Is it possible to have a Business Secretary that is too flexible?

Last week, Vince Cable grabbed a few headlines with a notably insightful speech about labour market flexibility. In what looked suspiciously like a significant attempt to differentiate Cable’s Liberal Democrats from their Coalition partners, the Business Secretary quickly got to his point by posing an interesting set of questions:

“Is it possible to have labour markets that are too flexible? Are we in that position now in the UK? If so, how do we maintain the advantages of flexibility – for workers and firms – while reducing the costs?”

As is often the way with politicians, Cable had some ready answers to his own questions. Noting that, due to welfare reform and other Coalition policies, “the incentives to work, particularly in low skilled jobs, have never been sharper”, he suggested that “we need to ensure is that this doesn’t produce an entrenchment of low pay, low productivity jobs”.

Now, this may be the right time for me to advance my theory that Cable actually wrote this speech in 2010, but was never allowed to deliver it. So the speech languished at the bottom of his filing cabinet until last week, when he dusted it down and sneaked off to the Resolution Foundation without telling Dave, Nick or George. Had he delivered it in 2010, the speech might have enhanced his reputation as an avant-garde thinker on economic issues. Now, it just sounds rather too much like the rusty hinges of a dilapidated stable door swinging shut, several years after the horse has bolted.

Whatever, Cable had a number of specific ideas on how to prevent the entrenchment of low pay, low productivity jobs. You know, the entrenchment that hasn’t yet happened.

The most headline-grabbing of these was the suggestion that workers on a zero-hours contract should have a “right to request a fixed-hours contract, building on the model we already have for flexible working”. This is so left-field that I can’t decide whether it’s a stroke of brilliance or just plain daft. Perhaps some kindly #ukemplaw person could put me right on this.

Rather more mundanely, Cable suggested that, alongside “encouraging companies to invest in training their workforces”, the government should be ensuring “a strong structure to protect the minimum wage and strengthen [its] enforcement”.

Now it just so happens that Cable is the government minister in charge of protecting the minimum wage and strengthening its enforcement. So this is one area where he could really crack on with preventing the entrenchment of low pay, low productivity jobs.

And, to his credit, Cable has recently (if somewhat belatedly) increased the financial penalties for non-compliance. Furthermore, not only has the HMRC minimum wage enforcement division escaped the worst of the Coalition’s austerity cuts, but at 180 the number of NMW enforcement staff is actually some 20 per cent higher than when Labour left office in 2010 (though the number of compliance officers is much the same).

On the other hand, since Cable and his Coalition colleagues took office in 2010, not one employer has been prosecuted for criminal non-compliance with the minimum wage. And, since Cable introduced a process for ‘naming & shaming’ employers found by HMRC to have flouted the minimum wage in early 2011, just six employers have been so ‘named & shamed’ by Cable’s Department for Business, Innovation & Skills (BIS).

As recently as October last year, that ‘naming & shaming’ scheme was revamped, with Cable’s then junior minister, Jo Swinson, boldly asserting that the new, streamlined process would “give a clear warning to rogue employers who ignore the rules, that they will face reputational consequences as well as a fine if they don’t pay the minimum wage”.

However, since that ministerial fanfare, just five (small) employers have been ‘named & shamed’ by BIS. Yet HMRC tell me (in response to a FoI request) that about 270 employers were issued with a Notice of Underpayment – the trigger for ‘naming & shaming’ under the revamped process – between 1 October and 28 February. Even allowing for the appeal process that Cable has indicated takes “roughly 150 days”, with the end of May approaching it is deeply puzzling why fewer than two per cent of those 270 “minimum wage rogues” have so far been ‘named & shamed’ by Cable’s department.

Has the process of ‘naming & shaming’ employers proved more difficult than Cable and Swinson envisaged? Or is their department simply being too flexible when it comes to tackling the entrenchment of low pay jobs?

Update (8 June): BIS has today named & shamed a further 25 (small) employers. But this still means that only 30 of the 270 minimum wage rogues caught by HMRC between 1 October and 28 February have been named & shamed under the new scheme. What about the other 240? How many have successfully appealed against being named & shamed? We really should be told. As the Independent notes, the 25 small employers named & shamed this week between them accounted for just £43,000, or less than one per cent, of the more than £4.6 million in underpayments identified by HMRC in 2013/14. And not one of the 25 firms will have paid anywhere near the current maximum penalty of £20,000, let alone the proposed new maximum of £20,000 per underpaid worker that Vince Cable seems to think is needed.

