Small Business, Enterprise and Employment Bill

Written evidence submitted by the Equality and Diversity Forum (SB 03)

1. The Equality and Diversity Forum (EDF) is a network of national organisations committed to equal opportunities, social justice, good community relations, respect for human rights and an end to discrimination based on age, disability, gender and gender identity, race, religion or belief, and sexual orientation. Further information about our work is available at www.edf.org.uk and a list of our members is attached. Our member organisations represent people who have any or all of the characteristics protected in the Equality Act 2010 and one of our key concerns is that each should have access to equal rights of access to justice regardless of their age, disability, gender and gender identity, race, religion or belief, and sexual orientation (unless there is a good reason why this is not appropriate).

Executive Summary

2. We have commented on only a small number of the Bill’s clauses. In particular –

· The EDF supports procurement measures that will assist small and medium sized enterprises in obtaining procurement contracts;

· The EDF recognizes that non-payment of Employment Tribunal awards is a substantial problem for successful applicants, however, we question whether the proposed provisions will assist the 35% of Applicants who receive no payment of their award at all. We suggest that enforcement of awards could be secured through Her Majesty’s Revenue and Customs (HMRC) as we consider that would result in a much better rate of collection.

· The EDF welcomes the introduction of increased financial penalties for underpayment of the National Minimum Wage (NMW), however, we regret that there is a very low level of enforcement of breaches of the NMW legislation.

· The EDF welcomes this prohibition of exclusivity clauses in zero hours contracts as a first step to tackling the problems that such contracts create for the most vulnerable members of the workforce. However, we consider that they should be given guaranteed working hours no matter how limited these will be.

Clause 33 - Procurement

3. This clause enables the Government to make regulations, under the negative resolution procedure, placing duties on contracting authorities as to how they conduct public procurement. In particular, the regulations could impose duties to make procurement documents available for free, to accept electronic invoices, to run efficient and timely procurement processes, and to engage with potential suppliers in certain ways. This last requirement might be used, for example, to ban the use of pre-qualification questionnaires for low value contracts and standardise them for higher value contracts.

4. The EDF welcomes any procurement measure that will assist small and medium sized enterprises in obtaining procurement contracts.

Clause 136 - Non-payment of Employment Tribunal Awards

5. This clause will allow the imposition of a financial penalty on respondents who have not paid Employment Tribunal awards its aim is to encourage compliance with their rulings and the prompt payment of awards. The provisions will also cover non-payment of sums owed in settlement agreements reached following ACAS conciliation.

6. The problem of non-payment of Employment Tribunal awards has been widely recognized by Government surveys [1] . For instance a recent BIS study [2] found that:

49% of claimants who had been granted an award by an employment tribunal had been paid this award in full, and a further 16% had been paid in part. This amounts to 64% of all claimants, and leaves more than a third who had not received any money at all, even after in some cases enforcement action was taken.

7. Research by Citizens Advice has also confirmed that the non-payment of awards is a very significant problem -

· one third of people [applicants] never see any of their money. Only half actually receive full payment.

· the most common reason for non-payment of awards is employer insolvency; however over half of the claimants giving this as a reason believed that the company was in fact trading again under a different name or at a different location. [3]

8. The risk of failure to secure payment of awards affects decisions to litigate in the first place. This is because applicants to the employment tribunal now have to pay a fee to lodge their application and again before a hearing. If they obtain an award which is then not paid they will be doubly out of pocket. Citizen’s Advice has commented -

As of 29 July 2013, claimants to employment tribunals are subject to issue and hearing fees of £390 for relatively simple claims (e.g. unpaid wages or holiday pay) and £1,200 for all other claims…These are substantial sums of money for anyone, let alone for low paid workers who are generally at greater risk of unfair practices… Where people do manage to pay them however, there must be an even greater obligation on the system to deliver, as far as possible, a genuinely meaningful outcome. To achieve this, there must be action to improve the initial rate of compliance with awards by employers, and an effective system of enforcement when the compensation ordered by the tribunal is not forthcoming. Otherwise, employees seeking justice through the tribunal system will simply end up worse off than they were before, and the reputation of the tribunal system as a credible corrective of bad employer behaviour, in ever greater shreds. The problem for a significant proportion of applicants is that employers disappear or go into liquidation – an extra fine is likely to be meaningless in this context. [4]

9. Moreover enforcement of an Employment Tribunal award is itself costly. There is a further £40 fee for the County Court to enforce the payment of the award or a £60 fee for the Employment Tribunal Fast Track Enforcement Scheme for the High Court to enforce the award.

10. EDF considers that a hard pressed applicant who has already paid the Employment Tribunal fees should not have to meet enforcement charges as well.

