Employment law under the coalition Government
Consultant editor Darren Newman asks what the coalition Government's programme for government tells us about the future of employment law in the UK.
Employment law is about to enter a very interesting time. We knew what sort of approach we could expect from a Conservative Government, but with a coalition Conservative-Liberal Democrat Government we are in new territory. The recently published coalition document Our programme for government (online version of document) gives some fascinating hints as to what might be on the horizon, but it is very short on detail.
One important factor to bear in mind, however, is the extent to which the detail of employment law will be in the hands of Liberal Democrat ministers of state - with Ed Davey taking the employment relations portfolio in the Department for Business, Innovation and Skills, and Lynne Featherstone being appointed Minister for Equalities in the Government Equalities Office. It will be interesting to see the extent to which they will be in a position to push forward issues raised in the Liberal Democrat manifesto.
At the moment, all we have to go on is what is set out in the coalition document, which pledges to "review employment and workplace laws, for employers and employees, to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive". This is just the sort of thing that any new government might say, and gives us very little to go on in terms of what the new regime might bring. It is noticeable that there is no mention of the employment tribunal system. With pressure on public spending and tribunals bogged down in local authority equal pay cases, it seems likely that some major reform will have to be considered.
Minimum wage
The Conservative manifesto said that a Conservative Government would "keep" the minimum wage, but the Liberal Democrats went much further, pledging to set the minimum wage at the same level for all workers (except apprentices) over the age of 16. The coalition document states "'we support the national minimum wage because of the protection it gives low-income workers and the incentives to work it provides". Whether or not that means that any change can be expected in the future is unclear. Neither can we discern from this what approach the coalition will take to uprating the minimum wage in line with the Low Pay Commission's recommendations.
Europe is one of the issues where the two coalition partners are furthest apart philosophically and where compromises have had to be made. The Conservative manifesto pledged to seek the repatriation of EU competency in the field of social affairs, but this has been watered down in the coalition agreement to a commitment to "examine the balance of the EU's existing competencies". The agreement is, however, more specific in pledging that the Government will "work to limit the application of the Working Time Directive in the United Kingdom".
This is a rather mysterious pledge. Presumably it does not mean that the Government will seek to roll back from the current application of the Directive in the UK. More likely it refers to the forthcoming review of the existing Directive, for which the European Commission launched a first-stage consultation in March 2010. The current individual opt-out from the 48-hour maximum working week is perhaps valued and used in the UK rather more than in most other member states. If the Government's aim is simply to maintain this opt-out, that is no more than is to be expected - and is the same objective that was successfully pursued by the last Government. If it means something more, this may result in a considerable political row.
The coalition document makes no mention of the Temporary Agency Work Directive (2008/104/EC) and the Agency Workers Regulations 2010 (SI 2010/93), passed by the last Parliament to implement it. The detail of these Regulations is likely to prove controversial, with many stakeholders on the employer side arguing that the Regulations go further than the Directive requires (and the TUC likely to argue that they do not go far enough). Both parties went into the election opposed to "gold plating" EU Directives (the practice of going beyond what is strictly necessary to implement a Directive), so a choice will need to be made about whether to stick with the Labour Government's plans for implementation or revoke the current Regulations and redraft them. My advice to the coalition would be to leave the subject well alone and stick with the current Regulations. The extent of the Directive is not entirely clear and it is better to err on the side of some minor gold plating than to fail to implement it properly. Besides, the 12-week qualifying period for agency workers to receive equal treatment is dependent on an agreement between the TUC and the CBI. The coalition Government will need to be mindful that it does not provoke the TUC into renouncing the agreement, with the result that equality for agency workers will have to apply from day one of their assignment.
Equality
It is in the realm of equality that we are likely to see the earliest indication of how the coalition approaches employment law. The coalition document, while suggesting great changes to come, is very short on specifics. It states "we will promote equal pay and take a range of measures to end discrimination in the workplace", but makes no mention of the Equality Act 2010. While this received Royal Assent before the dissolution of the last Parliament, it has yet to be implemented (the Labour Government had scheduled this for autumn 2010). Although much of the Act is uncontroversial, some areas may not find favour with the new Government and this may affect the timetable. These areas are likely to include the public sector duty relating to socio-economic disadvantage; the provisions on positive action; and the regulation-making power relating to gender pay reporting.
