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Employment law update: owner-employee contract

Last year saw Chancellor of the Exchequer George Osborne announce the introduction of a new type of employment contract, known as an owner-employee contract, now renamed an ‘employee-shareholder’ contract.

The government’s proposal contained in the Growth and Infrastructure Bill 2012-13 was considered by the House of Lords last Tuesday (8 January), where it was greatly criticised. The main concerns which were highlighted by the Lords were:

  • Only five of 219 consultation responses welcomed the proposal;
  • The likely increase in discrimination claims;
  • The potential for tax avoidance;
  • Issues regarding the valuation of shares;
  • The problems employers may face with having two types of employee;
  • Whether employers will actually use this type of contract.

Lord Monks commented: “First, I find it unethical that you can trade a statutory right for something in your contract in that way.” He went on to say: “I believe that it must be dismissed as a serious attempt to develop employee ownership: it is more a trashing of worker’s rights.”

Lord Monks later stated: “I believe that most employers will not touch this provision with a bargepole.”

The Bill is due to move forward to the Committee stage in the Lords on 23 January and it will be interesting to see what happens next.

For more information on the issues raised in this article or on employment law matters in general, please contact us on 0117 904 6000.

Posted on Jan 16th, 2013 by Lyons Davidson

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