11. EDF considers the non – payment of awards is therefore a real and substantial problem in securing real justice in cases which are well founded. It therefore welcomes the Government’s recognition of the need to address this problem.

12. Nevertheless the proposed mechanism for dealing with this problem does need deeper consideration. The new Bill proposes fines, however if the award cannot be collected we would question the likelihood of a fine being collected or the prospect of a fine having a deterrent effect.

13. An amelioration of this problem that would certainly provide some help to successful applicants would be for the Employment Tribunal Service to repay the fees paid to the applicant where a respondent fails to pay the award within a fixed period.

14. Additionally, if enforcement of awards could be secured through Her Majesty’s Revenue and Customs (HMRC) we believe that would result in a much better rate of collection. HMRC has enforcement officers both for the National Minimum Wage and to collect tax debt. Their responsibilities could be widened to cover enforcement of Employment Tribunal awards, with the associated costs being also recoverable from the recalcitrant unsuccessful respondent to the litigation.

15. HMRC are not only likely to hold information on a company’s tax position which could assist in establishing viable assets, but may also be chasing the same company for tax debts, so could add the unpaid award to this recovery.

16. Overall while EDF welcomes the intention behind this clause it considers that real work is needed in Parliament to make it truly effective and appropriate.

Clause 138 - National Minimum Wage abuses

17. This clause sets maximum financial penalties for the underpayment of the National Minimum Wage (NMW) on a per worker basis; thus the more workers that have been underpaid the greater is the maximum penalty. It also provides that this maximum figure can be amended by secondary legislation.

18. The EDF supports these provisions as a progressive measure that fits the enforcement to the circumstance of the default in a proportionate manner.

19. It can be forgotten how serious it is for those on low incomes to be properly paid but it should not be. In 1909 Sir Winston Churchill said –

It is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration. [5]

This is no less true now than it was in 1909 when Parliament was discussing the Trade Boards Bill.

20. Moreover the NMW is particularly important for women, ethnic minorities and disabled people. Women constitute two-thirds of those on low pay; unsurprisingly it has been estimated that the introduction of a UK living wage would disproportionately benefit low paid women. [6] Low pay is also closely linked to the poverty experienced by ethnic minority groups. [7] Additionally, disabled people are less likely to be working and more likely to be low paid when compared to a non-disabled person with the same level of qualification. [8]

21. EDF therefore welcomes the introduction of increased financial penalties for underpayment of the NMW.

22. However the proposed changes are less than what is necessary. EDF is well aware that there is a very low level of enforcement of breaches of the NMW legislation. Unless this is really improved some employers will continue to underpay, believing that the risk of being caught out is so low as to be acceptable. [9] It is not fair to those employers who pay the NMW if, for want of proper resources to ensure the regulation of the NMW they are undercut by unscrupulous employers. Lack of enforcement resources must be addressed to ensure that the NMW means what is says and is truly ‘national’ and a ‘minimum’ wage.

Clause 139 - Zero hours contracts

23. This clause will make exclusivity clauses unenforceable in zero hours’ contracts (ZHC). It will enable all workers on these contracts whose current employers are unable to offer them enough work, to boost their income by working elsewhere.

24. There has been a significant increase in the use of ZHC in the last 10 years and they have spread into an increasing number of different sectors. It has been difficult to obtain reliable information about this, and the resulting statistics have painted a widely variable picture.

25. In 2012, the Office of National Statistics estimated that there were 250,000 zero-hours workers, (representing 0.7 per cent of the workforce), compared with 134,000 in 2006 (0.5 per cent of the workforce).

26. However, it is widely recognised that these official statistics do not reflect the full extent of current zero hours working in the UK. [10] This reflects the precarious nature of this class of employment where flexibility is so great that many relationships are barely visible to the authorities.

· In July 2013 Norman Lamb, the Minister for Public Health revealed his Department’s analysis that there are more than 300,000 zero-hours contracts workers in social care alone. [11] This figure represents at least one in five of all workers in the sector.

· A report from the Chartered Institute of Personnel Development (CIPD) estimated in a report in November 2013 that there are just over 1 million zero-hours contract workers. This amounts to some 3.1 % of the UK workforce, being four times the ONS’s estimate; CIPD found that nearly a quarter (23%) of all employers use ZHCs. [12]

27. While it is clear that this reflects a huge amount of uncertainty for workers and the degree to which flexible working has been embraced by employers as a tool of modern employment cost management it is not clear how many of these contracts have the exclusivity clauses that this new clause proposes to address. EDF cannot therefore estimate how many people might benefit from this new clause.

28. Yet any protective measure is to be welcomed. Thus it is known that ZHCs are often used for women, ethnic minorities and young people – some of the most vulnerable people in the workforce.

