BIS, you had one job!

Previously on this blog, I have noted how the revamped BIS scheme for naming & shaming employers found to have breached the National Minimum Wage has struggled to get beyond second gear since it came into force 15 months ago, with only 55 (mostly small) firms being named to date.

Now – after months of side-stepping questions by MPs Caroline Lucas and Stephen Timms – BIS has finally conceded that, in June last year, it somehow managed to wrongly name & shame two long-dissolved firms. Among the 25 firms named & shamed by BIS on 8 June, Michael at Zoom Ltd (company registration no: 08311831) was wrongly named as Zoom Ltd (04906202, dissolved in April 2010), and Masterpart Distribution Ltd (04153440) was wrongly named as Master Distribution Ltd (06878211, dissolved in November 2010).

Unfortunately, because NMW-flouting firms are named & shamed only by means of a BIS press release, with no central on-line register of those named, there is no way for BIS to publicly correct these elementary errors, other than to include the two right names in the next press release – whenever that might be. Until then, the number of ‘NMW rogues’ actually named & shamed stands at 53.

 

 

 

The penalty spot miss that should go to the Court of Appeal

Customarily, the dawn of a new year is a time for looking forward, to what the future might bring. But, employment law-wise, 2015 looks so bleak that I’m going to kick the Hard Labour year off by looking back, to the Enterprise & Regulatory Reform Act 2013 and its creation of a power for employment judges to impose a financial penalty of up to £5,000 on employers found to have breached a worker’s rights in a way that “has one or more aggravating features.”

First mooted in the January 2011 BIS consultation on ‘resolving workplace disputes’, the penalty regime was presented as a key plank of the Enterprise & Regulatory Reform Bill unveiled by Vince Cable in May 2012. However, unloved both by the employer bodies and by the trade unions, the then clause 13 was the subject of some debate at the Bill’s Commons Committee Stage in July, and also at Report Stage in October, by which time it had become clause 14 (it would go on to become section 16 of the 2013 Act).

During the latter debate, Jo Swinson, who had replaced fellow Liberal Democrat Norman Lamb as BIS employment relations minister just a few weeks previously, told MPs:

“When we first proposed the introduction of [the financial penalty regime], we had thought to make the imposition of the penalty automatic when there was a finding in favour of the claimant, but we listened to the concerns expressed by business during the resolving workplace disputes consultation last year and revised our proposals to give the tribunal discretion to decide when a penalty was appropriate. Good employers—those who try to do right by their employees—have nothing to fear, regardless of their size. A genuine mistake will not be grounds for the imposition of a penalty. However, those businesses which the tribunal considers have acted deliberately or maliciously will rightly, I believe, face the prospect of a financial penalty. They will no longer be able to gain a competitive advantage over businesses that abide by their obligations.

This is not some kind of revenue-raising scheme; it is about ensuring that the right incentive structure is in place by creating a further penalty for businesses that deliberately flout the law. That will incentivise the right kind of behaviour. That will be fairer on the vast majority of businesses that are good employers and that should not lose out to those employers that gain some kind of advantage by treating their employees badly.

Although they make up a small portion, there are clearly too many employers who do not comply properly with their obligations. I think that it is quite right that we send a clear signal and make it clear that those employers can expect to face a bigger consequence at a tribunal than those well-intentioned employers who try to do the right thing but fall foul of the law because of an error—after all, we are all human.”

We are indeed – even those of us who are government ministers prone to make grandiose claims for their draft legislation. And it is fortunate for Ms Swinson and her Coalition colleagues in HM Treasury that section 16 of the 2013 Act was not ‘some kind of revenue-raising scheme’. Because, in reply to a written question by shadow BIS minister Ian Murray, Ms Swinson has just revealed that the number of financial penalties imposed since the regime came into force on 6 April 2014 is … none.

Yep, nine months, and not a single section 16 penalty. Nada. Zip. Rien.

Which could be good news, of course. Maybe the financial penalty regime has so incentivised the right kind of behaviour that there are no longer any businesses deliberately flouting the law to gain some kind of advantage over their law-abiding competitors. Rejoice!

However, I doubt even Ms Swinson would claim that is what has happened. I imagine the Minister might try to suggest that the fault lies with the employment judiciary, for failing to take up the tool so cleverly crafted for them by Vince Cable, Ed Davey and Norman Lamb. But it seems unlikely that a judiciary so often criticised (mostly by employer bodies) for an alleged lack of consistency would have acted quite so … well, consistently.

A far more likely explanation, it seems to me, is that the hefty, upfront tribunal fees introduced by the Ministry of Injustice in July 2013 have eradicated exactly the kind of tribunal claim that Cable, Davey and Lamb evidently had in mind when they came up with the section 16 penalty regime: a relatively low value claim (because the claimant is or was low paid) against a deliberately exploitative employer. For why would a vulnerable, low paid worker subjected to ‘wage theft’ of a few hundred pounds gamble up to£390 on trying to extract the unpaid wages or holiday pay from their rogue (former) employer?

Which means that the deliberately exploitative employers supposedly targeted by section 16 of the 2013 Act are able to break the law with near impunity. And that is something that really ought to be of concern not just to Dr Cable and Ms Swinson, but to the Court of Appeal when it hears UNISON’s appeal against the High Court’s dismissal of its two applications for judicial review of the fees regime.

