ANNEX II (continued)
Letter from the Assistant Director of the Employment
Relations Directorate, Department of Trade and Industry to the
Clerk of the Committee
(i) Transitional Arrangements
Point 1 The Committee asks for clarification
of the argument that transitional arrangements are necessary because
there would otherwise be a legal doubt as to whether an authorisation
was indefinitely valid.
The Government has given considerable thought to this question.
It accepts the TUC view, supported by other respondents,
that most existing authorisations do not contain on their face
any reference to a three year time limit. However, for
the reasons set out in the following paragraphs, it takes the
view that it is likely that at least some of the authorisations
given under the current section 68 of the Trade Union and Labour
Relations (Consolidation) Act 1992 (the 1992 Act) as amended by
the Trade Union Reform and Employment Rights Act 1993 for making
trade union subscription deductions are subject to an implied
term limiting their validity to three years.
The duration of a worker's authorisation might be clear from the
wording of the authorisation, for example if it was explicitly
valid only for a limited period. Where the duration is not clear
from the wording, it will depend on the intention of the worker
when agreeing to the deductions, inferred from the circumstances.
One relevant circumstance is the restrictions currently imposed
by section 68 of the 1992 Act, as amended. Workers who gave their
authorisation in the light of that provision cannot be
assumed to have intended to authorise more than the law allowed.
Therefore the duration of the authorisation is likely to be limited,
contractually as well as statutorily, to three years in duration.
This means that if the restrictions under section 68 are simply
repealed, authorisations given before the repeal takes effect
are likely to continue to be limited as a matter of contract to
three years in duration.
However, we cannot be sure that all existing authorisations
are limited in this way. The GMB in its response to the consultation
argued persuasively that, as a matter of fact, workers intended
their authorisations to be indefinite. Some authorisations may
be explicitly expressed to last for as long as the law from time
to time allows. Also, many authorisations will first have been
given before 1993. Where an authorisation was given before the
statutory limitation of authorisations to three years came into
force, the worker could not have relied on that limit in making
the authorisation. The restriction was imposed by the Trade Union
Reform and Employment Rights Act 1993 (the 1993 Act). Nothing
in the 1993 Act purported to alter workers' contracts with their
employers; all that it did was to impose a statutory prohibition
on an employer carrying out such a contract unless certain formalities
had been gone through. This suggests that the 1993 Act did not
bring pre-existing contracts or arrangements to an end, so that
removing the requirements introduced by the 1993 Act would allow
the continuing, indefinite contractual arrangements to be given
effect.
For these reasons, the Government takes the view that a transitional
provision is necessary to avoid leaving workers, employers and
unions in a state of unacceptable, continuing uncertainty about
the effect of existing authorisations after the repeal of the
limitation in section 68 of the 1992 Act. It could result in
a situation where a worker is able to establish, long after the
proposed deregulation order comes into effect, that his particular
authorisation is limited in scope, and that all deductions following
a certain date were unlawful. The Industrial Tribunal would be
obliged to require the employer to repay all of the contributions
to the worker. Other similar workers might then bring cases.
Since the deductions would relate to past union membership, it
would not be possible to return the situation to what it should
have been if the subscriptions had not been paid. This would
mean that the employer would be likely to be left out of pocket.
The only way for the employer to avoid this possibility would
be to undertake a complete re-authorisation, which would largely
defeat the purpose of the order. The proposed transitional provision
would allow employers safely to deduct contributions on a continuing
basis so long as the worker concerned has been given an opportunity
to specify that the authorisation is intended to be subject to
the current three year limit.
Point 2 The Committee asks whether the transitional
proposals would create a dual system in which some workers would
continue to re-authorise deductions every three years (and be
notified of deduction increases) whilst others would have their
deductions treated as indefinite (with no notification requirement).
The transitional proposals relate to those authorisations which
are current at the time of repeal. The Government considers it
would be unacceptable to remove existing limitations without giving
workers the opportunity to retain them. The transitional proposals
would indeed create two categories of worker - those who wished
to have their current authorisations treated as indefinite and
those who did not. The authorisations of workers in this latter
group would expire at the end of the current three year term.
Employers would therefore need to obtain new authorisations from
these employees to continue the deductions thereafter. In so
doing, employers would be free to make it a condition that this
next authorisation could not be time-limited to three years or
to any other period. It is therefore open to employers on the
expiry of existing authorisations to move to a system where all
check off deductions were treated identically, i.e. as indefinite.
The Government has received no indication from consultees that
individual employees place any value on re-authorising subscriptions
every three years or on obtaining advance notifications of increases
in deductions. This suggests that very few, if any, workers would
in fact wish to retain the three-year limit on their current authorisations.
If so, any extra inconvenience and cost of operating a "dual
system" would be very small, and, as discussed above, could
disappear altogether after the current authorisations expire.
The Government considers that its proposals strike the right balance
in removing the requirements on employers to obtain repeat authorisations
from their workers on check off, whilst ensuring that the terms
of existing authorisations cannot be varied without the foreknowledge
and consent of the workers concerned.
Point 3 The Committee asks whether the prescribed
notice could be made simpler.
