Chancellor George Osborne’s plan for a new employment contract, under which staff would relinquish workplace rights in return for tax-free shares, could lead to expensive and damaging legal disputes, Bristol employment lawyer Kevin Jones is warning.
The scheme was unveiled by Mr Osborne to much support at this week’s Conservative Party Conference. The Chancellor hailed it as a job-boosting measure particularly suitable for small, entrepreneurial businesses.
But Mr Jones, a partner at Bristol law firm Clarke Willmott, fears if it came into effect it could result in a number of law suits against employers, damaging staff relations and business reputations in the longer term.
Under the scheme, employees would be given an option of having shares in the business worth between £2,000 and £50,000. These
would be exempt from capital gains tax when sold back to the business. In return the employees give up their rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training.
Female employees signing up to the contract would also be required to provide 16 weeks’ notice of a firm date of return from maternity leave, instead of eight at present.
Mr Jones says: “As with any new law, the devil is in the detail. In particular, the mechanism for buying back shares will need to be looked at carefully. Valuing shares, particularly in small businesses, can be very difficult and time consuming. This is likely to lead to valuation and share disputes.
“These new contracts may also be more expensive to draw up and complex compared to existing terms. It also raises the question as to how the shares will be used in a disciplinary case, such as an act of gross misconduct – will employees then still be entitled to their entire shareholding? Furthermore, we could see the emergence of a two-tier culture where some employees want to waive their employment rights and others choose not to.”
However, Mr Jones feels the plan could have a positive impact for some businesses.
“An employment dispute or tribunal can literally kill a small business,” he said “Now, employers can secure a waiver of unfair dismissal and redundancy rights and it will avoid flexible working requests.”
The Government will consult later this month on certain details of the contract, which will be in use from next April.