(As an afterthought, it is worth noting that, during those two Commons debates in July and October 2012, Norman Lamb and then Jo Swinson firmly resisted amendments tabled by shadow BIS ministers that would have reworked the unloved s16 penalty regime to focus it on those employers who fail to pay a tribunal award. Having belatedly seen the light on that long-standing issue, Ms Swinson has sought to make amends by including provisions to establish a parallel penalty regime to exactly that effect in the Small Business, Enterprise & Employment Bill, currently in the House of Lords.)

 

The holes at the heart of Ed Miliband’s #ukemplaw speech

Yesterday, Labour leader Ed Miliband responded to recent media and internal criticism of his leadership by giving his #ukemplaw speech. This didn’t go quite so far as resolving the question of whether voluntary overtime should be included in holiday pay, but it did include a robust denunciation of inequality and the casualisation of so much of the UK’s labour force. There were repeated mentions of zero-hours contracts, low pay, and insecure work, and more than one shout-out for the Living Wage.

All fine and dandy, even if there wasn’t any new policy as such, and had the event concluded at the end of Miliband’s speech I would most likely have left Senate House feeling somewhat encouraged. But the speech was followed by a Q&A, and my positive mindset was inadvertently shattered when a Labour activist in the audience – picking up on her leader’s condemnation of zero-hours contracts and citing her own bitter experience – gamely urged Miliband to legislate for an outright ban.

Starting his response with a swipe at the Coalition’s plan to simply ban exclusivity clauses, which he (rightly) noted will do nothing to tackle the exploitative use of zero-hours contracts, Miliband went on to re-iterate Labour’s own plan to pass legislation giving zero-hours workers who are in fact working “regular hours” a legal right to demand a regular contract. “It is essential we do this”, said Miliband, “as the problem is affecting so many people.”

And then Miliband was off to the next question, without explaining how or why the “bad businesses” that cause so much misery to “so many people” will change their exploitative practices just because politicians in Westminster have passed yet more new employment law. Will tens of thousands of vulnerable, zero-hours workers suddenly discover the courage (and resources) to risk almost certain dismissal (or just a reduction in their hours to, well, zero) by issuing a tribunal claim against their exploitative employer for refusing to give them a regular contract?

No, they won’t. Which is why, if Miliband and his party are serious about tackling the ever greater casualisation of the labour market, and the associated zero-hours contracts, chronic low pay and insecure work, they have to start thinking about doing more than simply pass more laws creating more rights. For, as the October 2014 report of Labour’s own National Policy Forum acknowledges, “Employment rights have to be enforceable to mean anything.”

And what plans does Labour have to make employment rights – existing and new – more enforceable?

Well, somewhat belatedly, the party has started making the right sort of noises on tribunal fees, which have slashed the number of cases by 65% and left the average private sector employer facing a claim just once every 83 years. However, it’s pledge to replace the fees regime with one in which “affordability will not be a barrier to workplace justice” remains more a clumsy slogan than a credible policy solution to the not insignificant problem that outright abolition now comes with a price tag of some £40m in lost fee income (£4m) and increased operational costs (£35m).

However, as already noted, understandable fear of victimisation or summary dismissal means that, high fees, low fees or no fees, many abused workers will not even contemplate taking their employer on with a tribunal claim. And that means rogue employers can profit from exploitation with near impunity. It was for this reason that, in 1999, the then Labour government established the mechanism by which the national minimum wage is enforced, both in response to complaints and pro-actively, by a team of HMR inspectors. And similar reasoning lay behind the creation of the Gangmasters Licensing Authority (GLA) in 2005.

The National Policy Forum report includes a pledge to extend the narrow remit of the GLA to other sectors such as “construction, hospitality and social care” – but the CBI, REC and other employer bodies will never swallow such an extension of licensing (and see below). And the report states that “alongside increased fines and a new role for local authorities in enforcement [of the minimum wage], HMRC’s remit on enforcement should be expanded to include related non-payment of holiday pay” – these being recommendations from the May 2014 report for the Party on low pay and the future of the minimum wage by businessman Alan Buckle. But the fines have already been substantially increased, and it is hard to see many cash-strapped (and in many cases near bankrupt) local authorities taking an active role in such (limited scope) enforcement.

So, if Miliband’s #ukemplaw speech is to mean anything, he and shadow ministers need to take a leaf out of Vince Cable’s book. Last month, at his party’s conference in Glasgow, Cable quietly announced that the Liberal Democrat manifesto for May 2015 will promise a new Workers’ Rights Agency that would “revamp efforts to enforce employment law and tackle the exploitation of workers” by combining the remits and work of “the minimum wage enforcement section of HMRC, the working time directive section at the Health & Safety Executive, the BIS Employment Agency Standards Inspectorate, and the GLA.” According to Cable, this “joined-up enforcement approach” would “ensure the minority of unscrupulous employers who break the law do not get away with undercutting other employers who play by the rules.”

