Employee protection: how far can the law go?

Ed Miliband and Vince Cable have promised to do something about the abuse of zero hours contracts. As ever, though, political soundbites are easy. Coming up with workable legislation is likely to be more difficult, as Darren Newman explains.

For example:

[T]here is the small problem of what kind of contract will be defined as a zero-hours contract. We can broadly say that a zero-hours contract is one which does not guarantee a minimum amount of work per week. But what if the employer guarantees one hour? Would that be enough to escape the three measures that Ed Miliband is proposing? If you take action against zero-hours contracts, how do you stop employers coming up with contracts that are just the other side of the definition but every bit as exploitative?

Also, if you happen to be happy to work on a zero-hours contract (and some people are), would you have the right to opt-out of the minimum number of hours the law would require your contract to specify? Surely the law would have to provide for that. And if it did, how would you stop it becoming a semi-automatic opt-out like we have in Working Time? All workers have the right to refuse to opt-out of the 48 hour week, but how many vulnerable workers are really in a position to assert that right?

Vanessa James makes a similar point:

The most obvious route open to an employer seeking to continue ‘abusing’ staff contracts after a ban would be to engage staff on a part-time contract for a nominal amount of hours. Then the employer could, presumably use an overtime arrangement for any additional hours, still offering no guaranteed overtime. This is impossible to police or legislate against.

As I’ve said before, I’m not convinced that this is a problem that can be solved by legislation. The abuses happen because some employees are in a weak bargaining position. Zero hours contracts are simply the most recent manifestation of this power imbalance. Ban them and exploitative employers will find other ways of squeezing their workers.

A number of people have suggested that stronger unions might be the answer. As Chris Dillow says, collective bargaining is a better way of protecting workers than the law. Countries with strong unions, like the Scandinavian countries, have less employment law than those with weaker unions like Greece. The Nordic countries have no minimum wage legislation because they don’t need it.

Writing in the Guardian, Labour law professor Alan Bogg called for the next government to strengthen collective bargaining. “Labour law reform will be at the heart of the next general election,” he said, though his piece was frustratingly short of detail about the form any legislation might take.

This is perhaps because, just as it is difficult to legislate against zero hours contracts, there is also a limit to how far the law can be used to remote collective bargaining.

Advocates of stronger collective bargaining usually cite the Scandinavian model. After all, these are countries that have combined high wages with high levels of competitiveness and economic growth. Yet the Scandinavian systems are relatively light on legislation. Collective bargaining is based on cultural custom and practice rather than legislation.

In Denmark, for example, it goes back to an agreement between the main employers’ and trade union bodies, equivalents of our CBI and TUC, in 1899. The grievance procedure that still covers most employees came not from legislation but from an agreement between the two bodies in 1908. As this fascinating report from Copenhagen business school points out, there is considerable resistance in Denmark to the state’s involvement in industrial relations. One of the reasons for the persistence of the collective agreements, which cover 90 percent of the workforce, is that both employers and unions wanted to keep the government out. What better way than to work together put your own house in order first?

In Sweden, the collective agreements have a similar history. The agreements are legally enforceable but only for those who have agreed to participate in the first place. Non-organised employers and workers are not automatically covered. And yet 91 percent of Swedish employees conditions are subject to collective agreements. The situation is similar in Norway. Finland is slightly different in that a state commission enforces the applicability of collective agreements.

On the whole, though, Scandinavian workers and employers don’t do collective bargaining because the state tells them to, they do it because it is deeply rooted in their culture and has been for the last 100 years.

Left-wing politicians, trade unionists and even some employment lawyers and HR professionals are quick to call for legislation to improve working conditions and shift the balance of power back towards the employee. But how far can the law be used to mitigate the effects of economics and of social norms? Can legislation prevent the abuses associated with zero hours contracts or will they just appear in a different form? Could the law be used to drive a return to more widespread collective bargaining, as Alan Bogg seemed to imply, or would such a legislative framework be too cumbersome for the modern age?

As you might infer from the tone of this piece, I am sceptical about the extent to which the law can protect workers from all but the worst excesses by the worst employers. Any more than that requires something like the powerful countervailing forces and strong cultural norms that are a feature of the Scandinavian systems. In any country, employment relations are determined as much by social and economic factors as legal frameworks. The law can’t do much more than tinker around the edges.