The provisions on the socio-economic duty are highly unlikely to be brought in. The Conservatives were wholeheartedly opposed to the duty and the Liberal Democrats regarded it as being so woolly as to be of little actual value. In truth, the provisions make more of a political statement than creating a real legal obligation on anyone, and it is unlikely that many people will feel seriously let down if they are simply never brought into force.
Positive action is more interesting because, while the Equality Bill's provisions on the subject were roundly condemned by the Conservatives, they were supported by the Liberal Democrats. Speaking in the Second Reading Debate on 11 May 2009, Lynne Featherstone said: "It seems completely illogical that we should be allowed to fast-track the training of ethnic minority and women police, but not be allowed to fast-track their employment. The rebalancing of the workplace is hugely important, and I do not disagree with the Leader of the House's vision of the bank boardrooms of the future. When both the genders make a decision, it is likely to be more balanced." With that comment in mind, it is intriguing that the coalition document states "we will look to promote gender equality on the boards of listed companies". Does this mean that the positive action measures will be implemented after all?
There is a real dilemma for the Government here. Current discrimination law provides for some limited positive action (such as the provision of training courses for under-represented groups), but these provisions will be repealed along with the rest of the existing discrimination legislation when the Equality Act 2010 is brought into force. There is no way of bringing the rest of the Act into force and keeping the positive action measures under the old legislation. Of course, the Act could be amended before being brought into force, but that would be very time consuming. The choice then is between no positive action at all, and the positive action set out in the Act. It will be interesting to see which way the Government acts on this point.
The Equality Act 2010 makes only modest reforms to the law on equal pay. In particular, the former Labour Government resisted pressure to provide for a system of compulsory pay audits, preferring a regulation-making power to introduce requirements on companies to report on the average pay of men and women in their organisation. Again, in the Second Reading Debate, Lynne Featherstone was highly critical: "I cannot express how disappointed I am with the Government's overly patient approach to equal pay for women. I know that their heart is in the right place, but the idea that business is to be given another four years in which to change its ways is a cop-out ... I am sorry that the Government have backed away from mandatory pay audits. What the Government propose is not a pay audit at all, but simply a statement of average pay by gender, without any context to make it truly meaningful … they fall short of requiring a real pay audit that would evaluate the quality and nature of the work being done and then be published."
This view was reflected in the Liberal Democrat manifesto, which pledged to introduce compulsory pay audits for employers with more than 100 employees. The Conservative policy, on the other hand, was to require a pay audit when any company lost an equal pay claim in an employment tribunal. Whatever the shape of the final policy, it would appear that we can expect that the coalition will introduce some system of pay audits with a compulsory element, going well beyond what is currently set out in the Equality Act 2010.
Another interesting proposal in the Liberal Democrat manifesto was to introduce "name blank" application forms for recruitment exercises, so that employers would be unaware of the gender or ethnic origin of job applicants until they had selected a shortlist for interview. It is difficult to see how legislation could provide for this - many employers do not use application forms at all - but it is possible that something along these lines is one of the "range of measures" envisaged by the coalition.
Retirement
The coalition pledges to phase out the default retirement age. No timescale is given, but the reference to "phasing" presumably means that the default retirement age will be raised before it is finally abolished. It is clear, however, that employers will need to start getting used to the idea of a workplace in which employees cannot simply be retired when they reach a certain age. Dismissal will be possible only following appropriate performance management.
Flexible working
Both the Liberal Democrat and Conservative manifestos pledged to extend the right to request flexible working, and the coalition document states "we will extend the right to request flexible working to all employees, consulting with business on how best to do so". At present, employees with 26 weeks' service have the right to make a request in relation to a dependent child under the age of 17 or an adult for whom they have caring responsibilities. It is not clear if extending this right to "all employees" will simply mean removing the 26-week qualifying period or raising the maximum age of the child to 18 (a rather modest reform), or if it will mean removing any limitation on the reason why the employee is seeking flexible working. Whatever the proposal turns out to be, employers should remember that the right to request is just a right to request. The real legal bite with regard to requests for flexible working comes in the indirect (or direct) sex discrimination complaint that may follow a refusal to grant a request.
A quiet five years?
In five years time will our employment law regime be fundamentally different from that of today? I think probably not. Changes will be made and case law will continue to develop, but I see no signs of radicalism in the coalition's proposals so far. Much will depend on the delicate balance of power between the coalition partners, and it may be that as neither side can push its own agenda too far, major reform will be left until one party has a clear majority. Of course, I may have to eat my words - it has happened before!
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