Supplementary memorandum by the TUC
SUPPLEMENTARY EVIDENCE
ON EMPLOYMENT
STATUS AND
SELF-EMPLOYMENT
To what extent do you think the current UK legal
definitions of self-employment and employment need to be clarified,
and how should this be done? What advantages (or disadvantages)
might there be in making such a clarification part of a wider
EU clarification?
Employment status is a confusing and contentious
issue in the UK. Three main categories of employment are recognised:
"employees", "workers" and the "self-employed".
Assignment to a particular category has implications for tax,
national insurance and benefits and for employment protection.
The Government itself acknowledges that employment status is far
from straightforward. Guidance on its DirectGov website states
that: "there is no one thing that completely determines your
employment status because an Employment Tribunal decides, based
on all the circumstances of a case." This demonstrates the
completely unsatisfactory nature of employment status in the UK:
that it requires recourse to an employment tribunal to determine
status in an individual case, a costly, stressful and time consuming
procedure for all parties involved.
The distinction in UK employment law between
"worker" "employee" and "self-employed"
is a significant one, governing access to a hierarchy of employment
rights. In order to claim entitlement to important rights such
as protection from unfair dismissal and entitlement to redundancy
payments and certain parental rights, it is necessary for an individual
to demonstrate that they are an "employee" rather than
a "worker". Certain groups of worker in the UK labour
market, notably those in what are regarded as various forms of
"non-standard" employment relationships, find it particularly
hard to demonstrate that they are "employees." The legal
distinctions drawn between "employees, "workers"
and "the self-employed" combined with economic changes
means that growing groups of workers lose out on basic rights.
The so-called bogus self-employed are one such
group. According to the DirectGov website the self-employed do
not have employment rights (with a few notable exceptions - health
and safety and some discrimination protection) as they are their
"own boss" and can decide how much to charge for their
work, how much holiday to take etc. However, an increasing concern
is that growing numbers of workers are being classified as self-employed,
but are in reality, dependent workers who do not have the independence
and autonomy over their work, that characterises genuine self-employment.
In 2000 the OECD recognised "the borders
between self-employment and wage salary employment are becoming
more blurred".[25]
There are growing numbers of workers occupying the "grey
areas" between employed and self-employed status. This is
particularly an issue in sectors where employers increasingly
rely on outsourced or subcontracted labour, including the media
sector and print journalism, and most significantly construction
that currently accounts for 22.6 per cent of all self-employed
workers.[26]
In these sectors, the traditionally held assumptions
that employees accept the trade-off of security in return for
personal dependence or subordination, while the self-employed
enjoy independence and access to fiscal subsidies and the greater
opportunity for profit for the self-employed, often no longer
hold. There are many nominally self-employed workers who do not
employ others, have little or no access to working capital, and
have few business assets other than their own know-how and expertise.
As research by Mark Harvey has demonstrated,
many workers in these sectors, whilst being classified by the
courts as being self-employed for the purposes of employment protection,
are in practice economically dependent on one or a number of employers.
As a result they are excluded from employment protection and employers
avoid the costs of direct employment. This a problem commonly
experienced by freelancers who may work regularly for a limited
number of employers over a number of years, working at the employers"
premises under their direction, but as they are described as freelance
or as engaged as and when required, they are not considered to
be employees. As the workers are not free to set their own rate
for the job, but rather are paid the rate set by the employer
or the sector, they are in practice economically dependent.
Some freelancers do not even qualify as 'workers'
and therefore lose out on working time rights, which are crucial
in long hours areas such as the audiovisual and entertainment
sectors.
The TUC would welcome any legislative changes
at an EU level that would prevent such exploitative practices.
The TUC believes that all EU employment legislation should apply
to a wide category of workers and that there should be a legal
presumption that an individual qualifies as a worker. The onus
should be placed on the employer to demonstrate that an individual
does not qualify for employment protection rights. We would be
concerned about any change in EU law that encouraged employers
to increase the out-sourcing of labour or promoted labour market
segmentation.
SUPPLEMENTARY EVIDENCE
ON THE
WORKING TIME
DIRECTIVE
How do you see the way forward in relation to
the implementation of the Working Time Directive? What is your
view of how minimum requirements for working time could usefully
be modified?
The European Commission Review of the Working Time
Directive
The European Commission has been reviewing a
number of aspects of the Working Time Directive (WTD) since 2004.
In 2005 the European Parliament agreed a position, after which
the Commission issued a revised proposal in the summer of that
year.
However, since then a number of attempts to
reach agreement in the Social Affairs Council have failed. Member
states are split into three groups: those who broadly support
the Commission's proposals; those who want more robust social
protection and those, including the UK, who want more liberalisation.
Both of the groups that are not content with the EC's proposals
have enough members to form a blocking minority.
It would be likely that the review would make
no further progress if it were not for the fact that the SIMAP
and Jaeger European Court of Justice (ECJ) Judgements mean that
on-call work spent on the employers premises counts towards the
limits and triggers the rest break entitlements in the directive.
As this has a significant impact on the operation of hospitals
in many countries it is likely that a large number of member states
will continue to press for a solution.