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9 Responses to Employee protection: how far can the law go?

  1. John D says:

    Miliband and Cable are just “pitching” for working class votes. They will not provide any specific details of their proposals; simply make sound-bite mumbles about enhancing workers’ rights.
    What they should both commit to is the creation of a full employment economy, which would create conditions of relative labour scarcity and force employers to treat their employees decently.

  2. Pingback: Employee protection: how far can the law go? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  3. TickyW says:

    Perhaps it is difficult for the state to intervene in employment contracts via employment legislation. However, one area the in which the state can legitimately intervene is business taxation. For example, the state could place a limit on the tax deductibility of an individual’s employee remuneration, say to £100 k per annum per employee.

    The consequent additional tax raised could then be used to top up the wages of zero hour workers by the state (via Universal Credit if and when it is implemented?). If employers start gaming the system then the tax deductible threshold can be lowered so at increase the state’s tax take. The threshold could even be customised so that less scrupulous, more exploitative employers are suffer lower thresholds than socially responsible employers. So, yeah, such a regime may produce a game of cat and mouse between employers and government but it may well be worth it.

  4. TickyW says:

    Would also like to add that in cases where a zero-hours contact is exclusive then HMRC should be able to prosecute the employer for breach of minimum wage legislation. Clearly, if an employer has stipulated to a worker that he or she must be available for a specified period then the worker should be paid for that time and so the NMW kicks in.

    Under an exclusive contract the worker is selling his or her time. There is no obligation for an employer to provide the worker with work in that even if the employer has paid for the time – it has always been thus under employment law. It can not be ethically right for an employer to buy a worker’s time for a zero wage rate.and I suggest this may be true legally, if it was ever tested in the courts.

  5. I would be cautious about highlighting a correlation between minimal employment legislation and high wage / high employment economies, such as the Nordics, as this can obscure a variety of different situations in the same country (what’s life like for the other 9% in Sweden?). For example, Germany has no minimum wage, but it has also been the pioneer of mini-jobs (low wage and limited hours), not to mention austerity and wage repression avant la lettre in the early 00s.

    It should also be borne in mind that employment legislation is usually advanced to privilege certain types of capital, rather than to protect labour, as is obvious from the history of the Factory Acts in the UK during the nineteenth century. The tone of the attacks by Cable and Miliband (a critique of “bad businesses” and the “wrong sort” of capitalism) indicates, as much as the substance (or lack of it), that this is a neoliberal initiative.

    Advocating free collective bargaining is fine, but it is only going to happen once labour has sufficient leverage. The need for government legislation on hours and conditions declined in the twentieth century not because of this legislation’s success, but because it was superseded by the growth of the trades unions and collective bargaining. The return to fashion of employment law is a symptom of labour’s current weakness and the continuing trend towards a low-wage, low-productivity economy. The Beecroft report’s inanities and Miliband and Clegg’s interventions are two perspectives on the same anxiety, the one small capital, the other big capital

  6. MikeG says:

    There isn’t even a clear agreed definition of what a zerro hours contract is. This explains why estimates of the numbers vary so much. To me, it has to be something different to a casual contract, where there is no obligation on either side to give or accept work.

    • TickyW says:

      @MikeG

      I would suggest that a zero hours contract is one where the contract requires an employee to be available to the employer but where the employee is not paid for this “idle time”. For example, the contract may say (in effect), “you will be available for duties between the hours of 8am to 5pm Monday to Saturday. You will be paid the NMW if, and only if, you are called in to perform your duties, Time for which you are available but for which you are not called in to perform your duties will not be paid”.

  7. metatone says:

    Rather agree with TickyW – at the very least there are blunt instruments that should be employed against the worst of the “zero hours” contracts out there. And the NMW legislation is a good example of one such blunt instrument.

    I’d also query the “velvet fist in a silk glove” premise about employment legislation. Why kowtow to workers who like their zero-hour contracts? Further, let’s outlaw everything below (for example) an 8 hour contract. Sure it will not solve the problem of vulnerable workers, but it would improve their lot by 8xNMW much of the time. And yes, there will be problems for businesses that wish to write less than 8 hour contracts, but again, are they so vital to the national interest, really? I could be persuaded to reconsider, but I’m not interested in generalisations, or random anomalies, I want to see actual justification of widespread cases.

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