The notice must contain sufficient information to ensure that
workers are aware of the issues at stake and understand the consequences
of responding, or failing to respond, to the notice. To do otherwise
would lay the Government open to charges that it was failing to
protect the right of individual workers freely to choose how their
existing authorisations should be treated. These considerations
limit the degree to which the notice can be condensed and information
omitted.
The Government recognises that the existing draft of the notice
should be re-examined in the light of the Committee's comments
to see if improvements can be made. After consulting Parliamentary
Counsel further, the DTI will send a redrafted version of the
notice to the Committee by February 11. It would
greatly help officials in the re-drafting process if the Committee
could identify those aspects of the current draft notice which
they consider to be unclear or unnecessarily complicated.
(ii) Removing the requirement to notify increases in amounts
deducted
Point 4 The Committee asks for information
about the wider legal context of the assertion that workers would
not be deprived of a significant right by the repeal of the requirement
that workers are told in advance of increases in the rates of
subscription deductions. In particular the Committee asks for
more information regarding present requirements for deductions
analogous to check off, and whether there is any statutory protection
for consumers against subscriptions for services being increased
without notification.
There are no statutory controls which specifically require a consumer
who pays for a service by subscription to be informed in advance
of increases in the rate of subscription. Whether notice is given
will depend on the contractual arrangements between the consumer
and the person supplying the service, and on the method by which
the subscription is paid.
Contractual arrangements: Where a subscription is payable
in connection with membership of an organisation, then the rules
of the organisation may well require members' agreement to increases
in deductions, and this will provide advance notice. Where the
subscription relates simply to the supply of goods or a service
(such as a magazine), the contract under which it is supplied
may include a requirement that the supplier gives advance notice
of increases in the subscription. However there is no
statutory requirement in either case.
Method of payment: Where subscriptions are paid by deduction
from wages, the relevant statutory provisions are section 13 and
14 of the Employment Rights Act 1996. Deductions may be made
from a worker's wages in favour of a third party if they are made
in pursuance pf arrangements under which the employer is to deduct
amounts due from the worker to the third person. The worker must
have consented in writing, either to the establishment of the
arrangements themselves, or to the inclusion in his contract of
provision for establishing such arrangements. Provided the arrangements
allow for increases in the amount, and the increased amount is
in fact due, the worker need have no advance notice of the increase.
If the subscription is paid in cash (or by cheque etc.) when it
falls due, there will inevitably be some advance notice of the
rate required, though there is no reason for this to set out the
amount of the increase, and the actual notice might be very short.
If the subscription is paid by standing order, the person making
the payment would need to start a new standing order at the new
rate, so again some notice would be inevitable. Many subscriptions
are paid by direct debit. In this case, the Government understands
that the arrangement under which banks operate the system includes
a requirement that notice is given of alterations in the amount
deducted.
Point 5 The Committee asks if there are any
statutory requirements regarding the notification of increases
in trade union subscriptions paid by other means.
There are no explicit statutory requirements requiring banks,
unions or others to notify in advance workers who do not pay by
check off when their subscriptions are to rise. However, the
Government understands that it is the practice of most unions
to inform their members in advance of increases in subscriptions.
Point 6 The Committee asks which categories
of workers are not entitled to itemised pay statements.
The right to an itemised pay statement arises under section 8
of the Employment Rights Act 1996. Under that section an employee
has the right to be given by his employer, at or before the time
at which any payment of wages is made to him, a written itemised
pay statement including particulars of the amount of the employee's
gross salary, the amounts and purpose of any variable and fixed
deductions and the amount of the employee's net salary. This
right, in common with most of the rights under the 1996 Act, applies
only to workers who are employees.
"Employee" is defined in section 230 of the 1996 Act.
A person is an employee if he has entered into or works under
a contract of employment. A contract of employment is a contract
of service or apprenticeship, which may be express or implied,
and need not be in writing. Other rights which apply only to
those employed under a contract of service or apprenticeship include
the right to a statement of particulars of employment (Part 1)
the right not to be unfairly dismissed (Part X) and the right
to a redundancy payment (Part XI).
Certain other employment rights, such as those under Part II of
the 1996 Act not to suffer unauthorised deductions from wages,
and the rights in relation to check-off under section 68 of the
Trade Union and Labour Relations (Consolidation) Act 1992 apply
to a wider range of individuals, referred to as "workers".
In the 1996 Act, "worker" is defined as any individual
who is an employee, plus any individual who works under a contract
which is not a contract of employment, under
which the worker undertakes to do work or perform services, personally,
for another person, except where the effect of the contract is
that the person is a client or customer of the workers' business
or profession. (The Trade Union and Labour Relations (Consolidation)
Act 1992 contains a similar definition of worker, which, although
expressed slightly differently, covers the same people). This
means that a person will be a "worker" (but not an employee)
if he is an independent contractor, provided he does the work
under the contract himself, and not in the course of a profession
(for example, a solicitor) or as part of a business (for example,
an independent self-employed painter and decorator). One example
of a person who is a "worker" but not an employee is
a nominally self-employed sub-contractor on a building site.
Such people would not be entitled to itemised pay statements.
20 January 1998
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