A second factor that militates against the status
quo prevailing is that a large number of member states are not
complying with the directive in full. It seems most likely that
the Commissions next step will to be to take action against some
of the worst offenders, which may result in a shift in some member
state's position in the Social Affairs Council.
The TUC's view is that the position of the European
Parliament was a strong attempt to forge a compromise. The Parliament
wants to see the individual opt-out phased out within five years,
in exchange for which employers would be able to calculate the
48-hour limit over a 52-week averaging period rather than over
the present 17-week calculation period. In addition, the ECJ judgements
on working time would be severely watered down.
The TUC supported the European Parliament's
position because our prime goal is to get rid of the opt-out,
which is much abused and undermines the other WTD rights. We took
this position even though it would have meant exempting nearly
half of our long hours workers from the limit on working time
by lengthening the reference period and rolling back the on-call
judgements, which we wanted to keep.
How the Working Time Directive was implemented in
the UK
The WTD was implemented in UK by the Working
Time Regulations (WTR) 1998, which has since been amended on several
occasions. Responsibility for enforcement for different rights
and industries is split by industrial sector and by groups of
rights:
— Health and Safety Executive—48
hour week, night-work limit, night work health assessments in
factories, construction sites.
— Local authorities—48-hour
week, night-work limit, night work health assessments in shops
and retailing, offices, hotels and catering, sports, leisure and
consumer services.
— Individual cases to Employment
Tribunal (ET) in all industries—annual leave and rest break
entitlements.
— The Maritime and Coastguard
agency have responsibility for seafarers and inland waterway workers;
the Civil Aviation authority have responsibility for pilots and
cabin crew; the Vehicle Operator and Service Agency have responsibility
for heavy good vehicle and passenger coach drivers.
Our general assessment is that the widespread
use of the individual opt-out has also undermined the other rights
in the directive, as many UK managers believe that they do not
have to address working time issues at all and many UK long-hours
workers believe that the directive did not really give them any
rights.
The context is that although extent of long
hours working in the UK has declined by 15 per cent since the
WTR were introduced in 1998; the UK still has the highest incidence
of long hours working in the European unions - some 2.5 times
the EU average.
The TUC would still be concerned even if all
of these workers had signed the opt-out through free choice, since
we believe that it should not be possible to opt-out of heath
and safety legislation. Unsafe working practices impact not just
on the individual but also on third parties and the wider society.
Therefore the right to work long hours must be mediated by the
duty to work safely.
However, there is also abundant evidence that
employers put pressure on employers to opt-out, including the
DTI's own 2004 report - 'A survey of workers experiences of the
Working Time Directive'. This ranges from the practice of sending
the worker opt-out forms with the job offer to some nasty cases
of old fashioned bullying.
Unsurprisingly, independent enquiries have concluded
that UK business does not really need the freedom to make its
employees work more than 48 hours per week for 52 weeks of the
year:
— "There was no sign that
the extent of sustained long hours working was systematically
associated with the business and financial needs of workplaces
… workplaces have organisational choice and are able to reduce
the need for sustained long hours should they choose to do so".[27]
— "With the WTD only aiming
to limit the working week to an average of 48 hours, it would
seem to us that there is plenty of scope for particularly long
hours to be reduced without encountering the problems that these
economies are facing. Consequently we are not convinced of the
necessity of maintaining the opt-out".[28]
The DTI's assessment of the Working Time Regulations
The DTI commissioned a survey of workers experiences
of the WTR. The results highlighted below suggest that the UK
regime needs to be made more robust:[29]
— 31 per cent of night workers
have not been offered health assessments;
— 44 per cent of those who have
signed an opt-out say that it was a condition of their employment
— 23 per cent of long hours workers
have not signed an opt-out but have been put under pressure by
their employers to work more than 48 hours;
— 28 per cent of UK long hours
workers (eg those working more than 48 hours per week) know that
there is a 48-hour limit;
— 50 per cent of the long hours
workers who have either raised issues about the 48 hour limit
or know that such issues have been raised by somebody else in
their workplace say that the issue was not resolved—in other
words, they have been unable to access their rights;
— 13 per cent of employees did
not get all their statutory annual leave;
— 15 per cent of employees did
not get the rest breaks stipulated by the WTR.
Problems with the UK regulations
In the TUC's view there are a number of areas
where the WTD has not been properly transposed or where the regulations
have simply failed to work:
— The Health and Safety Executive
and local authority environmental health departments do not fulfil
their duties as the legal enforcement agencies. Complaints are
screened using risk assessment techniques, which means that many
are not investigated. Some local authorities do not even know
that they have responsibility for enforcing the WTR.
— The regulations governing the
use of the individual opt-out are too weak to ensure genuine freedom
of choice.
— Enforcement by ET has not been
sufficient to ensure that workers can get their rest breaks and
holidays. Workers will generally not take their employers to ET
because this would effectively destroy their employment relationship.
— The European Court of Justice
judgements on-on call work and compensatory rest have not been
included in the UK regulations.
— The rest breaks and leave provisions
are couched as "entitlements" in UK law and can therefore
be ignored by the worker. Taken together with the opt-out, this
means that there is no enforceable limit on the working time of
those who have opted out.