Update (16 June): Brilliant detective work by Michael Reed of the Free Representation Unit has uncovered the surprising fact that at least three of the 25 businesses named & shamed by BIS on 8 June were dissolved several years ago, in one case as long ago as 2009. Is BIS padding out its lists of those named & shamed with some ancient cases from the HMRC archives?

Acas early conciliation and time limits: let the confusion begin

Nothing gets employment lawyers going like a vigorous argument over tribunal time limits, and the new system of mandatory Acas early conciliation (EC) has provided the ideal excuse for several arguments. Here’s just one of them.

Where a prospective claimant has filed an EC form with Acas, the time limit for bringing a tribunal claim is paused on ‘Day A’ (the date the claimant submits the form) and restarts on ‘Day B’ (the date they receive an EC certificate). However, if the original time limit would have expired less than a month after Day A, there is a further extension so that the last day for lodging a claim is extended to ‘one month after Day B’. In short, you should never have less than a month after you receive the EC certificate to get your claim in.

HM Courts and Tribunals Service states, in its information leaflet Making a claim to an Employment Tribunal, that if the EC certificate is sent by email on 5 June (and presumably received the same day), Day B is 5 June and the last day for bringing a claim (under the one month extension rule) would be 4 July. Acas are apparently in agreement, on the basis that this is how the ordinary time limits in tribunal cases work (e.g. an employee dismissed on 5 April would normally only have until 4 July to bring a claim: three months less one day).

But is the HMCTS leaflet right? It ignores the ‘corresponding date rule’, a rule of interpretation used for calculating the start and end point of notice periods and other periods of time expressed in months. Under that rule, one month after 5 June is the ‘corresponding date’ in July, i.e. 5 July. This is the approach adopted by Practical Law (OK, I have to declare an interest there), Lewis Silkin (according to the excellent time limits calculator they posted on Twitter a few days ago), and Camilla Palmer who has written an article in ELA Briefing this month about early conciliation. I’m also informed that lawyers at BIS support the corresponding date approach.

Who’s right?

Acas are certainly right in their approach to the primary time limits (three months minus a day) according to the case law, and it would arguably make a lot of sense if there was a common approach to the one-month extension. However, there are good reasons, based on differences in the wording of the relevant statutory provisions, why tribunals should use the corresponding date rule.

The EC legislation requires the claim to be submitted within the period ‘ending one month after Day B’, whereas the primary limitation date in (let’s say) an unfair dismissal case is ‘before the end of the period of three months beginning with the effective date of termination’. The difference is that ‘one month after Day B’ means you start counting on the day after Day B (a rule of interpretation that, according to Lord Diplock in Dodds v Walker [1981] 2 All ER 609, has been ‘consistently applied by the courts since Lester v. Garland (1808) 15 Ves. Jun. 248’). On the other hand, ‘three months beginning with the effective date of termination’ means you start counting on the EDT. This crucial difference was explained by the EAT, in an admirably short judgment, in University of Cambridge v Murray [1993] ICR 460It’s worth a read.

Acas have highlighted that it’s safer to adopt a cautious approach. That, of course, takes no account of the fact that some employees may, if they leave it until the last minute, believe they are one day out of time when they are in fact still within time, so cannot present a claim. An employment judge could conceivably, without the benefit of contrary legal argument (and who can afford legal advice these days?), be led down the same path by the HMCTS leaflet.

Don’t get caught out

In view of this very unfortunate difference of interpretation, claimants should really adopt the cautious line followed by Acas and lodge a claim no later than one month less one day after Day B (4 July in the example above) and not risk leaving it until 5 July. Ultimately it will be for the appellate courts to decide, although ending up in the EAT over this is probably not in anybody’s interests.

With many thanks to Camilla Palmer for our email correspondence over this issue, from which I’ve shamelessly borrowed some of the wording for this post.

Labour’s contract killing

Earlier this week, I was offered a contact. Which, sadly, doesn’t happen as often as my bank manager or my family would like. And, in any case, there wasn’t any money involved. At least, not for me.

On the plus side, the contract was offered to me by none other than the leader of the Labour Party, Ed Miliband. Yes! Me and Ed, bound together by a contract signed in brotherly blood. Well, me, Ed and a few thousand other people. Maybe tens of thousands. Quite a lot of brotherly and sisterly blood, then. Ed might need a transfusion.

