The future of working practices in Scotland Contents

3Unfair employment practices

33.While the vast majority of employers respect the employment rights of their workers, we have received evidence from several witnesses about employers who perpetrate unfair or illegal employment practices.72 Citizens Advice Scotland identified a wide range of abuses of employment rights in its most recent report on the rights of workers, with its bureaux giving advice on 46,540 new employment related cases over the course of 2013–14. Examples of unfair employment practices included:

Our predecessor Committee was told by the Scottish Trades Union Congress that “unfair and exploitative employment practices are widespread in Scotland” and could take many forms, including unfair management practices, low pay, anti-union practices and poor employee engagement”.74

34.The then Minister for Small Business, Consumers and Corporate Responsibility told us that the Taylor review had “exposed […] some serious breaches, some serious abuses”,75 and said that although the vast majority of employers “aspire to treat their employees fairly” there was “a significant minority of employers who, at best, play fast and loose with the law and at worst engage in illegal abuse.” Despite acknowledging that this was a significant problem, the Minister told us that the Government did not have “a truly quantifiable idea of the extent of the abhorrent practices”.

35.We are deeply concerned by the unfair and illegal employment practices we have heard about during this inquiry. Although it appears that these issues affect only a small proportion of workers, it is not known how prevalent unfair employment practices are in Scotland. We recommend that the Government commission a study to assess the extent of unfair employment practices in Scotland—to establish how many workers suffer from unfair or illegal employment practices, and whether there are particular issues in certain sectors. The Government should set out the work it is commissioning in its response to this Report.

Access to justice

36.Individual workers are responsible for enforcing the majority of their employment rights through employment tribunals, which adjudicate on disputes between employees and employers. Employment tribunals are currently operated on a UK-wide basis, but the Smith Commission recommended that all powers over the management and operation of all reserved tribunals be devolved to the Scottish Parliament.76 The Scotland Act 2016 provided a mechanism for the transfer of functions from reserved tribunals to Scottish tribunals, but this has not yet been given effect. The Scottish Government held a consultation in 2016 on draft legislation effecting the above changes,77 and in December 2017 stated that they were awaiting a further draft of the Order in Council from the UK Government before responding.78 The UK Government has stated that it anticipates that employment tribunals will be transferred to the Scottish government by April 2020.79 The devolution of responsibility for employment tribunals will only affect the operation of tribunals, with employment law itself remaining a reserved responsibility.

Applying to an employment tribunal

37.In the last Parliament, our predecessor Committee heard that fees for taking a case to an employment tribunal posed a significant barrier to the ability of workers to access justice in relation to unfair employment practices.80 That Committee launched its inquiry at a time when workers applying to an employment tribunal had to pay a fee—introduced by the Coalition Government in 2013—to take a case to a tribunal, and was told that employment tribunal applications fell by over 60% following the introduction of fees.81 The Supreme Court has since ruled that the fees which were being charged were unlawful and that any fees paid in the past must be refunded.82 The Government has introduced a scheme to refund employment tribunal fees which were paid.83

38.Announcing the refund scheme, the Government noted that the Supreme Court judgment said that “fees paid by litigants can, in principle, reasonably be considered to be a justifiable way of making resources available for the justice system and so securing access to justice”, but the court ruled that the Government had not set the fee at the right level to deliver that outcome. Speaking to the Justice Committee in October 2017, the Justice Secretary stated:

we need to […] consider, in the light of the judgment, what our approach to fees should be overall. We still intend to charge fees; it is necessary as a contribution to costs. It is also necessary and sensible as a deterrent to frivolous or vexatious litigation, and that was something the court itself acknowledged in the Reed judgment.84

Asked about the possibility of fees being reintroduced in the future, the then Minister for Small Business, Consumers and Corporate Responsibility told us that she was sure the Ministry of Justice would “pay great attention to ensuring that it provides for real and proper access to justice”.85 Keith Brown MSP suggested that “the Lord Chancellor learns from past mistakes and puts access to justice and the protection of workers at the heart of the tribunal system”, and said that once employment tribunals were devolved to Scotland there would be no “unfair fees”.86

39.We note with concern the decrease in employment tribunal cases which were brought following the introduction of fees for applications to employment tribunals, and welcome their recent revocation, which in our view will increase access to justice for workers. Employees should not have to pay to enforce their rights.