And, if it makes Miliband and colleagues feel better about lifting ideas from Cable, this wasn’t actually Cable’s idea – he simply lifted it from me. Over more than a decade at Citizens Advice, I repeatedly advocated a consolidation of the State enforcement bodies into a Fair Employment Agency, so as to shine a light into the murkiest corners of the labour market, provide better value to taxpayers, and secure a fairer competitive environment for business. And I’ve continued to do so in recent years. I really am that boring.

However, not long after I got home from Senate House, a tweet by shadow work & pensions secretary Rachel Reeves alerted me to another, equally depressing hole in Miliband’s purported determination to tackle the scourge of insecure and badly paid work. Reeves was tweeting a link to an interview she and shadow business secretary Chuka Umunna have given to the Financial Times, from which it is clear that, faced with protests from the CBI and others, Reeves and Umunna are now rowing back on Miliband’s eve of conference pledge to raise the minimum wage rate to at least £8.00 per hour from October 2019. And, later in the evening, on BBC Newsnight, Umunna confirmed that Labour would only “try to get the minimum wage to £8.00 per hour by 2020”.

So, while Miliband’s #ukemplaw speech has been rightly praised for its greatly improved oratory and highly commendable “focus on inequality and insecurity,” the content seems as sadly hole-ridden as ever.

Earth calling Remission Control … come in, Remission Control … is anyone there?

Back in January, I noted on this blog that the tribunal fees remission scheme was providing ministers with a very small fig leaf as they sought to fend off increasingly alarmed suggestions that the hefty employment tribunal fees introduced in July 2013 were blocking workers’ access to justice. And today we learned – from the Ministry of Justice’s reply to a written PQ by shadow business secretary Chuka Umunna – that just 3,913 ET claimants (a mere six per cent of all claimants) were granted fee remission between 29 July 2013 and 30 June 2014 [but see also Postscript, below].

As the super-brained and hyper-cool Michael Reed of the Free Representation Unit was first to point out – please note that Michael and I were separated at birth, but he had the more privileged upbringing – the Ministry’s reply raises a number of questions.

The first being, why did it take the Ministry three months to answer the PQ, which was tabled by Umunna on 15 July? It’s not as if the PQ was especially complicated. It simply asked how many ET fee remission applications have been made and granted since 29 July 2013, and at what administrative cost. You’d think a cost-cutting Justice Secretary like Chris Grayling would have made sure he had such data at his fingertips.

The second question – posed by my long lost twin in his blog post – is: why did grants of fee remission increase so substantially from March this year, despite the number of ET cases (and claims) continuing to plumb the depths? From just 144 in December 2013, and 114 in February 2014, grants of remission shot to 753 in March, and 754 in May. Did awareness of the fee remission scheme (and so the number of applications) suddenly increase? Or did HMCTS’s decision-making suddenly become less severe? We simply cannot say, because we don’t have the necessary data on fee remission applications.

And that takes us to a third question: why was the Ministry unable to say, in its reply to Umunna’s PQ, how many fee remission applications were made between 29 July 2013 and 30 June 2014?

The long answer to this question is set out in my multi-part post on this blog in February. In a nutshell, in 2013 the Ministry of Justice shelled out some £2m on a shiny new ET fees & remission database with, er, no reporting tools. That is, an ET fees & remission database incapable of producing any basic data such as the number of fee remission applications made. And, as well as pocketing £2m of hard-working taxpayers’ dosh, the company that delivered this duff database – Jadu Ltd – got nominated for an award. Did someone mention justice?

So perhaps the most shocking revelation of the Ministry’s reply to Umunna’s PQ is that, 15 months after Jadu’s £2m ET fees & remission database went live in late July 2013, those basic reporting tools still don’t exist (or, at least, have “not yet been assured to sufficient standards”). Who the **** in the Ministry is overseeing this project? Clearly not the same minister or official overseeing the legal aid budget.

And the last question is, how does Michael always get his blog post out first? Do they not have any actual work to do at the Free Representation Unit? You know, representing all those vulnerable workers subjected to wage theft by rogue employers in their tribunal claims. Oh, hang on …

Postscript (21 October): Today we learned, from the Lord Chancellor’s evidence to the judicial review of his ET fees regime in the High Court, a few details on remissions that the Ministry of Justice somehow managed to leave out of its reply to Chuka Umunna’s PQ. It seems that just 2,178 (56 per cent) of the 3,913 remissions granted between 29 July 2013 and 30 June 2014 were to individual (i.e. single) ET claimants – the other 1,735 remissions being to claimants in multiple claimant ET cases (1,530) and to applicants to the EAT (205). I’m somewhat surprised that so many remissions have been to claimants in multiple claimant cases, but let’s leave that point for another day. For we also learned that the figure of 2,178 remissions granted to single claimants includes 232 remissions of the hearing fee.

While we cannot be certain without seeing more detailed figures, it seems reasonable to assume that very few if any of the 232 claimants granted remission in relation to the hearing fee will not also have had remission for the issue fee. In other words, 232 those remissions were double counted in the total of 2,178 claimants. Which means only 1,946 (7.7 per cent) of all 25,284 single claimants obtained some remission (full or partial) in relation to their case.

