The (Un)Employment Rights Bill

The greatest expansion of workers rights since Clement Attlee? The first step on the road to our own ‘southern European employment crisis’? I have in the last few months heard both and it’s easy to see why when seemingly nobody has actually read the Bill beyond the clause headings and press releases. I however, using the flexible working arrangements the Bill seeks to regulate, have had the misfortune of reading the Bill, and rather more annoyingly the Trade Union and Labour Relations of Act 1992 and the Employment Rights Act of 1996, both of which this new Bill references extensively. Here then I shall make some effort, though not too much or I may have to start a trade union for ASI fellows much to Maxwell’s delight, to explain the Bill. It does not cover all of it - for much of it is banal, establishing advisory boards or creating duties to consult over distribution of tips (tipping being a practice I frankly abhor) - though it does cover the key parts. To get to the point then let us start with the removal of qualifying periods (that is the time you must have worked at a business before receiving certain benefits from it).

The removal of qualifying periods for parental leave and sickness pay is, as so much of what we will discuss later on, a policy that sounds nice but becomes evidently counterproductive past a certain point. Though it might be in a different domain, the best example here is what happened when US states implemented “ban the box” policies - that is a prohibition on employers asking hires whether they have a criminal conviction, a noble policy designed to promote racial equality and give people a second chance. Yet, instead of promoting equality the policy led to, uh more racial discrimination as employers shorn of specificity instead assumed all people in high-crime demographics were ex-cons. We could expect much the same here - employers, particularly small ones, shorn of the kind of protection that qualifying periods provide are left with a broad discriminatory incentive against demographics likely to get pregnant or sick.

The ban on zero hours contracts is much the same - stable, secure work is, I think, something we all aspire to have for ourselves and for society. Yet the key word there is work, which this ban and this Bill hinders. The only academic study - as far as I am aware - on the effects of a zero hour contract ban put this point across quite clearly. The paper, from three Economics Professors based primarily around the University of Bristol, assesses under its model the employment effects of a ban, which are shall we say ‘not good,’ with an estimated reduction in the employment rate of the low-pay labour market of “between 6.8 and 7.4 percentage points”. That is caused quite simply by the substitution effect (that much talked about idea of full-time jobs being created as zero hour contract work) being much smaller than both the job creation effect (volatile businesses being able to exist) but particularly the participation effect (workers who would not be able or willing to work without the kind of flexibility ZHCs provide).

What sticks out in particular here really is just the timing of the change - for in that regard it couldn’t be worse. The government is not merely reducing labour market flexibility but simultaneously, thanks to the Budget, hiking the minimum wage by some 6.7% (or up to 18% for under 21s) and employer NI payments by, for someone on, say £15,000, 84%. Collectively these policies indicate a government intent on devastating the low wage labour market - or a government that believes incidence does not exist and that businesses will simply absorb costs. It’s certainly a gamble to take when there are the highest number of NEETs since 2013, one of the developed world’s sharpest hiring falls, and unexpectedly high and rising unemployment. This isn’t even to mention the £8bn bill the good intentions of the judiciary have foisted on supermarkets, our grocery bills, and their staff. One might reasonably start to ask whether every Labour government since 1924 leaving unemployment higher than the level they inherited might not be a coincidence. 

Moving on to a cheerier part of the Bill, Clause 52 stands out as my personal favourite for it is perhaps the most naked example in recent history of using the law to boost your own party’s fundraising efforts - though I doubt we will be hearing the usual cries of democratic backsliding that are raised whenever political fundraising or election law is touched. The Clause, which shifts the law to auto-enroll every trade unionist as a contributor to political funds, these political funds representing something like 25-30% of Labour’s fundraising in a given year, may as well be renamed the Labour finance law. It’s a delightfully fun version of the kind of dark patterns used by companies like the New York Times - sign up online, but a six hour phone call to unenroll. 

More wonderfully the Bill proposes in the subsequent clause to make it even easier for trade unions to deduct union subscriptions from wages - so under Labour’s proposal then, workers in a union will be automatically contributing to the Labour Party and might not even notice. As the final cherry on top of this delightful ‘gerrymander’, Clause 67 removes the need for unions to even disclose their political expenditure. Having to display ID cards to vote? The height of Republican style voter suppression, a fundamental attack on democracy. Using trickery to boost your campaign’s financing? Major progress for workers and their rights. It’s a take, I suppose.

Clause 67 is, predictably, not the only clause in which the government seeks to strip information from trade union members and the public writ large. In Clause 59 Labour proposes to make it impossible to work out what the turnout in strike ballots is - weaponising information obfuscation. This is done of course because in the Clause immediately prior, they propose to remove any turnout requirements for legitimating strike action.  It really is fringe voices too - if you remember prior to these restrictions being introduced in 2016 you had NHS strikes called on just 16% turnout and 20% of England’s schools shut down by strikes supported by 20% of NUT members. You may also remember the time when just 30% of TfL staff voting for a strike led to core stations like Oxford Circus being able to open for just 11 minutes - all to protest the most barebones modernisation efforts.