Employment tribunal decisions and awards

40.Even once an employee has taken a case to an employment tribunal and won, there is no guarantee of a positive outcome for the applicant, or reformed behaviour on the part of the employer. We have been told that workers often do not receive the compensation which has been awarded to them—research undertaken by the UK Government in 2013 found that almost half of employment tribunal awards made in Scotland had not been paid.87 Our predecessor Committee also heard complaints that limits on the level of compensation claimable meant that workers weren’t always fully compensated. We have heard concerns that, because employers don’t face any significant penalty upon losing a case, the system doesn’t provide an adequate disincentive to poor practice.88

41.The Business, Energy and Industrial Strategy and Work and Pensions Committees considered the effectiveness of the employment tribunal system at ensuring good conduct by employers, and concluded that the absence of penalties for widespread abuses may incentivise employers to “wait and see” whether individuals are willing to risk pursuing their rights. Those committees recommended that the Government create an obligation on employment tribunals to consider the increased use of higher, punitive fines and costs orders if an employer has already lost a similar case.

42.The Taylor Review made several recommendations on how the process of enforcing employment rights through an employment tribunal should be changed, including that:

43.The then Minister for Small Business, Consumers and Corporate Responsibility told us that she had been “absolutely astonished at the number of employee tribunal awards that go unpaid”,89 and told us that the Government was “very sympathetic” to Matthew Taylor’s recommendation that employers who do not pay employment tribunal awards within a reasonable time be named and shamed.90 The Government’s response agreed that “individuals who win their case at tribunal and receive an award should get what they are owed”, accepted the value of a naming scheme for those employers who do not pay tribunal awards within a reasonable time, and stated that it would consult on the best way to implement such a scheme.91 The Government also accepted the need for strong punishments for those who ignore the law, and stated that it would consult on how to extend the use of sanctions. The Government has recognised that any reform of employment tribunals could have implications for the transfer of responsibility for tribunals to the Scottish Parliament, and stated that it will continue to work closely with the Scottish Government in light of decisions made following this consultation.

44.It is deeply concerning that more than half of all employees who win a case at an employment tribunal do not receive the compensation they are due, and we also recognise the concerns raised by the Business, Energy and Industrial Strategy and Work and Pensions Committees that the absence of penalties for widespread abuses may incentivise employers to “wait and see” whether individuals are willing to risk pursuing their rights. We endorse Matthew Taylor’s recommendation that employers who fail to pay employment tribunal awards should be named and shamed, welcome the Government’s acceptance of this recommendation, and call for it to be implemented as soon as is practicable.

45.We concur with the conclusions and recommendations of the Taylor review and the Business, Energy and Industrial Strategy and Work and Pensions Committees, which called for the Government to create an obligation on employment tribunals to consider the increased use of higher, punitive fines and costs orders if an employer has already lost a similar case. We welcome the Government’s consultation on how best to implement this recommendation, and call on the Government to bring forward stronger and more deterrent penalties, including punitive fines, for repeat or serious breaches of employment legislation, and expand “naming and shaming” to all non-accidental breaches of employment rights. The planned transfer of responsibilities for employment tribunals to the Scottish Parliament will mean that these measures will need to be discussed with the Scottish Government, and we welcome the UK Government’s commitment to working closely with the Scottish Government in this regard.

Government enforcement agencies

46.While employees have to take positive action through the employment tribunal system to enforce most breaches of their employment rights, there are some areas where the Government has established dedicated agencies with responsibility for enforcing specific parts of employment law. These are:

The UK Government has stated that these agencies are intended to provide enforcement of a small number of employment laws “where we deem there is a higher risk of vulnerability and therefore more risk of people suffering exploitation”.92

47.To strengthen arrangements for enforcing employment law, in January 2017 the Government appointed Sir David Metcalf as the UK’s first Director of Labour Market Enforcement, with responsibility for setting strategic priorities for these enforcement agencies to “stamp out exploitation”.93 Announcing Sir David’s appointment, the Government said that intelligence gathered on minimum wage violations, unscrupulous employment agencies and other labour market exploitation would be used to identify vulnerable sectors and regions and inform the most effective response. The then Minister for Small Business, Consumers and Corporate Responsibility said that “Sir David’s extensive experience will be invaluable in this hugely important role to help stamp out workplace exploitation and ensure that when unscrupulous employment practices are found, justice is done for those affected.”