Now, 7.7 per cent is a long, long way below the 31 per cent predicted by the Ministry of Justice in September 2013, in its final impact assessment of the remission scheme, even before we allow for the much greater fall in ET claim/case numbers than the Ministry anticipated. In 2012/13 there were 54,704 single claims, and it is against such figures that grants of remission should really be judged, as that is (roughly) the number of single claimants we could have expected in the 12 months up to June 2014 were it not for the deterrent effect of fees. That is, only 3.6 per cent of those who might have been expected to make an ET claim in the 12 months up to June 2014 had their access to justice protected by the fee remission scheme.

The ET fees remission scheme has so far been a very small fig leaf.

New parlour game: hunt the ET fees review

For much of this year, whenever the justice-denying impact of the employment tribunal fees introduced by the Ministry of Justice in July 2013 has been raised in public with business secretary Vince Cable or BIS employment relations minister Jenny Willott (covering Jo Swinson’s maternity leave), they have shielded themselves from any criticism by suggesting that the fees regime is under review.

For example, at a conference of employment lawyers in April, just weeks after the release of the first full set of quarterly figures showing a dramatic fall in the number of cases, Jenny Willott reportedly deflected questions from the floor by stating that “the level of fees” will be one of several issues considered under a review of the fees regime.

And, in the House of Commons in mid-July, just two weeks before the first anniversary of the fees regime coming into force, Vince Cable responded to an intervention by Labour MP Debbie Abrahams, drawing attention to the drop-off in the number of cases in the months up to 31 March, by stating:

“Yes, I am aware of a substantial fall in numbers. There are several reasons, which we are currently investigating, one of which could be connected with fees. Another reason is that earlier legislation sought to introduce an arbitration mechanism through ACAS as a first port of call.” (Hansard, House of Commons, 16 July 2014, col. 909)

Let’s leave aside the fact that the system of early conciliation by Acas to which Dr Cable was referring did not come into force until 6 April, so played no part in the dramatic fall in tribunal cases in the six months up to 31 March, and focus on that phrase “we are currently investigating”. Not ‘we will consider as part of a review at some point in the future’, but “we are currently investigating”.

The MPs who listened to Dr Cable that day in July, and anyone who subsequently read the Hansard record of the debate, could be forgiven for concluding from this that the government (or, at least, that part of the government in which Dr Cable includes himself) has been ‘investigating’ the tribunal fees regime for at least the last three months.

Except that … it hasn’t. At least, not according to Jo Swinson, who returned from maternity leave to her role as BIS employment relations minister over the summer.

Asked on Twitter last Thursday to confirm whether she agrees with Liberal Democrat Policy Paper 120 – adopted at the party’s conference in Glasgow earlier in the week – when it states that the “high level of tribunal fees presents too much of a barrier” to justice, Ms Swinson dodged the question but volunteered that the “lead department on this is [the Ministry of Justice] not BIS so they will be launching the review [of the fees regime]”.

Er, they will be launching the review?

Yes. Asked to clarify whether her earlier tweet meant that the government’s review of the fees regime is in progress or has yet to start, on Friday Ms Swinson tweeted confirmation that the review has “yet to start”. And, asked to say when it might start, Ms Swinson declined to answer but suggested the question be directed to the Ministry of Justice.

So, contrary to the statement made by Dr Cable to the House of Commons in mid-July, no one in government is yet investigating the “substantial” fall in tribunal cases since July 2013 (at least, not in any meaningful sense). And this despite just about everyone outside government – including the CBI and the Federation of Small Businesses – having concluded that the dramatic fall in the number of cases is entirely due to the fees being set far too high.

Ministers at the Ministry of Justice may start ‘investigating’ these matters at some point in the future, but if they have a timetable for doing so they don’t appear to have shared it with the BIS employment relations minister.

Which begs the question: what the **** are they waiting for? It’s not as if there is that much to ‘investigate’. Fees came in, and the number of cases dropped off a cliff that no one in government saw coming. End of.

It’s perhaps worth adding that, according to the answer to a written question in the House of Lords given by justice minister Lord Faulks, the Ministry was “currently finalising arrangements for the timing and scope of the review” as long ago as 24 June. Almost four months have passed since then. What are they doing? It’s not as if they are being asked to rerun the Hutton Inquiry.

 

 

 

 

Have your say on the Small Business, Enterprise & Employment Bill

After a slow start – nothing much happened until early 2011 – the Tory-led Coalition has kept us employment policy wonks pretty busy over the last four years. We’ve had one significant piece of primary legislation – the Employment & Regulatory Reform Act 2013 – and several pieces of secondary legislation providing for extensive reform of both employment law and the employment tribunal system. We’ve had an overhaul of the employment tribunal rules of procedure, some tinkering (yet to come fully into force) with the law relating to parental leave, and a major consultation on how to tackle the proliferation and abuse of zero-hours contracts. And, last but not least, we’ve had the introduction of hefty, upfront fees for tribunal claimants that have demolished access to justice on workplace rights.

However, with the Tories and Liberal Democrats having arranged for the nation to enjoy a full five years of coalition government, irrespective of what the nation might want, ministers have decided there’s still time for a tad more employment law reform.

Well, I say ‘reform’, but the handful of clauses on employment law in Part 11 of the Small Business, Enterprise & Employment Bill – which starts its committee stage in the Commons on 14 October – are more tidying-up than fundamental change. And at least three of them are likely to make little if any practical difference, however sensible and welcome they might seem at first glance.

