Robbie Gilbert: Labor Law Under Labour

9/29/17

As the UK’s Labour Party meets for its annual conference, with leader Jeremy Corbyn telling delegates that they are the government in waiting, businesses are growing increasingly concerned to know, “what would their election mean?” While Theresa May’s minority government struggles to maintain authority against the troubled background of the Brexit negotiations with the EU-27, and with Labour now neck-and-neck in the Opinion Polls, the answer needs examining. Business is growing increasingly concerned at the prospects. Banker and former New Labour Trade Minister, Mervyn Davies warns, “We are headed for a full-blown deep crisis or a very left-wing government. We want neither.” One area in which a Corbyn government would mean very dramatic change is labour law. The whole machinery of industrial relations across the UK would be rebuilt to maximise trade union involvement, along lines that France’s President Macon would recognise – and is determined to dismantle.

Recasting labour relations arrangements to give unprecedented power to trade unions

The biggest changes in prospect from Labour under Corbyn concern the institutions and processes for pay determination and the role of trade unions.

  • For the first time in 50 years, a Ministry of Labour would be established, with “the resources to enforce all workers’ rights”. Trade unions would be involved in enforcement and have a seat on the Ministry’s Executive Board.

  • Sectoral pay bargaining would be rolled out across every business sector “because the most effective way to maintain good rights at work is collectively through a union.”

  • Public contracts would only be awarded to companies which recognise trade unions for collective bargaining at local level.

  • Statutory recognition rules would be eased so that unions would win local collective bargaining rights for more workers in other businesses.

  • Unions would have rights of access to every workplace “so that unions can speak to members and potential members”; and to support members individually “whenever they are negotiating with their employer.”

  • There would be a public inquiry into ‘blacklisting’, i.e. arrangements (already illegal, but still alleged to continue) under which employers refuse to hire employees on the basis of past union activity.

  • Legislation would provide for both online and workplace balloting for industrial action and union elections: previous governments have resisted this on the basis that the scope for interference and internet fraud or ‘group-think’ or, worse, intimidation at the workplace, is too great.
A business-friendly settlement at risk

In the UK, as in much of the world, the last three or four decades have seen a substantial decline in the importance of the trade union movement, with falling rolls, lower rates of industrial action and non-inflationary pay settlements the norm. The unions’ strength has shifted substantially from the private production sector to the public services. They have struggled to make a real impact in the main area of job growth, the private services sector.

The dangers of wage-led inflation, which had plagued the UK economy from the late 1950s and reached its zenith in the ’70s, began to recede after the election of Margaret Thatcher, supported by a series of labor law reforms that impose secret, postal balloting and other obligations both before industrial action can be taken and in organising picketing. These reforms have enjoyed considerable public support, even among union members. Tony Blair’s new Labour introduced a legal procedure for achieving trade union recognition but, as it set quite demanding tests of support, its main impact has been to further reduce the extent of industrial action, as recognition disputes were all diverted into the legal procedure. Otherwise new Labour made no changes to the Thatcher-era laws. For the first time since the Industrial Revolution the UK appeared to have a settled regime of trade union law.

Within the Labour Party, however, there have always been voices raised against the current settlement. The unions themselves remain the foundation stone of the Party, and crucially supply the funds and foot-soldiers needed to run and win elections. Their leadership has grown increasingly hostile to the present laws. Academic voices, too, have always disputed the fairness of a legal framework that was based more on stopping disruptive practices by trade unions than on providing scope to them for a legitimate role. Jeremy Corbyn has always been in the dissenting camp within the Labour Party; and his Shadow Chancellor and fellow London MP, John McDonnell, has been the most prominent and active Parliamentary supporter of the academics and left-leaning employment lawyers who comprise the Institute of Employment Rights (IER), the left-wing think tank who have consistently championed the union cause. He is closely in tune with their agenda.

The June Election manifesto

It was during the June election 3 months ago that it became apparent just how far a rift has developed between the Labour Party’s position and the current framework of law, and how much a Corbyn-led administration would be committed to the thinking of the IER and his Shadow Chancellor: their years in the wilderness, addressing small groups of likeminded souls in dingy North London halls and otherwise being ignored are over.

