in European Directives.
Clear differences of approach from that taken by the current Labour Government are, however, emerging as the Equality Bill 2009 makes its way through Parliament. The passage of the Equality Bill before the dissolution of Parliament is by no means guaranteed. Even if the Bill receives Royal Assent, it will probably not be brought into force before the general election. The substantive provisions of the Bill come into force only when a minister makes an order to that effect (clause 205 of the Bill), so a new Government would have a choice as to whether or not to implement particular provisions, particularly in respect of new, free-standing provisions.
Although the Conservatives do not oppose the main provisions of the Equality Bill, they did vote against giving it a second reading in the House of Commons. The amendment to the second reading motion that was moved by Theresa May MP is as follows:
"That this House declines to give a second reading to the Equality Bill because it fails to address the root causes of the reduction in social mobility in recent years, fails to address the disability pay gap, especially in the civil service, gives employment tribunals too many powers in areas where they are not best placed to judge, contains disproportionate and bureaucratic proposals on the gender pay gap which will impose unnecessary costs on business whilst failing to solve the problem, fails to implement proposals on compulsory pay audits for those organisations which are found guilty of discrimination by an employment tribunal, gives ministers the power to amend the Act by order instead of leaving this to Parliament, and allows discrimination in recruitment and promotion decisions." [Hansard 11 May 2009: Column 565]
Although the reference to the disability pay gap in the civil service seems a surprising issue to highlight in such a short motion, the other issues set out give a neat summary of where Conservative Party thinking is on equality issues.
The Conservatives oppose clauses 1-3 of the Equality Bill, which impose a duty on public authorities to have "due regard to the desirability of exercising [their functions] in a way that is designed to reduce the inequalities of outcome which result from socio-economic disadvantage".
Another aspect of the Bill opposed by the Conservatives is the provision on gender pay-gap information set out in clause 75. However, the clause provides only the power to make regulations on the issue, and does not of itself contain substantive provisions. A new Government could simply neglect to implement the provision, or bring it into force but then decline to issue any regulations. In any event, it seems unlikely that clause 75 would be utilised with a Conservative Government in force.
The Conservatives have also been opposed to the provisions on positive action set out in the Equality Bill: in particular clause 155, which allows for direct discrimination in favour of a candidate from a disadvantaged or under-represented group, provided that the candidate is "as qualified as" the person discriminated against for the job in question. However, it might be more difficult for a new Government simply not to implement this provision. Without it, no positive action in recruitment or promotion would be permitted - which would appear to include the measures in relation to training that have always been permitted by the equality legislation. Failure to implement the measure could therefore leave a gap in the law.
A new Government would not have the option of choosing between particular provisions of the Equality Bill and those in the current discrimination legislation. Under sch.27, the current scheme of equality legislation is repealed en masse - it cannot be done in a selective way.
On the whole, we could probably expect a Conservative Government not to implement some aspects of the Equality Bill, with the overall scheme of discrimination legislation remaining largely unchanged.
One proposal made by the Conservatives is that employers that lose an equal pay claim in an employment tribunal should be required to carry out an equal pay audit of their organisation. This was proposed at the committee stage of the Equality Bill and was also the focus of a private member's Bill introduced in the House of Lords by Baroness Morris of Bolton in January 2009, which enjoyed the support of the Conservative front bench.
This step would require primary legislation. Whether or not it is an issue that a new Conservative Government would prioritise remains to be seen.
The Equality and Human Rights Commission
The position of the Equality and Human Rights Commission (EHRC) under a different Government has been the subject of some speculation, with disagreements about its leadership and criticism of its financial management. David Cameron's speech on quangos on 6 July 2009 (see the BBC website) did not allude to the EHRC, but a number of commentators have speculated that a cost-cutting Government might have it in its sights.
However, the EHRC was established by statute - the Equality Act 2006 - and it would require primary legislation to abolish it. The chair, Trevor Phillips, was recently appointed for a further three-year term. It would be open to a minister to remove any of the commissioners from their post, but only if it was the minister's opinion that the commissioner was "unable, unfit, or unwilling" to perform his or her functions (para.3(5) of sch.1 to the Equality Act 2006). Dismissal of current commissioners would probably be seen as a political act and could be subject to judicial review. It therefore seems likely that a new Government would have to get along with the current commissioners as best it could.
As regards the funding of the EHRC, the Act leaves this to the minister to determine what it needs (para.38 of sch.1 to the Equality Act 2006). With tightening of all aspects of government expenditure expected, the EHRC may have to work hard to compete for resources.
Trade unions and industrial action
The last Conservative Government was notable for the extent to which it transformed the law on industrial relations in general and industrial action in particular. Since 1997, the Labour Government has implemented a number of measures that were not supported by the Conservatives. However, this does not mean that a Conservative administration would simply act to reverse them, particularly not in a first term. Most aspects of the law on industrial action could be changed only through primary legislation and would be politically controversial. As long as industrial action continues to be a low-profile public policy issue, it would be surprising if a new Conservative Government embarked on wholesale reform.
