Following the House of Lords this morning approving the Commons’ amendments to the controversial ‘employee shareholder’ scheme, James Hall, Associate at Charles Russell LLP, commented: “In a rapid turnaround, the House of Lords this morning approved the Commons amendments to the controversial ’employee shareholder’ employment status so beloved of the current Government. Due to be inserted as s27 of the Growth and Infrastructure Bill, the new status is expected to be introduced this autumn.
“Having been rejected twice by the Lords, many felt that the fundamental flaws in this proposal were only too obvious. However, the Commons appear to have finally addressed one of the main concerns: that of employees receiving proper advice. Now, employees being offered ’employee shareholder’ status will be required to get independent advice that is funded by the company regardless of whether the individual takes up the offer. This advice will come after the individual has been given specific information as to the employment rights they will be giving up (broadly being unfair dismissal rights, the right to request flexible working and some amended parental leave provisions) as well as on the shares they will receive and the rights that these will carry. Having taken this advice, the employees will then have a 7 day cooling-off period to consider their position before they are able to accept any offer.
“This provision for proper advice is undoubtedly a good thing. Interestingly, the advice can be sought from unions (in addition to lawyers or legal advice centres). Whilst similar advice would normally given to individuals free of charge as part of union membership, it seems likely that unions will seek to capitalise on their ability to request fees from employers.
“Despite their concessions, the Government have not properly addressed the issues around the valuation of shares upon exit, or what arrangements there will be for adequate disposal. Whilst this may on the surface appear be a good thing for employers, this aspect is undoubtedly something that will be raised by a competent adviser, particularly if they are a union. Pressure may therefore be applied to employers to outline the exit provisions, possibly even in the contracts themselves.
“It remains somewhat of a mystery as to why the Government has been so keen to push this new status into being. Both employees and employers alike have shown a distinct lack of interest. The Employee Ownership Association, the self-proclaimed voice of co-owned businesses, has been vocal in its opposition, stating on its website this this new status is ‘hugely disappointing’ and that there is ‘absolutely no need to dilute the rights of workers’. With high profile businesses such as the John Lewis Partnership amongst its members, who have a long history of employee ownership, the EOA clearly knows its market. As they are condemning it and there are potential risks to the ’employee owners’ themselves, it begs the question of whether anyone will really want this new status at all.”