Employee Shareholders - Yet another Update

Yesterday (24 April), the government introduced yet a further concession into the Growth and Infrastructure Bill and, last night, the House of Lords voted to accept the clause (having rejected it twice).  Employee Shareholders will now become law - Royal Assent is expected today and BIS intends to implement this new, third, type of employment status in autumn 2013.

The further concession is that an agreement that someone shall become an employee shareholder is invalid unless, prior to entering into the contract, the individual has received advice from a relevant independent advisor (ie a lawyer, CAB, law centre, union etc).  Further, the employer has to pay the reasonable costs of that advice - whether or not the employee then accepts the role - if they would otherwise have been payable by the employee.  Doubtless unions will now start charging fees for advising on employee shareholder status, and look for those fees to the employer.

If the employee does not receive independent advice before agreeing to become an employee shareholder, then s/he will be an ordinary employee.

This concession is in addition to earlier concessions, namely:-

• there will be a seven day 'cooling off' period, during which any acceptance of employee shareholder status will not be binding
• employers must provide a written statement with full details about the shares and the rights they carry
• any jobseeker who refuses an offer with employee shareholder status will not forfeit their social security benefits
• the first £2,000 of shares will not attract income tax
• existing workers will be protected from detriment if they refuse to switch to an employee-shareholder contract

Laurie Anstis of Boyes Turner has put together an excellent timeline of employee shareholders, from proposal through to enactment.

And best comment of the day goes to barrister Sean Jones QC, for his comment on Twitter:-

Employee Shareholders - an Update

Employee Shareholder Status - an Update

Last night, the House of Lords voted for the second time to reject the proposed Employee Shareholder status set out in the Growth and Infrastructure Bill (by 260-191).

Under this scheme, which creates a third type of employment status, employers can award employees at least £2,000 in shares in exchange for the employee giving up a bundle of employment rights (including 'ordinary' unfair dismissal and the right to a statutory redundancy payment).

The government is determined to pursue the scheme, however, and this morning published a list of concessions which it hopes will mean the Lords accepts the proposed legislation. The concessions include:-

• a provision that the employee cannot accept the offer within seven days of it being made (how that would work in practice is unclear, and an employer remains free to refuse to offer the job to a prospective employee who doesn't want to take up employee shareholder status)
• a written statement setting out the rights that the employee is giving up
  
  
• a written statement setting out the details of the shares being offered (including whether they are voting or non-voting shares, whether they carry a dividend, and whether they carry a right to a share in the company's assets if it is wound-up, whether pre-emption rights are excluded, and details of drag-along and tag-along rights). Most employees will not understand the implications of this information, and there is nothing to prevent employers issuing pages of gobbledigook about the shares which buries this information somewhere within.

The government had made some earlier concessions to the original proposals:-

• a jobseeker who refuses a job on an employee shareholder basis will not automatically forfeit their unemployment benefits
• the first £2,000 of shares given to the employee will not attract income tax

So, the Commons will now re-debate - and presumably re-pass the relevant clause of the Growth and Infrastructure Bill. It will then go back to the Lords for a third time.  Meanwhile, shadow Business Secretary Chuka Umanna has tweeted:-