The TUC has raised the issue of enforcing the
existing law on the 48-hour week and the rules on the opt-out
with the government on numerous occasions.
We also made a formal submission to the UK Government's
2004 consultation on enforcing the rules on the opt-out.[30]
This government consultation followed the publication of the EC
report by Barnard et al on the implementation of the WTD.
The TUC suggested a 10-point program of improvements
to the current rules. The Government initially gave a positive
response to just two of our suggestion: that there should be a
campaign to raise awareness of the existing rules, and that the
WTR should be amended so that the opt-out could not to be signed
before commencement of employment.
However, the government has so far taken no
action since publishing its response to the report, citing the
ongoing EC review as the reason for the delay.
Finally, as the rest breaks and leave provisions
are only entitlements in the UK, there is no effective limit on
the hours of those who have opted out, with the result that 430,000
employees regularly work more than 60 hours per week and 130,000
more than 70 hours per week.[31]
We are concerned about the detrimental effects
that long hours are likely to have on the health of these workers.
In addition, many are in safety-critical occupations such as driving
delivery vans.
The next steps for the UK regulations
The TUC would prefer the Government to change
its position in the Social Affairs Council to one that is better
aligned with the evidence on long hours workers and affords more
protection for UK workers.
The problems with the UK regulations are substantial,
and have detrimental effects on our workers. The TUC's initial
assessment is that the UK government might have to justify to
the Commission several real breeches of the directive. The on
call judgements have not been incorporated into the UK regulations,
the enforcement system is moribund, and the rules on the opt-out
are too weak to support free choice.
However, progress in the UK should not be dependent
on the ongoing European Commission review. Given that the UK Government's
formal position is that UK workers should be able to invoke their
WTD rights whilst retaining the right to opt out of the 48 hours
average weekly limit, they ought now to take steps to try to alleviate
the problems with the UK Regulations.
If the government were to try to deal with some
of these problems immediately this would improve their bargaining
position in Europe whilst giving greater protection to UK workers.
First, the government needs to deal with the
ECJ judgement concerning on-call work. They should begin by taking
further steps to minimise on-call working in public services.
In fact, the Department of Health has already advised hospitals
to do this, although implementation has so far been patchy.
Second, it is clear that the enforcement regime
for the WTD is not working. Enforcement is split between a number
of routes and agencies. Annual leave and break entitlements are
enforced by the worker taking a case to Employment Tribunal, whilst
the 48 hour week and nightwork limits are enforced for 61 per
cent of workers by complaint to the HSE, for 37 per cent of workers
by complaint to the relevant local authority and for 2 per cent
of workers by complaint to one of the transport authorities.
Leaving aside the complexity of the arrangements,
the main problem is that neither the HSE nor local authorities
see this as a priority or have the resources to answer complaints.
As a result, many complaints have simply been ignored, in which
case the worker has nowhere else to go.
The TUC believes that this problem could be
most easily resolved by emulating the 2-channel model used to
enforce the minimum wage. Workers should be allowed claim their
working time rights either by taking an ET case or by complaining
to an enforcement agency.
In addition, more effort needs to be made to
ensure that workers can take their annual leave entitlements and
rest breaks. This is particularly important in the light of the
Governments' welcome plans to increase the minimum statutory leave
entitlement. Again, the simplest thing would be to establish a
two-channel enforcement mechanism for all the WTR rights by giving
the HSE and local authorities a duty to enforce these provisions.
Finally, the rules around the use of the opt-out
should be tightened. The TUC proposes the following changes:
— The opt-out should not be signed
before the contract commences or during any probation period;
— The working time of those who
have signed the opt-out must be capped in order to protect the
health and safety of both the workers themselves and others who
might be put at risk by dangerous long hours working.
— Employers must monitor the hours
of workers who have signed the opt-out, must keep records, and
must make them available for inspection
— The notice period for opting
back in should be the same as the notice period in the workers
contract - typically either 1week or 1 month.
— Opt-outs should be reviewed
after one year.
— Workers need to be protected
against detriment for trying to enforce their rights.
May 2007
25 OECD Employment Outlook, 2000. Back
26
Labour Force Survey data for fourth quarter of 2006, downloaded
from http://www.statistics.gov.uk/downloads/theme-labour/LFSHQS/Table23.xls
on 13/03/2007 10:20. Back
27
"The Business Context of Long Hours Working", T Hogarth,
WW Daniel, AP Dickerson, DCampbell, M Wintherbotham, D Vivian,
University of Warwick Institute for Employment Research, DTI Employment
Relations Series 23, November 2003, p 9. Back
28
House of Commons Trade and Industry Select Committee Report £7,
"Labour Market Flexibility and Employment Regulation",
March 2005, paras 64/63. http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtrdind/90/9002.htm Back
29
Source: A survey of Workers Experiences of the Working Time Regulations,
DTI Employment Relation Series No 31, 2004 Back
30
http://www.dti.gov.uk/files/file11782.pdf Back
31
Source: ONS Labour Force survey Microdata Service autumn 2006. Back
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