Given the scope and arguably more fundamental nature of the rest of the 142-clause Bill, it seems unlikely that these employment provisions will receive more than limited scrutiny by MPs and peers. But the Committee of MPs that starts work next week is keen to receive external input, and if you have the time and the inclination you can submit your views and comments up until 6 November.

I urge you to do so. And, for what it’s worth, the following is what I have submitted to the Committee, covering clauses 136, 138, and 139.

Clause 136: Financial penalties for non-payment of an ET award

Clause 136 provides for the imposition of a financial penalty of up to £5,000 on an employer who fails to pay a tribunal award (or Acas-conciliated settlement), the aim being to discourage such non-payment.

During my time at Citizens Advice (2000 – 2013), I researched and wrote three reports on the widespread non-payment of tribunal awards: Empty justice (2004); Hollow victories (2005); and Justice denied (2008). So I warmly welcome the financial penalty mechanism provided for in clause 136, not least because it is pretty much the same mechanism that I proposed to ministers in 2012, during the passage of the then Enterprise & Regulatory Reform Bill. Ministers were not (sufficiently) impressed by the idea then, but pressure from the opposition front bench did lead to BIS minister Jo Swinson commissioning further research on the issue (replicating the research commissioned by the Ministry of Justice, in direct response to Justice denied, in 2009). And the damning findings of that BIS-commissioned research have evidently led to a ministerial change of heart.

Some have been quick to note that clause 136 would not solve the problem of non-payment of awards and Acas settlements. Indeed it would not, but then no single measure would, as the problem is extremely complex. There are other steps that BIS and the Ministry of Justice could and should take, such as ‘naming & shaming’ those employers who fail to pay up. But, by creating a meaningful financial disincentive to non-payment of an award, clause 136 could be expected to at least reduce the rate of non-compliance.

Except that, the kind of relatively low-value claim for e.g. unpaid wages, holiday pay and/or notice pay that has in the past often culminated in a hollow victory for the claimant when the employer fails to pay up, is also the very kind that has been eviscerated by the hefty, upfront tribunal fees introduced by the Ministry of Justice in July 2013.

Not surprisingly, vulnerable workers subjected to wage theft by a rogue employer have proven to be reluctant to throw up to £390 of good money after bad. So the number of claims for unpaid wages etc. has tumbled, from an average of 4,587 per month in the nine months immediately before the introduction of fees, to an average of just 1,073 in the nine months up to June 2014.

In short, thanks to the tribunal fees introduced in July 2013, the longstanding problem that clause 136 seeks to (partly) address is no longer quite the problem that it was. So, while BIS might now seek credit for trying to close the stable door, most of the horses have been galloping around the fields since July 2013, and will continue to do so until such time as the tribunal fees regime is substantially reformed.

Clause 138: Maximum financial penalty for breach of the NMW

Clause 138 provides for an increase in the maximum financial penalty that can be imposed by HMRC for breach of the national minimum wage, from £20,000 per employer (technically, £20,000 per Notice of Underpayment), to £20,000 per underpaid worker.

On the face of it, clause 138 is welcome. Fifteen years after its introduction, there can be no excuse for not paying the NMW. But the practical impact of clause 138 would be negligible, for two reasons.

Firstly, as the average underpayment (and penalty imposed) per worker was just £205 in 2013-14, the number of employers who pay even the current maximum penalty of £20,000 is small: just 52 (eight per cent) of all 652 employers penalised in 2013-14. So the number liable to receive a penalty anywhere near the proposed maximum of £20,000 per underpaid worker would be even smaller.

Secondly, HMRC already can in effect impose a penalty of up to £20,000 per underpaid worker, by the simple expedient of issuing more than the normal one Notice of Underpayment to the employer. This practice was adopted in March 2014, when the penalty percentage was increased from 50 per cent to 100 per cent of the total underpayment, and the maximum penalty was increased from £5,000 to £20,000. (I am not aware of any published figure for the number of employers issued with more than one Notice of Underpayment since March 2014, but the Minister may be able to provide that figure to the Committee).

In short, all that clause 138 would do is align the statutory power to set the maximum penalty with the practice adopted by HMRC in March 2014 (in order to meet the Prime Minister’s announcement in November 2013 that penalties would be both increased and imposed on a ‘per worker’ basis). According to the associated BIS Regulatory Impact Assessment, this would save HMRC some £250,000 per year in administrative costs associated with serving a small number of employers with more than one Notice of Underpayment.

However, that would be the sum total of the impact of clause 138. And, as it is not clear from the Regulatory Impact Assessment how HMRC (or BIS) arrived at the total costs figure of £250,000, even that figure might well be an over-estimate.

Clause 139: Banning exclusivity clauses in zero-hours contracts

According to a BIS facts sheet on the Bill, clause 139 would “make exclusivity clauses in zero-hours contracts invalid and unenforceable,” the aim being to address the abusive use of zero-hours contracts.

Such exclusivity clauses – which prevent an individual on a zero-hours contract from working for a second employer, even when no work is on offer from the first – are easily labeled as unfair. But even if clause 139 achieved its aim of making such clauses “invalid and unenforceable” – a rather large ‘if’ – it would still have little if any impact on the abusive use of zero-hours contracts, for the simple reason that such exclusivity clauses are far from essential to that abuse.

