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 andsettlement agreement solicitors based in the City of London.
If you’ve been asked to consider entering into a compromise agreement then you may have certain demands of your employer – one of these may be, for example, continued use of your company car after your employment ends (whether temporarily or permanently). In this post we’ll look at what a compromise agreement is, what forms of benefit you can expect under a compromise agreement, and whether you can use your company car after you’ve signed your compromise agreement. We’ll do so in the following order:
- What is a compromise agreement?
- What forms of benefit can I receive under a compromise agreement?
- Can I use my company car after I’ve signed a compromise agreement?
What is a compromise agreement?
A compromise agreement is a form of contract regulated by statute. It allows an employer and an employee to settle a potential or existing dispute, with the employer offering some form of benefit (whether this benefit is financial or non-financial) in return for the employee agreeing to waive certain (or all) of their rights against the employer (such as the right to make an unfair dismissal claim). The employee should be informed by the employer that they should receive independent legal advice from a relevant legal adviser. The employer will normally contribute towards the cost of obtaining legal advice (in the range of between £250 and £600).
What forms of benefit can I receive under a compromise agreement?
Broadly put, you can receive either financial or non-financial benefits under a compromise agreement. Financial benefits could include notice pay (or pay in lieu of notice), redundancy payments, holiday pay, compensation for the termination of your employment, or the continued use of contractual benefits (such as medical insurance, the use of a company car, or the use of company equipment such as a mobile telephone or laptop computer). Non-financial benefits include such things as particular agreements to confidentiality or the provision of an agreed reference to potential future employers.
Can I use my company car after I’ve signed a compromise agreement?
If you already enjoy the use of a company car under your contract of employment you can agree with your employer under the compromise agreement an extension of the time period under which you’re allowed to use the company car. This arrangement can be either temporary or permanent (it’s more frequent for it to be a temporary measure). However, you should bear in mind that the provision of a contractual benefit such as this is taxable and you should therefore be careful for this eventuality to be covered in the terms of the compromise agreement.
London Compromise Agreement Solicitors are settlement agreement solicitors based in the City of London.
In this post we’ll take a look at the potential offences that may be committed by a director if they engage in the management of a company when they are under a bankruptcy order. We’ll therefore look at the following elements:
- When may a director be disqualified from taking part in the management of a company?
- What are the consequences if they breach this disqualification?
- What is the potential sentence if a director is convicted under the CDDA 1986?
- What should you do if you’re charged with an offence under the CDDA 1986?
When may a director be disqualified from taking part in the management of a company?
Under sections 11 and 13 of the Company Directors Disqualification Act 1986 (“CDDA 1986″) a person may be disqualified from taking part (directly or indirectly) in the management, formation or promotion of a company at a time when he is either:
- Undischarged bankrupt; or
- A bankruptcy restriction is in force in respect of him
What are the consequences if they breach this disqualification?
If a person breaches the provisions of sections 11 and 13 of the CDDA 1986 then they may be liable to the following (depending upon whether the case is tried in the Crown Court or the Magistrates’ Court):
- On conviction on indictment: to imprisonment of not more than 2 years or a fine, or both; and
- On summary conviction: to imprisonment for not more than 6 months or a fine not exceeding the statutory minimum, or both
It’s no defence for a person to state that they were not aware that they were breaching their disqualification order (for example, because they didn’t know of the existence of the order or they thought the order had lapsed) – liability is strict (which means that their intentions didn’t matter). Although a disqualification order prevents persons from getting involved in the management of a company, they should also be careful that they don’t advise on financial matters of the company or on such things as a company restructuring – this would still render them liable under the CDDA 1986.
What is the potential sentence if a director is convicted under the CDDA 1986?
If a director is convicted under the CDDA 1986 (as above) then they can receive a sentence of up to two years in prison or a fine (or both) if convicted on indictment or they may receive a sentence of up to six months in prison or a fine (or both) on summary conviction.
What should you do if you’re charged with an offence under the CDDA 1986?
If you’re charged with an offence under the CDDA 1986 then you should take advice from a criminal defence solicitor (you may also wish to consult anemployment law solicitor) – the potential repercussions of such a charge are serious.
Criminal Defence Solicitors are criminal defence lawyers based in the City of London.
Chancellor George Osborne’s initiative announced at the Conservative Party Conference earlier this month would allow employees to swap some of their employment rights for shares in the company they are working for. Mr Osborne announced that if deemed effective, the policy would be implemented by April 2013.