29. The Office for National Statistics have found that –

Looking at the types of people employed on ‘zero-hours contracts’, the Labour Force Survey shows that they are more likely to be women, in full-time education or in young (16-24) or older (65 and over) age groups, perhaps reflecting a tendency to combine flexible working with education or working beyond state retirement age. [13]

30. Whilst a minority of people do choose this type of employment because it suits their way of life, most do not, and for them it is the only work available. This type of employment often means that those working on ZHCs are poorly paid, have no regular income, find it impossible to plan ahead and are at risk of exploitation.

31. Accordingly the EDF welcomes the proposed prohibition of exclusivity clauses as a first step – but only a first step - to tackling the problems that ZHCs create for the most vulnerable members of the workforce.

32. The EDF welcomes this prohibition of exclusivity clauses as a first step to tackling the problems that zero hours contracts create for the most vulnerable members of the workforce. However, we consider that they should be given guaranteed working hours no matter how limited these will be.

33. Such an approach would not make part-time employment any less common but would make the relationship between those who are dependent on it and those who offer it less one sided.

August 2014

Annex

Equality and Diversity Forum members

Action on Hearing Loss

Age UK

British Humanist Association

British Institute of Human Rights

Children’s Rights Alliance for England (CRAE)

Citizens Advice

Disability Rights UK

Discrimination Law Association

End Violence Against Women Coalition

Equality Challenge Unit

EREN – The English Regions Equality and Human Rights Network

Fawcett Society

Friends, Families and Travellers

Gender Identity Research and Education Society (GIRES)

JUSTICE

Law Centres Network

Mind

National AIDS Trust

National Alliance of Women’s Organisations (NAWO)

Press for Change

Race on the Agenda (ROTA)

RNIB

Runnymede Trust

Scope

Stonewall

The Age and Employment Network (TAEN)

Trades Union Congress (TUC)

UKREN (UK Race in Europe Network)

UNISON

Women’s Budget Group

Women’s Resource Centre

Other signatories to this briefing

Inclusion London

British Muslims for Secular Democracy


[1] MoJ, Research into enforcement of employment tribunal awards in England and Wales, May 2009, BIS, Payment of Tribunal Awards - 2013 Study - IFF Research, 2013 at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/253558/bis-13-1270-enforcement-of-tribunal-awards.pdf

[2] BIS, Payment of Tribunal Awards - 2013 Study - IFF Research, 2013

[3] Cost of a hollow victory, CAB, November 2013, at http://www.citizensadvice.org.uk/index/policy/policy_publications/er_employment/the_cost_of_a_hollow_victory.htm

[4] Ibid, p 6-7.

[4]

[5] Hansard Series 5, Vol 4, col 388 , 28 April 1909 at http://hansard.millbanksystems.com/commons/1909/apr/28/trade-boards-bill .

[6] See Fawcett Society (2013) The changing labour market: delivering for women, delivering for growth’. April. Available at http://www.fawcettsociety.org.uk/wp-content/uploads/2013/04/Fawcett-The-changing-labour-market.pdf

[7] See, for example, Palmer, G. and Kenway, P. (2007) Poverty among ethnic minority groups: how and why does it differ? York: Joseph Rowntree Foundation. Available at: http://www.jrf.org.uk/sites/files/jrf/2042-ethnicity-relative-poverty.pdf

[8] New Policy Institute Report on Disability, Long-term Conditions and Poverty, Tom MacInnes, Adam Tinson, Goretti Horgan, Ben Baumberg, Declan Gaffney, 15th Jul 2014, at http://npi.org.uk/publications/income-and-poverty/disability-long-term-conditions-and-poverty/#sthash.J4xfytqG.dpuf

[9] Across all sectors, only two employers have been prosecuted for non-payment of the National Minimum Wage since 2010. This is despite the fact that 700 penalties have been issued in the same period. See All-Party Parliamentary Group on Migration (2014) ‘How can we ensure a level playing field for all workers?’ APPG Migration Briefing at http://www.appgmigration.org.uk/sites/default/files/Briefing%20Paper%201.pdf

[10] CIPD Zero-hours contracts: Myth and reality. Research Report ,November 2013; Ian Brinkley

[10] (2013) Flexibility or Insecurity? Exploring the rise in zero-hours contracts. The Work Foundation

[10] August 2013.

[11] These statistics, provided in a written response to a Parliamentary Question are based on Skills for

[11] Care workforce estimates.

[12] CIPD Zero-hours contracts: Myth and reality. Research Report, November 2013.

[13] http://www.ons.gov.uk/ons/rel/lmac/contracts-with-no-guaranteed-hours/zero-hours-contracts/art-zero-hours.html

Prepared 15th October 2014