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The Government Responds to the Taylor Review

on Friday, 16 February 2018.

After being published in July last year, the government has now responded to Matthew Taylor's review of the UK labour market and employment practices - the Taylor Review.

The government has issued a press release setting out how it intends to respond to the Taylor Review and commits to four consultations, which will gather further information on the topics raised.

Employment Status - Does the Future Hold Clarification?

The government has accepted  that there is a lack of clarity in this area.

One of the key recommendations made by the Taylor Review was to ask the government to codify the case law principles that 'govern' employee status in primary legislation. The case law principles used to determine employment status are 'personal service', 'control' and 'mutuality of obligation'. However, the Taylor Review did also question if these principles were appropriate, considering the changing landscape of the modern labour market and the new ways that people are engaged by businesses. The Review went so far as to suggest that to account for modern practices, a new "dependant contractor" status should be made.

In response, the government has opened an employment status consultation, to canvas views on whether the options proposed by the Taylor Review could achieve more certainty and clarity for businesses when determining employment status. The consultation suggests a number of approaches, such as:

  • To refine the test used to determine employment status. They suggest that the test used by courts could be made more precise, by either creating a stricter criteria (eg by length of engagement) or by creating a narrower structure (eg by using a hierarchy or weighted criteria).

  • Although the government believes that the three-tier systems of employment status (employee, worker and contractor) remains appropriate and will not consider introducing a new dependant contractor status, it is open to adopting the new name in relation to workers who are engaged under a contract to provide personal service. They have therefore asked for views on if this approach would bring any benefits.

In direct response to the Taylor Review, the government has:

  • Committed to developing an online tool to determine questions of employment status, once the employment legislation is finalised.

  • Extended the right to written particulars of terms to workers.

  • Agreed to legislate to extend the right to receive a payslip to all workers and require that employers state the hours being paid for on the payslips of all time paid workers. This will come into force on 6 April 2019.

"More Predictable Contracts" and Other Issues for Agency and Atypical Workers

The Taylor Review raised a number of issues surrounding a lack of certainty for those who work atypical hours. In response, the government has indicated that all workers should be able to request a more predictable contract where appropriate. The government is seeking views as to how such rights might operate in practice as part of the transparency consultation, including:

  • Whether a right to a more predictable contract should be subject to a qualifying period.

  • How long the employer should have to respond to a request.

  • Whether there should be a limit on how many requests an individual can make.

The government has also addressed the problems which atypical workers have in establishing 'continuity of service'. Currently, where there is a period of a week or more that is not covered by a contract of employment, continuity of service will be broken.The government has stated that it is committed to extending this period, although the exact extent of this is yet to be confirmed and views are being sought on this point.

The government will also be seeking views on how 'working time' is best defined for those working on app-based platforms as favoured by car services and food delivery companies, in particular:

  • How should employers deal with a requirement to pay the national minimum wage (NMW) in relation to work which is carried out at times of low demand?

  • Is there is a need to be more prescriptive in relation to the circumstances in which the NMW applies, such as period when a worker is inactive but available to accept a 'gig' via an app-based platform?

The government has acknowledged that the pay reference period under the Working Time Regulations 1998 should be increased from 12 to 52 weeks to better accommodate seasonal variations in working time experienced by atypical workers such as farm workers, fruit pickers and retail workers.

A further issue raised under the Review was the abuse of the 'Swedish derogation' under the Agency Workers Regulations 2010. The derogation means that workers who have a contract providing for a minimum level of pay between assignments are excluded from the right to equal pay when compared with permanent employees. However, the Review highlighted concerns that the derogation has been used inappropriately by some agencies and this has been addressed by the government, which has sought further clarification as to the extent of the abuse.

One proposal which has not been taken forward is that of reporting requirements for companies of a certain size in relation to their model of employment and use of agency services beyond a certain threshold. The government's response accepts that employers should be more transparent about workforce structures but it expects that corporate governance reforms are likely to encourage companies to be more open. Further action will be taken if this does not appear to be the case.

How Will These Changes Be Enforced?

There are a number of changes that the government have accepted need to be made in terms of enforcement:

  • The government (through HMRC) will enforce a basic set of core pay rights that apply to all workers: NMW, sick pay and holiday pay. In addition, the enforcement consultation aims to gather evidence regarding the current rates of non-compliance of holiday and statutory sick pay obligations, to prepare a plan for targeting enforcement proposals.

  • The government accepts the recommendation that Action is needed to simplify the enforcement procedures for successful employment tribunal claimants whose employers do not pay employment tribunal awards. An enforcement reform project to address enforcement strategies for unpaid court and tribunal awards began in January 2018 (by HM Courts and Tribunals Service). Therefore, the current enforcement consultation specifically addresses how these reforms can be applied to employment tribunal awards.

  • The government has stated that, when an employment tribunal reaches a judgment based on factual circumstances which would apply to other workers within their organisation, the employer should update its contracts and employment relationships accordingly. This is unless there is good justification for not doing so. The enforcement consultation will consider how to best implement sanctions against repeat offenders to encourage compliance.

  • The government has committed to raising the maximum penalty for aggravated breach of employment legislation from £5,000 to at least £20,000. The enforcement consultation asks whether the legislation should set out what types of breaches may be considered 'aggravated' for these purposes and proposes introducing a 'naming and shaming' scheme for employers that do not pay employment tribunal awards.

What Else Was Addressed in the Response?

There are a number of other matters which the government has indicated it will  consider in its response to the review. These include:

  • Reviewing and consolidating guidance in relation to statutory protections for pregnant workers and those on maternity leave.

  • The potential benefits of making it easier for workers to trigger formal consultation with their employer.

  • The proposal that statutory sick pay should be reformed in order that all workers are eligible from day one irrespective of their income.

Which Taylor Proposals Will Not Be Taken Forward?

The government has not accepted the Taylor Review's recommendations that:

  • In circumstances where employment status is in dispute, the burden should be placed on the employer.

  • Individuals should have the right to be paid 'rolled-up' holiday pay (ie receiving a premium of their pay instead of paid time off). The government would not implement this suggestion as the European Court of Justice has rules this practice to be unlawful.

In addition, the response addressed the issues raised regarding non-compete clauses which were subject to a call of evidence in May 2015 to examine if they unfairly restrict individuals from moving between jobs. The government found in favour of restrictive covenants, stating that they were valuable, necessary and do not unfairly affect an individual's ability to find other work.

For more information please contact Joanne Oliver in our Employment Law team on 0117 314 5361.

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