In a nutshell, employees would create a hybrid employment contract – exchanging their rights such as flexible working, redundancy pay and cover for unfair dismissal for shares in the business, ranging from £2000 to £50,000. As an added incentive, Mr Osborne announced that the shares would also be exempt from Capital Gains Tax.
There has been much controversy in the national press regarding the issue. Many opinions so far have taken an economical or financial angle, as well as criticism based on workers’ rights. As the owner of a firm of solicitors in Norwich specialising in employment law, I’d like to put forward some of my opinions, taken from an employee’s point of view.
Freedom In Employment Contracts Is Nothing New
Firstly, these sorts of hybrid arrangements are actually nothing new in the employment law world. There is no set employment contract that all employees must sign. Obviously there is EU legislation and The Equality Act in place that any employer must abide by, but the arrangements surrounding flexible working, redundancy pay, maternity or paternity leave can be made however is agreed by the employer and the employee.
Employers can already offer an employee any type of contract they wish, so long as it does not conflict with human rights or EU legislation. If the potential employee does not agree to the restrictions of the contract, they can choose to either negotiate different terms or refuse the job.
It is very common for new businesses to offer similar arrangements to employees, sometimes also with an equity share. For example at mySolicitors firm in Norwich , Philip Bazley, head of our wills and probate department, is a partner with equity share in the company.
The John Lewis Partnership
The most high profile example, and a fantastic demonstration of shares for employees is that of the John Lewis Partnership. All employees are essentially partners in the company and reap the benefits of yearly bonuses. Therefore, all members of staff are highly motivated to go above and beyond because by doing so they can earn more money. I think we are all in agreement that in general the customer experience offered by Waitrose is noticeably of a higher level than that of some of their competitors. In this instance however, unlike the new proposal offered by Mr Osborne, they do not lose any of their employment rights.
The idea behind giving employees shares is that they will be happier – feeling more like part of a team and receiving more money, while the employer benefits from harder workers, increased customer experience and more sales as a result. I would hope that George Osborne’s policy would incentivise more employers to follow this example to the benefit of all.
Benefits For Employees
While at first glance it may appear that employees are giving up their statutory rights, they will still be protected by English and European Law – for example they will never have to lose the right to equality in the workplace.
Employees in start-up businesses will be able to benefit from increasing dividends as the business grows. If the start-up fails, there is no loss to the employee other than the loss of their shares which they would not have had otherwise.
It has also been reported that employers will be able to give back rights to employees if they wish to. While I do not have the actual details of how employers will decide which employees have their rights reinstated, in theory a worker could receive both shares in the company and also their right to redundancy pay. This opens up negotiations between employer and employee to the point where both parties are happy. Currently, in many instances, employees simply accept the contract they are given without any negotiation of what could be flexible.
Risks For Employees
With unemployment figures the way that they currently are, there is an argument that some people could feel pushed into contracts they are not wholly happy with. An unemployed person who desperately needs a job but without many job offers may feel pressured to take a contract in which they give up rights in exchange for shares in the business, because otherwise they have no option but to refuse the job and remain unemployed. It gives employers more control over who they hire and how that person will work for them.
Accountants have also warned that there is a tax loophole for large earners in bigger companies whereby they have more to gain from the Capital Gains Tax relief. This could add fuel to the fire in the current political discourse about policies favouring the rich becoming richer.
However, there will always be bad employers unfortunately – this policy is not going to change that or make it worse.
Agency Workers
Agency workers in the UK have very few rights other than those covered by EU and English law. People working under agency contracts are therefore worse off than any employee as they do not have the same employment rights and would also not be offered shares in the company. The same goes for interns – a subject around which there was also a large amount of controversy last year. Could this policy mean that we start to see a rise in the numbers of agency workers?
Current verdict
Overall, I am all for new ideas that benefit employees, business growth and the economy and I think it is very important to explore ideas such as this before launching it.
In the case of bankers’ bonuses, this scheme would be perfect as employees would be working towards the long-term gain and performance of the company rather than to short-term targets so that they can receive inflated bonuses. On the face of it, I think that the scheme would be beneficial to both small and large businesses – the former having more confidence to employ new workers and the latter being able to better incentivise and bring together their team.
The intention of the scheme is to improve buy-in from employees and also ease the strict employment law that can sometimes limit smaller businesses, however until all of the details of the new policy are laid out, we cannot know whether the rights of the individual workers will be protected enough and that loopholes will not be exploited.
Before it can go ahead the policy must first go through Parliament and the House of Lords and I would be very doubtful of it being passed without the current criticisms being ironed out.