In practice, all that an abusive employer has to do is let it be known that taking work with another employer will result in no further work being offered. Employment law specialist Mark Tarran has put it this way:

Zero-hours contracts before [clause 139]: “If you work anywhere else you will be in breach of contract and I won’t give you any more work.”

Zero-hours contracts after [clause 139]: “If you work anywhere else you will not be in breach of contract but I still won’t give you any more work.”

It is worth noting that, according to BIS, only 125,000 – about one in ten – of the estimated 1.2 million zero-hours workers have an exclusivity clause in their contract. And why would employers not have bothered to insert such a clause into nine out of ten zero-hours contracts? They didn’t, because they don’t need to. Take away the exclusivity clause, and the worker is still on a zero-hours contract, with no guarantee of work from one week to the next. And that is what makes them vulnerable to abuse.

To my mind, zero-hours contracts are best viewed as one (very nasty) symptom of a killer disease: the abuse of vulnerable workers by exploitative employers. That disease has become more prevalent and more virulent in recent years. But treating a symptom will not cure the disease, even if it makes the doctor feel more comfortable.

[Postscript: my submission has now been published by the Bill Committee]

So, just how radical is Labour’s ‘£8 by 2020’ minimum wage pledge?

At the weekend, on the eve of the Labour party conference in Manchester, Ed Miliband used an interview in the Observer to reveal that, if elected in May 2015, a Labour government will raise the National Minimum Wage (NMW) rate to £8.00 per hour “by 2020” – which most observers have interpreted to mean from 1 October 2019, when the last annual uprating under the next government will take place.

Reaction has been mixed. Conservative Central Office was quick to claim that the pledge amounts to a slower rate of increase than that between 1999 and 2007.  At a conference fringe meeting, the right-wing commentator Iain Dale suggested that “£8.00 by 2020 is hardly a radical policy”, and the Fabian Society’s Andrew Harrop tweeted that “we need to go further and faster than £8 per hour by 2020”. On the other hand, the move was welcomed by the TUC and the trade union UNISON.

On the question of the rate, I find myself agreeing strongly with Andrew Harrop and – quite possibly for the first and last time ever – Iain Dale. With the NMW at £6.50 per hour from next month, the pledge of £8.00 per hour by 2020 equates to a steady annual increase of 4.25 per cent. Which is not massively above this year’s increase of 3 per cent, or even (what I’m told is) the average annual increase since 2010 of 2.3 per cent.

As the following chart shows, if this year’s slightly more generous increase of 3 per cent were to be replicated in each of the next few years – that is, the sort of rate of increase that George Osborne has said he would be happy with – the NMW rate would be £7.54 from October 2019, just 46 pence per hour below what it would be under Labour’s new proposal. Indeed, at that rate of increase, the NMW rate would reach £8.00 per hour in October 2021, just two years later than Labour now proposes. And Labour’s proposal looks rather pathetic against the Green Party’s far more ambitious policy of an NMW rate of £10.00 per hour by 2020. (I don’t think anyone knows what the Liberal Democrats would like the NMW rate to be in 2020).

NMW2

So, while certainly nothing to be sniffed at, the ‘£8.00 per hour by 2020’ pledge is hardly radical. At least, not in terms of the NMW hourly rate.

However, Miliband’s announcement does represent a radical break away by Labour from the long-standing political consensus that the NMW rate is set not by politicians, but by the ‘independent’ Low Pay Commission. George Osborne crudely tossed this 15-year-old political pact aside in January, when he let it be known that he would be content with a rate of £7.00 per hour. But, presumably out of fear of upsetting the TUC and trade unions, Labour has stuck with it. Until now.

This more radical aspect of the move seems to have gone unnoticed by most commentators, with the notable exception of the CBI which, together with the TUC, has dominated the Low Pay Commission (and therefore the NMW rate) since 1999. “A move to a politicised US-style system is not in the interest of companies or workers”, said the CBI in its response. Well, that depends. But it’s probably fair to say that the move is not in the immediate best interests of the CBI, which would no longer have quite the say on the setting of the NMW rate that it does now.

Like Andrew Harrop, I’d like to see Labour go a lot further and faster than £8.00 per hour by 2020. More particularly, I’d like to see the NMW rate brought up to at least 60 per cent of median earnings by 2020 at the very latest, not some time afterwards (as the detail of Labour’s proposal suggests). And I’d like to see Statutory Maternity & Paternity Pay raised to parity with the NMW by 2020.

But at least now we are talking openly about what the NMW rate should be, rather than leaving it to be fixed by TUC and CBI officials behind closed doors. And, believe me, that is pretty radical. The TUC may have publicly welcomed Miliband’s announcement this week, but I suspect it did so through gritted teeth. Certainly, the CBI is by no means alone – as this blog post by the New Policy Institute illustrates.

So, over the coming months, Miliband and his team are likely to come under intense pressure – from both sides.

With many thanks to Ravi Subramanian of UNISON, whose tweet of his own graph prompted me to write this post.

