Shareholder rights for employees to create red tape?

Thursday 24 January 2013


The Law Society has reiterated its opposition to proposals to implement a new employee shareholder status in exchange for certain worker rights.

According to the organisation, the new provision, contained within Clause 27 of the growth and infrastructure bill - currently before the House of Lords - is "flawed".

It believes the change will lead to more red tape for employers, rather than less.

Announcing the measure last year, the Con-Lib government said its aim is to boost employee engagement and productivity in the workplace.

It has also been designed to remove the perceived barriers around the fear of being taken to employment tribunal, since employees would be required to sacrifice some rights in return for shares.

However the Law Society is concerned that small businesses - who are the prime target audience for this proposal - will be put off by the complex tax, company law requirements and extra costs.

President Lucy Scott-Moncrieff said the employee-shareholder status will cause "substantial confusion" for employers at the beginning, but particularly on the termination of an employee’s contract.

"There is potential for costly litigation on a range of complex issues which are likely to arise when an employee leaves, which runs counter to the government’s stated aim of supporting small and medium-sized enterprises through simpler regulation," she stated.

“The decision to restrict employee shareholder access to maternity rights and flexible working also conflicts with the government’s commitment to family friendly policies. The proposals are likely to have a discriminatory impact as employers may not be aware of the interaction between the rights being sacrificed and those rights governed by domestic legislation, which still apply to them."

Ms Scott-Moncrieff noted that employers would have to take this into consideration in order to avoid allegations of indirect sex discrimination.

Posted by Sarah Parish