As contracts go, it’s quite short – just ten brief clauses, each one a policy pledge by Ed. And, being a workplace rights nerd, I was pleasantly surprised to find that no fewer than three of the pledges relate to workplace rights. However, the wording of those three clauses left me with both a sinking feeling in my stomach, and a strong desire to bash my head against the nearest wall. Let’s take each of the workplace rights pledges in turn.

Ban exploitative zero-hours contracts

Well, I’ve already written elsewhere about Labour’s fumbling towards a credible position on the exploitative use of zero-hours contracts, so I’m not going to add much here. Suffice to say, Ed and his team are going to have to wake up to the fact that, whilst it’s very easy to make speeches criticising the exploitative use of zero-hours contracts, in practice (and in law) it is not so easy to distinguish between the exploitative and the fair use of such contracts. The very same paper zero-hours contract could be used entirely differently by two separate employers – one in a way that benefits both the employer and the employee, and one in a way that benefits only the employer and simply exploits (and quite possibly brings severe hardship to) the employee. That’s a conundrum that won’t be solved by sloganeering.

Make work pay by strengthening the Minimum Wage

Well, yes, but what does ‘strengthening’ the NMW actually mean? In the hope that someone in Labour might provide an answer, earlier this week I put the question out on Twitter. And Antonia Bance – a former Labour parliamentary candidate – promptly responded by suggesting that it means “raising & enforcing [the NMW]”.  Well, yes, but raise it by how much, and better enforce it how? To which Antonia’s response was: “I don’t think we ‘ll know the answers to questions of detail unless Labour get into government”, and “broad promises that show direction of travel & values are thought more effective than detailed pledges”.

So it would seem. But to my mind, the votes of the more than one million workers paid at or just above the NMW rate are much more likely to be captured by a specific promise of a new, higher rate than they are by a ‘broad promise showing direction of travel’. George Osborne is on record as saying he believes Britain can ‘afford’ a rate of £7.00 per hour, without any significant negative labour market consequences, and if George Osborne thinks that then it’s surely not too much to expect a Labour government elected in May 2015 to go at least that far. Furthermore, from £7.00 per hour it’s really not that far to the Living Wage rate (outside London) of £7.65 per hour. So why not make an explicit commitment to an immediate hike in the NMW rate to £7.00 or even £7.50, and to achieving parity with the Living Wage by 2020?

Yes, that would imply making the Low Pay Commission redundant. But perhaps the Commission’s budget would be better spent enforcing the NMW, rather than just talking about it and (mostly) recommending below inflation increases. Government ministers routinely make decisions with far greater economic implications than what the NMW rate should be, and the long-term future of the NMW rate could be secured by writing into legislation an annual uprating at least as great as inflation. It’s really not rocket science.

Tackle the abuse of migrant labour to undercut wages, by banning recruitment agencies that only hire foreign workers

This is the one that really made me want to bang my head against a brick wall. For, leaving aside (for Jonathan Portes and others) the question of whether migrant labour does actually  ‘undercut wages’, the proposed ban is so patently nuts that this clause of Ed’s contract looks like nothing more than a shameful case of dog-whistle politics. Because, if hiring only foreign workers were to become illegal, what proportion of indigenous workers would a recruitment agency have to hire to be legal? One per cent? Ten per cent? Fifty per cent? Fifty-one per cent?

And, were any such arbitrary figure to be (foolishly) enshrined in law, who would police it? Under the Coalition, the BIS Employment Agency Standards Inspectorate has been reduced to a rump of just two inspector-level staff. Would Ed’s contract deliver any more human and other resources for enforcement of new (and the existing) rules?

Again, earlier this week I put these questions out on Twitter, in the hope that someone in Labour might be willing to provide some answers. When they didn’t, I put my questions direct to John McTernan, the fearsome Labour thinker and strategist with the self-appointed task of keeping Tony Blair’s halo shiny and bright. And, whilst first noting that he is “not my brother or sister’s keeper”, John was frank enough to say: “I think there are worse things than foreign workers. Like non-enforcement of [the] NMW”. Hear hear to that.

So, I will keep on posing these (and other) questions, in the hope that someone in Ed Miliband’s team might stop and think these silly contract promises through before they find their way into the manifesto for May 2015. Because, to my mind, that would be a serious mistake that might just blow up in some shadow minister’s face at some point during what is clearly going to be a tough and dirty election campaign. Or maybe Antonia is right when she says the party manifestos “will be meaningless this time because of possible coalition”.

Now that really is a depressing thought.