Do employees have protection if they refuse to agree to employee-shareholder status?
An employee shareholder is an individual who has agreed to give up certain employment rights in return for shares in the employer's company, in accordance with the requirements of s.205A of the Employment Rights Act 1996. Employers cannot insist that their existing employees enter an employee-shareholder agreement.
If an employer dismisses an employee because they refuse to agree to become an employee shareholder, the dismissal will be automatically unfair. The employee does not need to meet the usual minimum service requirement to bring an unfair dismissal claim in these circumstances.
Employees also have the right not to be subjected to a detriment on the ground that they have refused to agree to become an employee shareholder. An employment tribunal can award such compensation as it considers just and equitable in the circumstances, if it finds that an employer has subjected an employee to such a detriment.
While existing employees are protected if they refuse to change their status, the employer can require new recruits to agree to employee-shareholder status.
The tax advantages linked to shares awarded under employee-shareholder agreements have been abolished for arrangements entered into on or after 1 December 2016. Further, in the Autumn Statement 2016, the Chancellor of the Exchequer announced that the status itself will be closed to new arrangements at the next legislative opportunity, in response to evidence that it is primarily being used for tax-planning purposes by high-earning individuals. On 4 January 2018, the Department for Business, Energy and Industrial Strategy confirmed to XpertHR that this is still the Government's intention.