The 1997 Conservative Party manifesto proposed outlawing industrial action that "has disproportionate or excessive effect", a proposal specifically aimed at strikes in the public services. The manifesto also proposed requiring industrial action to be authorised in a ballot in which action is supported by a majority of the members eligible to vote rather than a majority of those who vote, which is the current position.
The Conservatives have not indicated a return to these policies. However, if they were in power, and a public spending clampdown led to industrial unrest in the public sector, it is quite possible that they would be revived and a Bill brought forward on industrial relations. In that event, a number of other technical changes could be made with potentially important consequences. For example, one small but important change made by the current Labour Government is the provision that accidental failures in respect of the industrial action balloting process should be disregarded if the errors are small enough that they are unlikely to affect the result of the ballot (s.232B of the Trade Union and Labour Relations (Consolidation) Act 1992, inserted by s.4 of the Employment Relations Act 1999). This made it more difficult for employers to challenge the legality of industrial action. The repeal of this provision probably would not gain a great deal of press attention, but it could have a significant practical effect.
Individual employment rights
The last Conservative Government took pride in its deregulatory approach to individual employment rights, although this was belied somewhat by the rise in the importance of individual employment law during its time in power. Current Conservative thinking is focused on the burden of "red tape", particularly on small employers, and it is likely that measures with this in mind would be taken during a Conservative Government's first term.
Unfair dismissal is an area that would be likely to attract attention. The qualifying period for unfair dismissal was last changed in 1999 when it was reduced from two years to one. The power to vary the qualifying period is set out in s.209(1)(c) of the Employment Rights Act 1996, so it would be open to any new Government to introduce a different qualifying period with relative ease.
Indeed, s.209 of the Employment Rights Act 1996 gives ministers wide powers to amend the application of employment rights. Under s.209(1)(a), the Secretary of State may, by order, "provide that any provision of this Act … shall not apply to persons, or employments of such classes as may be prescribed in the order". This right is subject to a number of exceptions, but the right not to be unfairly dismissed in s.94 of the Act is not one of them. An order could therefore be made excluding, for example, those employed in small businesses from the right not to be unfairly dismissed. The same power could be used to exclude small businesses from the requirement to pay redundancy payments under s.135 of the Act. No such proposals have been made by the Conservatives, but there is likely to be a considerable lobbying effort in this direction from representatives of small businesses.
The annual uplift in compensation limits in areas including the compensatory award for unfair dismissal and the maximum week's pay for the purposes of calculating unfair dismissal basic awards and statutory redundancy payments was once a matter for an individual ministerial decision. However, this position was changed as a result of the Employment Relations Act 1999. The Act increased the maximum unfair dismissal compensatory award from £12,000 to £50,000, and repealed the discretionary power to review the limits with a specific mechanism linked to inflation set out in s.34. The compensation limits could not, therefore, be reduced to their pre-Labour-Government levels without primary legislation.
The national minimum wage
The national minimum wage was a key plank of the Labour Party manifesto in 1997 and was strongly opposed by the Conservatives. However, early in his leadership, David Cameron said that a Conservative Government would not seek to abolish it. That does not mean, however, that some reform of the way in which the national minimum wage works would be out of the question, possibly as a measure designed to increase opportunities for employment.
Although the National Minimum Wage Act 1998 governs the national minimum wage as a whole, much of the detail of its application is set out in regulations (chiefly the National Minimum Wage Regulations 1999 (SI 1999/584)), which could be amended relatively easily. The rate of the national minimum wage is set out in s.1 of the Act as being "such single hourly rate as the Secretary of State may from time to time prescribe". In practice, the Secretary of State has set the rate on the basis of a recommendation from the Low Pay Commission, established under s.8 of the Act. While there was a legal requirement to seek the views of the Commission on the initial rate of the national minimum wage, subsequent referrals of matters to the Low Pay Commission are a matter for the discretion of the Secretary of State. If a referral is made, the Secretary of State is not obliged to accept any advice given, but must lay a report before each House of Parliament explaining his or her reasons for failing to do so (s.6).
It would, therefore, be open to an incoming minister to freeze the minimum wage or to reduce it. Whether or not such a course is politically likely is a different matter, but the important point is that the change could be made without the need for primary legislation. It would also be possible significantly to alter the definitions of pay and the ways in which hours of work are calculated without any need to alter the Act. New regulations could greatly increase the flexibility that employers have in respect of payment by benefit in kind and the treatment of charges for accommodation or other services provided by the employer.
Conclusion
It should be stressed that the changes contemplated in this article are based on informed speculation rather than any definite policy proposals from the Conservatives. However, there is little doubt that, in anticipation of forming a Government in 2010, the Conservative leadership is already considering what reforms could be made in relation to employment law and how these would be prioritised. Any initial reforms might be modest, but it is worth bearing in mind that the huge transformation in employment and industrial relations law that took place between 1979 and 1997 was not foreseen by anyone when Margaret Thatcher became Prime Minister. Employment law has taken a consistent direction since 1997, but the country might soon experience another sea change.