Enforcement of minimum wage legislation

48.The UK Government has established minimum wages for all employees and workers, and this is one of the few areas where the UK has a bespoke enforcement regime. However, we have been told that “insufficient resources” were put into policing the UK’s minimum wage framework.94 Steve Dillon, from Unite, argued that there needed to be effective enforcement of minimum wage levels, and stated that the National Living Wage policy would not be effective if it wasn’t policed.95 Bryan Simpson highlighted the low prosecution rate of employers found to be in breach of minimum wage legislation, and told us that of 700 employers across the UK who did not pay the minimum wage, or broke minimum wage legislation, only three were prosecuted.96 Mr Simpson argued that employers who failed to pay the minimum wage should be fined, and that the fine should be “much more than what they took off staff”.97 The Taylor review recommended that HMRC should take responsibility for enforcing the core pay rights that apply to all workers—including holiday and sick pay entitlements—and not be limited to pursuing cases involving minimum wages. The Business, Energy and Industrial Strategy and Work and Pensions Committees found that enforcement agencies such as HMRC’s National Minimum Wage enforcement team “urgently need more resources”, and recommended that the Government provides enforcement agencies with the resources necessary to undertake both reactive and proactive roles.98

49.The UK Government has stated that it “is committed to tackling non-compliance with minimum wage law and our clear policy is that anyone entitled to be paid the minimum wage should receive it”, and that “HMRC investigates every complaint it receives”.99 The Government has stated that it doesn’t bring prosecution in all cases of non-payment of minimum wages as its priority is to ensure that workers receive the money they are owed as quickly as possible, and that for the majority of cases the civil route is the most efficient means of returning money owed to workers, with criminal prosecution being reserved for the most serious minimum wage offences.100 The Government’s response to the Taylor review accepted the case for the state taking responsibility for enforcing pay rights on behalf of the most vulnerable workers, and stated that it would consult to gather detailed evidence of the scale and distribution of noncompliance with holiday pay and statutory sick pay obligations, and then evaluate the best way to target enforcement activity. It stated that, in doing so, it would remain mindful of “the need to minimise burdens on compliant businesses and ensure that enforcement activity is cost effective”.101

50.We welcome the Government’s commitment to tackling non-compliance of minimum wage law, and the presence of a team within HMRC specifically tasked with this issue, but we share the concerns expressed by the Business, Energy and Industrial Strategy and Work and Pensions Committees about the resourcing and effectiveness of enforcement efforts.

New mechanisms for enforcing employment law

51.For those areas of employment law which are not covered by a specific enforcement agency, we have been told that “the current legislative framework is not offering adequate protections for many workers”,102 and that the UK Government is not proactive enough when it comes to enforcing employment law. Citizens Advice Scotland has raised concerns that there is no body responsible for ensuring that repeat offenders or rogue employers are targeted,103 and the Scottish Trades Union Congress has stated that there should be “properly resourced monitoring and enforcement mechanisms” for all areas of employment law.104

52.Citizens Advice Scotland has called for the creation of an Employment Commission to “oversee the enforcement of employment law, with the legislative teeth to target rogue employers”.105 Rob Gowans told us that this Commission could bring together reports from employment tribunals and be empowered—through an ability to impose fines—to take action against employers which were guilty of repeatedly breaking employment law.106 Professor Patricia Findlay, a member of Scotland’s Fair Work Convention, also thought there was scope for “some kind of inspectorate that allows for investigation and response to certain kinds of employment practices”.107

53.We welcome the appointment of a Director of Labour Market Enforcement to set strategic priorities for employment enforcement agencies to “stamp out exploitation”, but the UK Government has not yet put in place the mechanisms and resources which are necessary to tackle unfair employment practices. We recommend that the Government put in place new mechanisms—which could include the establishment of additional enforcement agencies—to proactively identify and combat all unfair employment practices. We note that HMRC already takes a proactive approach in identifying employers which do not pay the minimum wage, and recommend that similar mechanisms be used to tackle other unfair and illegal employment practices.