MoJ’s new line on ET fees as spurious as the old one

As if further proof were needed, the latest set of quarterly tribunal statistics – released by the Ministry of Justice on Thursday – confirm the dramatic impact of the employment tribunal (ET) fees introduced in July last year. For the third quarter in a row, the number of new ET cases is down by 65 per cent or more, compared to the same quarter a year ago. Over the nine months immediately prior to the introduction of fees, 44,000 employers had an ET case brought against them. But over the nine months up to June 2014, just 15,750 did.

As can be seen from the following chart, this is unquestionably a sudden and dramatic decline. Back in March 2013, the Department for Business, Innovation & Skills (BIS) noted that ET cases are “relatively rare”. They’re a lot rarer now.

Chart 1: Single claims/cases & multiple claimant cases (= total number of respondent employers), April 2012 to June 2014

casesSource: Table C1 of Annex C to Tribunal Statistics: April to June 2014, Ministry of Justice, September 2014.

Think of it this way: on average, each of the UK’s 1.21 million employers now faces an ET case just once every 58 years.

In the face of such evidence, the Ministry of Justice now seems to have abandoned its laughable initial line that this pattern is no more than a long-term downward trend. Conservative ministers such as Matt Hancock now proudly acknowledge the scale and suddenness of the decline, but seek to suggest it is no cause for concern as all the thousands of cases ‘lost’ to fees since July 2013 are simply vexatious or spurious claims that should not have been brought anyway.

Until the release of this week’s set of tribunal statistics, this was not an argument that was readily susceptible to disproof by analysis or chart, as that requires data on claim/case outcomes and – due to the time taken to process cases through the system – such outcome data lags at least two quarters behind that on new claims made. But the latest quarterly data – relating to the period April to June this year, so up to almost one year after the introduction of fees – allows us to start putting the new ministerial line to the test. For we can be reasonably confident that the great majority of the claims resolved in this quarter will have been issued after July 2013, not least because the dramatic fall in the number of cases has reduced the average time taken to resolve most types of claim.

If ministers are right, and fees have simply cut out all the vexatious and spurious claims, but have had no effect on access to justice by workers with meritorious claims, we would expect to see substantial shifts in the proportion of cases that are ultimately successful (whether at a hearing, by a default judgment, or through settlement), or unsuccessful. Indeed, we would expect successful claims to be heading towards 100 per cent, and unsuccessful claims towards zero.

So, what does the this outcome data tell us? Well, the following chart compares outcomes in the period April to June 2014, to the same quarter a year ago (i.e. immediately prior to the introduction of fees), and to previous full years. And from this it is clear that the introduction of fees has had no significant impact on outcomes (at least, not yet). Whilst the proportion of successful claims has increased slightly since the same quarter a year ago, from 13 per cent to 17 per cent, it’s still no higher than in any full year since 2007-08. And the proportion of unsuccessful claims is down, but only marginally so. (Note that the only significant changes evident in the chart – those in the proportion of cases settled by Acas, and withdrawn – not only cancel each other out, but pre-date the introduction of fees in any case).

Chart 2: Outcomes of ET claims (singles & multiples).

outcomesSource: Table 2.3 in Tribunal Statistics: April to June 2014 (Tables), Ministry of Justice, September 2014.

In short, not only is there no evidence whatsoever to support the new ministerial line – hardly a unique occurrence under this evidence-averse government – but the only available evidence shows it to be a pile of pants.

I imagine that some in government (and elsewhere) will try to claim that it is still too early to tell. But that is a weak argument that will get ever weaker with the release of each new set of quarterly tribunal statistics.

Or, as Alice might have said, spuriouser and spuriouser.

ET fees income: don’t spend it all at once, Chris

In recent months, faced with a strong aversion to transparency and openness on the part of the Ministry of Justice, there has been much speculation about just how much money the Ministry is making from its justice-denying ET fees regime. Well, there has been in my house. Back in 2012, officials indicated that they were looking to receive at least £10 million a year in ET fees, whilst the Ministry’s original ‘cost recovery’ target of 33 per cent implied an annual fee income nearer to £25 million. But, with the startling drop in the number of claims since the introduction of fees in July last year, even the lower of these two figures has looked increasingly unrealistic.

In May, the justice minister, Shailesh Vara, declined to answer a parliamentary question by shadow justice minister Andy Slaughter seeking a fee income figure to date, on the grounds that “financial information relating to fees and remissions in the ET system will be published [in July] by HMCTS in its Annual Report and Accounts”.  Well, that 108-page report, covering the financial year 2013-14, has now been published by HMCTS.  And, buried away on page 85, there are some interesting figures on ET fee income and remission up to 31 March 2014.

In the eight-month period 29 July 2013 to 31 March 2014, gross income from ET fees was £5.149 million, of which £0.680 million (13.2 per cent) was foregone in fee remission.  That represents an actual ‘cost recovery’ of just 6.7 per cent of the ET system’s total cost of £76.364 million, well below the Ministry’s original target of 33 per cent.

The proportion of fee income foregone in fee remission (13.2 per cent) is also strikingly low, given that, as late as September 2013, the Ministry was predicting that 31 per cent of all ET claimants would qualify for full (25 per cent) or partial (six per cent) fee remission.

