Employee-shareholder proposals receive a rough ride in the House of Lords

Employment Law Advice Solicitors
February 11, 2013

Both Xpert HR and Paul Waugh have recently released articles detailing the bludgeoning that the Government is receiving from the House of Lords over what has been dubbed their “rights for shares” proposals. We’ll take a look in this post at what those proposals entail, why the Government thinks the proposals are a good idea, and how the proposals were received in the House of Lords last week. We’ll do so in the following order:

What are the employee-shareholder proposals?
Why does the Government think the proposals are a good idea?
How were the proposals received in the House of Lords?

What are the employee-shareholder proposals?

The Government is proposing to introduce a new type of “owner-employee” contract under which employees will be given shares in the business that they work for in return for waiving certain of their employment rights. If they choose to enter into such a contract then their employer may choose to give them between £2,000 and £50,000-worth of shares (any gains on which would be tax-free) and in return they would have to waive the following rights: unfair dismissal protection; statutory redundancy pay; the right to make a flexible working request; and the right to request time off in relation to training.

Why does the Government think the proposals are a good idea?

The Government wants to make employment regulation more “flexible” and allow small- and medium-sized businesses the room to grow without what the Government feels are onerous restrictions. According to Paul Waugh, this proposal is the brain-child of George Osbourne and he seems determined to carry it through.

How were the proposals received in the House of Lords?

The best way to describe the reception of the draft legislation in the House of Lords last week was a “good kicking”. Xpert HR reports that Lord Adonis in particular weighed heavily into the debate, describing the proposal as a “bully’s charter” , a “£1bn tax loophole” and a “farce”. Paul Waugh reported that the Government’s minister (Lord Younger) came under heavy fire from Lord Adonis, Lord Pannick and Lord Deben. Lord Deben, in particular, stated that he found the plans to be “mystifying” whereas Lord Pannick attacked the proposals as an attempt to subvert the balance that statutory protection afforded to the employee-employer relationship.

It will be interesting to see how the draft legislation proceeds through the House of Lords over the next few weeks.

Employment Law Advice Solicitors are employment law solicitors and compromise agreement solicitors based in the City of London.