Clauses 58 and 65 - the part of the Bill that repeals minimum service levels - might as well be called the rent seekers charter in that regard. Minimum service levels - the practice requiring emergency and security services (e.g. the fire service) to, when striking, provide at least some service - is, as UK in a Changing Europe helpfully put together commonplace policy in Europe. France, Germany, Italy, Spain, all maintain some form of minimum service requirement for essential public services and for good reason. It is one thing when a shop or a warehouse closes for a few days - but something entirely different for nuclear waste control to be shuttered. The particularly elderly may remember the Fire Brigades Union’s strikes of 2002-2003 where militant firefighters attempted to revive the 1980s extorting the government for a 40% pay rise (having been offered *only* 11.3%) and causing at least a half dozen documented deaths.

The powers in 2023’s Minimum Service Levels Act have thankfully not had to be used and, had they been, their impact was likely to have been limited by both judicial review and voluntary local agreements. Nevertheless, minimum service levels remain a helpful backstop for emergencies that Labour may at some point regret removing. That point may come far sooner than expected too - Transport Secretary Heidi Alexander has already indicated that the government , through caving into a 15% pay rise for train drivers, has worsened the rail service. It is hardly a surprise really, for all we talk of corporations abusing natural monopolies (of which the railways are not one) to charge unreasonably high prices, the workers who hold a monopoly on the monopoly are just as capable of doing so. The governments new legislation and rail renationalisation merely intensifies that dynamic - as the RMT which has consistently opposed open access rail, has correctly identified.

To be clear it is an intensification but it is not, as some hysterical commentary has suggested, a return to the 1970s (something quite regrettable for those of us who were hoping for a chance to wheel out our Richard III). Some bits of the Bill are even, dare I say it, something that the Opposition ought to welcome. Clause 6, a ban on exclusivity terms in zero hours contracts, is perfectly reasonable. Indeed if anything Labour ought to have gone further in regulating other forms of exclusivity like non-compete clauses (essentially a limitation on the ability of an ex-employee to work in the same industry) which the last government rightly proposed to limit the duration of (but never ultimately legislated for). Not picking that up - or banning them outright given US research suggesting it would raise wages by 4% - is outright bizarre though fits with the legislation more broadly. Indeed what really sticks out is how little it does and how little it reflects the modern economy. The Bill in dealing with zero hour contracts, and not the gig economy, feels like something that ought to have been written in 2015. In the focus on union power, and not the direct individual-employer relationship, it feels more like a focus on a vision of Britain that hasn’t existed since 1985

The most glaring aspect here is the huge missed opportunity to appropriately regulate the gig-economy. The current status quo of employment tribunals and the court system slowly drifting the gig economy into forms of contractualised employment may be satisfying for fans of judicial imperialism and lawyers with large retainer fees, but it has created a regulatory mess (try distinguishing between the Uber and Deliveroo case law) whilst leaving gaping holes in the labour market (that banning zero hours contracts will only exacerbate). The Conservatives and opposition parties should absolutely point out the most fundamental hole in the Bill; that the gig-economy practices (account substitution for instance) that have created an unprecedented illegal migratory pull factor, as has been pointed out time and time again, remains entirely unaddressed. One would have thought shutting down genuinely exploitative labour practices at the same time as reducing illegal migration would have been a priority for the Bill, and yet here it is.

So then, to draw a tepid conclusion, what does the Bill propose to do? Well in its 199 pages there is a good deal of irrelevant fluff so, discarding that, at its core it proposes to ban zero hour contracts, ‘move rights to day one’, water down standards that prevent a small hardcore of militants from crashing public services, and, as a cherry on top, weaponise paperwork and forgetfulness to boost the Labour Party’s finances. 

Now none of this will crash the economy, as Labour MP Andy McDonald has stated its opponents believe in his long winned comparison with the minimum wage. Yet simply stating that because the economy still functions today despite the last Labour government having introduced a minimum wage is not good enough - not least now post-budget that the minimum wage has reached a level where it is demonstrably functioning as an economic block, David Card fast-food experiment handringing aside. The question is not whether the economy will still function, it will, but whether this Bill when it becomes an Act will do more harm than good. The answer to that is primarily in how you qualify trade-offs, whether you value having a zero hour contract over having no contract, and how large pre anticipatory discrimination is (something that we do not know). From the limited information we do have, those are a noticeable net negative with much more effective alternatives (like restricting ZHC use for big business solely). What should be relatively easier to answer in the question of ‘what will do more harm than good’ is the Bill’s trade union rules, repealing minimum service levels and eliminating any turnout requirements, that merely promote a classic extraction dynamic from which the public as a whole will lose over an unquantified future. So yes Andy McDonald was right ‘the Bill won’t crash the economy’ but personally I don’t think that’s a particularly good legislative standard to set.