The government has proposed a single enforcement body for employment rights, but is it enough to help employees?
The government’s consultation on a single enforcement body for employment rights (Good Work Plan: establishing a new single enforcement body for employment rights
, Department for Business, Energy and Industrial Strategy, 16 July 2019; closes 6 October 2019) got me thinking about some cases employment law cases I’d represented in. A case may stick in the mind because of an interesting legal point it explored or a particularly good result for your client. Some cases though float up into my memory because of the sheer injustice of what happened to the clients and the inadequacy of the law to provide a remedy. Tinsel Town is one such case.
Around 25 years ago, I was working in a not-for-profit centre in Manchester. We held a legal aid franchise in employment law and received a grant from our local authority that covered work (including representation before tribunals) not paid for by the legal aid scheme (if only we’d known it then, but they were halcyon days as regards funding and the service we were able to provide to our clients). A week before Christmas, a succession of people came into the office to complain about their employer, Tinsel Town, which had closed down and not paid their wages that were due for Christmas week, including holiday pay.
It turned out Tinsel Town was what is known as a phoenix company. Statements from the former employees and a bit of digging around at the Manchester office of Companies House showed that the director behind Tinsel Town had placed previous incarnations of the firm into liquidation two times before. He’d bought back the assets, the main one being (not surprisingly) a tinsel making machine and merrily (sorry!) restarted the business employing staff whom he then sacked just before the festive break, thus avoiding payment of wages and holiday pay for Christmas week.
We were eventually able to recover the unpaid wages, including notice pay and accrued holiday pay, from the Department of Social Security (the same system continues for unpaid wages of insolvent companies), but of course that’s not the point. The employees’ payments were delayed for months and little could be done to stop the former employer playing the same trick again.
I wrote a letter to the official receiver (incidentally covered by legal aid!) outlining the evidence we’d uncovered, as they are obliged to compile a report on the conduct of directors in insolvency cases. As many employment lawyers and advisers will confirm, though, even if you get a company director barred from office, on the fringes of the legitimate economy there are many loopholes that unscrupulous employers will exploit to get around this.
The consultation suggests bringing together existing enforcement bodies, such as the Gangmasters and Labour Abuse Authority (GLAA), under one umbrella organisation to provide a one-stop shop for vulnerable employees to seek advice and enforcement action. One of the main extensions of power proposed for the new body will be to enforce the right to holiday pay. This is a welcome move as there is much anecdotal evidence to suggest that many employers are ignoring this right.
Thinking back to the Tinsel Town, though, the state did provide a fail-safe system for the payment, albeit in the specific circumstances of an insolvency; the main problem with this was the delay in establishing the employee’s right to the payment. Enforcement powers already exist for the national minimum wage, national living wage and statutory sick pay, but I’d question whether there are sufficient resources available to meet demand, and justice delayed is justice denied, particularly for low-paid workers who rely on wages week to week and cannot wait for enforcement action.
The principle of a single enforcement body, while sound, might well crash into the reality of overwhelming demand. It will need substantially more funding to deal with cases in a timely manner. The GLAA, for example, has had some high-profile successes in clamping down on the worst cases of unlicensed gangmasters, but it rarely undertakes more than a couple of dozen cases each year
The consultation paper refers to almost £33m spent in total on enforcement actions each year, but this is a small amount, especially given the damage reaped by cuts in recent years for public funding in the legal and advice sectors. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 alone cut £5m (Revised figures for cuts in social welfare law
, LAG, 15 November 2011) from legal aid for employment cases and many more millions have been cut by local authorities and other funders. At the start of my career, it was not uncommon to provide a free full service using public funding for employment law clients. Such services are now a rarity.
Returning to the Tinsel Town case, the consultation paper states that the government wants to create a better world of work in which employment rights are respected, but the law needs to be boosted to lift the corporate veil behind which some unscrupulous employers hide. They would soon think twice before breaking the law if their personal assets were more readily at risk for flouting employment rights.