54.Blacklisting is the practice of compiling information on individuals—often concerning their trade union membership and activities—with a view to that information being used by employers or employment agencies to discriminate in relation to recruitment or treatment. Although it has been unlawful since 1990 to refuse a person employment on the basis of trade union membership, it was only in 2010 that the compilation, use, sale or supply of blacklisting lists was made illegal.108 In the 2010 Parliament our predecessor Committee investigated the extent of blacklisting in the past, focussing on the construction industry, and examined the remedies which have been pursued.109 That Committee recommended that the Government hold a full public inquiry into blacklisting, but no such inquiry has been held to date.

55.During this inquiry we have received mixed evidence about the current extent of blacklisting. In the last Parliament, our predecessor Committee heard that it was unlikely blacklisting was still being used on a widespread basis,110 but that there were still issues around the treatment of people who raised concerns about health and safety in the workplace.111 In 2015 the STUC stated that “there is a need to investigate the incidence of blacklisting in other sectors of the economy beyond construction”.112 More recently, Steve Dillon, Regional Coordinating Officer at Unite, told us that blacklisting was still happening and was “as bad as it ever was”.113

56.The then Minister for Small Business, Consumers and Corporate Responsibility told us that the evidence of blacklisting which took place in the past was appalling, and said that there was absolutely no excuse for what happened, but stated that the evidence the Government had seen was historic.114 The then Minister told us that since new legislation had been passed—to make it illegal to engage in blacklisting employees—there had been a reduction in the practice and she was “yet to see any hard evidence that it is a problem that would merit a public inquiry”. The then Minister accepted that blacklisting “will not have been eradicated altogether”, and told us that she would “encourage trade unions to bring their evidence forward”.

57.We welcome the Minister’s evidence that there has been a reduction in blacklisting, but her acknowledgement that the practice “will not have been eradicated altogether” means there is still work to be done, and we note with concern the evidence from union representatives that blacklisting is “as bad as it ever was”. We recommend that the UK Government work with the trade unions to establish the current extent of blacklisting, and set out in response to this Report how it will do so. If blacklisting is found still to be in operation, the Government must publish any evidence of blacklisting it uncovers, and bring forward proposals to eradicate the practice and provide remedies for workers who have been blacklisted.

72 Oxfam Scotland (SES0001), STUC (SES0009), Citizens Advice Scotland (SES0015)

73 Citizens Advice Scotland (SES0015)

74 STUC (SES0009)

75 Q963

79 Department for Business, Energy and Industrial Strategy, Ministry of Justice, Good Work: The Taylor Review of modern working practices – Consultation on enforcement of employment rights recommendations, February 2018

80 Citizens Advice Scotland (SES0015)

81 Q296 [Bryan Simpson], Scottish Government (SES0012)

84 Q9, Justice Committee, Oral evidence taken on 25 October 2017, HC 418

85 Q970

86 Q895

87 Department for Business, Innovation and Skills, Payment of tribunal awards: 2013 study, November 2013

88 Q296 [Bryan Simpson]

89 Q964

90 Q989

92 UK Government (SES0002)

93 Home Office and Department for Business, Energy and Industrial Strategy, Sir David Metcalf named as the first Director of Labour Market Enforcement, January 2017

94 Q27

95 Q742

96 Q280

97 Q756

98 Work and Pensions and Business, Energy and Industrial Strategy Committees, A framework for modern employment, Second Report of the Work and Pensions Committee and First Report of the Business, Energy and Industrial Strategy Committee of Session 2017–19, HC 352, November 2017, para 65

99 UK Government (SES0002)

100 UK Government (SES0002)

102 Fair Work Convention (SES0013)

103 Q834

104 STUC (SES0009)

105 Citizens Advice Scotland (SES0015)

106 Q834

107 Q890

109 Scottish Affairs Committee, Blacklisting in employment

110 Q291

111 Q23, Q290

112 SUC (WOC0052)

113 Qq763–4

114 Q966

2 March 2018