Furthermore, we already know, from one of the parliamentary questions by Andy Slaughter that the Minister did deign to answer in May, that the Ministry spent £4.4 million on new IT systems to “support the processing of fee receipts and remission applications across the ET system”. Take that away from the net fee income (gross income – remission) of £4.469 million, and Chris Grayling was left with just £69,000 to cover the staff and other operational costs associated with processing fees and remission applications over the eight months up to 31 March 2014.

In short, it seems highly likely that the Ministry made a net loss on ET fees in 2013-14. Clearly, things can only get better from now on, as most of that capital expenditure of £4.4 million will not be repeated in 2014-15 and beyond. And, of course, the above figures take no account of the operational cost savings to the Ministry associated with tumbleweed blowing through near-empty ET hearing rooms – the real policy intention. As recent speeches by BIS minister Matt Hancock and others have indicated, the Conservative side of the Coalition Government, at least, appears to be very pleased with the overall impact of the ET fees regime, including the 80 per cent drop in claims.

So I don’t expect Chris Grayling to be the least bit bothered about the somewhat less than impressive financial figures noted above. To my mind, their primary significance lies in the implications for any alternative fee regime that might be brought in by any alternative government elected in May 2015. Assuming the number of claims remains at much the same (low) level as now, a net fee income over eight months of £4.469 million implies an annual net income of some £6.7 million. Unless that £6.7 million can be found from savings made elsewhere in the Ministry’s budget, any alternative fees regime is likely to have to generate at least most of it.

Then again, the Lord Chancellor may be humiliated by UNISON in the Court of Appeal later this year, and this blog post will not even rate a footnote in history. I’ll settle for that.

Queen’s Speech: “May government will achieve grayth in hollow cable”

So, going by their breathless blog announcements earlier today, the most exciting legislative measure that the Liberal Democrats have been able to come up with for this week’s Queen’s Speech is … [drum roll] … an increase in the maximum penalty that can be imposed by HMRC for non-compliance with the national minimum wage.

Not only is this not news – the increase was formally announced by Vince Cable’s department in January, and was then re-announced in February – but in practical terms it’s next to meaningless, for the simple reason that very few if any of the minimum wage rogues caught by HMRC will receive financial penalties anywhere near the new maximum.

Until March this year, employers found by HMRC to have breached the minimum wage had to pay the unpaid wages, plus a financial penalty calculated as 50 per cent of the total underpayment for all workers found to have been underpaid, subject to a maximum of £5,000. However, following January’s announcement and the tabling of new Regulations, on 7 March the financial penalty percentage increased from 50 per cent to 100 per cent of the total unpaid wages owed to workers, and the maximum penalty increased to £20,000.

Now we’re told that, in line with the January and February announcements, a Bill in the Queen’s Speech will increase that maximum penalty to £20,000 per underpaid worker. Which will have all those minimum wage rogues running for cover! Er …won’t it?

Well, possibly, but I very much doubt it. In 2012/13 – the most recent year for which the relevant HMRC data is available – the average amount of underpaid wages was just … £300 per worker. Which means that, even under the new Regulations that came into force in March, the average financial penalty is in the region of £300 per worker – or just 1.5 per cent of the £20,000 per worker maximum that the Liberal Democrats, at least, seem to see as their jewel in the Queen’s Speech crown.

Indeed, we also know that, in 2012/13, just 51 (seven per cent) of the 708 minimum wage rogues caught by HMRC received the then maximum penalty of £5,000.  From which it seems reasonable to assume only a very small number of employers will receive the current maximum penalty of £20,000 that came into force in March, let alone the £20,000 per worker for which Vince Cable is now set to legislate.

In any case, if even the current maximum penalty of £20,000 is considered inadequate, why does Vince Cable not simply increase it to £50,000, or £100,000? That wouldn’t require a new Bill – the financial penalty percentage and maximum penalty can be increased at the flick of a minister’s pen, as they were in March.

The answer, of course, is that this measure has little if anything to do with ‘enhancing enforcement of the national minimum wage’. It’s a political move, intended to capture a few headlines and shoot one of Labour’s low pay foxes: Ed Miliband and other shadow ministers have repeatedly indicated they would increase the minimum wage financial penalties if elected in 2015.

While politicians play these meaningless games, back in the real world the bottom line is that better enforcement of the minimum wage requires a bigger chance of rogues getting caught by HMRC. And that means more HMRC boots on the ground. Which no political party is (yet) offering.

Postscript

Since I write and posted the above on Sunday, HMRC has issued a press release with key figures on enforcement of the minimum wage in 2013/14. This shows that, in 2013/14, the average  amount of underpaid wages was just … £205 per worker. Which means that, even under the new Regulations that came into force in March, the average financial penalty is just £205 per worker – or just one per cent of the proposed £20,000 per worker maximum. Interestingly, unlike last year, the press release does not include a figure for the number of employers who received the maximum penalty (of £5,000). Why could that be, I wonder?

Update (19 June):

BIS has today, in response to a parliamentary question by Caroline Lucas MP, confirmed that in 2013/14,  just 52 (eight per cent) of the 652 minimum wage rogues caught and issued with a financial penalty by HMRC received the then maximum penalty of £5,000.