To some extent, the Conservatives have themselves to blame for the rift. In the face of a wave of disruptive industrial action affecting London commuters, and with then London Mayor Boris Johnson in the lead, they introduced the most restrictive measures yet, demanding high thresholds of support in snailmail postal ballots before any industrial action would be lawful – especially in “important public services” such as the London Underground.

It was hardly surprising, then, that the Labour Party’s manifesto for an election called less than two months after the new law came into force should include a pledge to repeal the Trade Union Act 2016. But that formed only half of just one of the 20 points in a plan that promised “security and equality at work” in a chapter on “Rights at Work” filling 5 pages of the manifesto.

Among the full rota of proposals are a number which could significantly limit and change the types of employment relationships available to employers. These include:
  • The banning of zero-hours contracts (and unpaid internships) and guaranteeing every worker a certain number of hours per week after 12 weeks;

  • ‘Clamping down’ on ‘bogus self-employment’ by banning payroll or ‘umbrella’ companies that limit employers’ tax liabilities and workers’ rights, by shifting the burden of proof so that the law assumes a worker is an employee unless the employer can prove otherwise, with ‘punitive fines’ for any breaches;

  • Giving employment agencies and end-users joint responsibility for ensuring that agency workers’ rights are enforced;

  • All workers to have equal rights from day one, whether part-time or full-time, temporary or permanent “so that working conditions are not driven down.”
A Commission of legal and academic experts, assisted by trade union and industry representatives, would be set up to review the changing forms of work and employment, and charged with developing new statutory definitions of employment status.

Redundancy arrangements will be reviewed “to bring workers more in line with their European counterparts”.

Other proposals impact corporate governance. Labour would
  • Legislate to impose a duty on company directors towards employees – a duty “of at least equal intensity to that owed to shareholders”, according to the IER whose thinking lies behind Labour’s position – and to customers, the environment and the wider public

  • Change takeover rules to ensure that businesses identified as “systematically important” have in place a “clear plan to protect workers and pensioners” when faced with a takeover

  • Create a new “right to own” giving employees the right of first refusal when the company they work for is up for sale

  • Tighten the rules on corporate accountability for abuses in global supply chains, including the reporting of due diligence towards supply chains under the Modern Slavery Act.
Labour in government aims to make considerable use of what used to be called ‘contract compliance’ arrangements, under which firms supplying national or local government in the UK would be expected to observe various other requirements as well as union recognition. Amongst these, are measures designed to impact executive pay.
  • A maximum pay ratio of 20:1 would be established across the public sector;

  • Government suppliers would have to move towards a similar gap of no more than 20:1 between the highest and lowest paid in their businesses;

  • All companies – not just those with government contracts – with staff on very high pay would have to pay an “Excessive Pay Levy”.
Some other proposals fall into the category of obvious election bribes: doubling paid paternity leave; granting four new public holidays; raising the Minimum Wage to an anticipated £10 an hour by 2020; and ending the Public Sector Pay Cap. Their impact on payroll costs would nonetheless be considerable, both directly and indirectly. Higher pay rises for the lowest paid and across the public services would create pressure for compensatory increases across the economy in addition to the public spending burden.

What it means

The plans of the Corbyn-led Labour Party were not examined too closely at the time. The election campaign was shorter than usual and the result was widely expected to produce a strong endorsement for the Conservative government led by Mrs May and humiliation for Mr Corbyn.

The outcome, as we know, was very different. Nearly 4 months later, Mrs May has survived so far with a small majority based on cooperation from the Democratic Unionist Party in Northern Ireland. But Brexit would be a demanding agenda for any government. It is proving almost unmanageable as the current Cabinet contains strong but competing views on how it should be handled and Mrs May seems insufficiently decisive or too weak to impose effective discipline.

Many Labour MPs believe that they may only be months from office.

The programme sketched out quite fully in their recent manifesto would mean a revolution in labour relations arrangements in the UK. It would give a formal role and status to trade unions beyond anything they have previously known. When most commentators look at John McDonnell, it is what his Marxist affinities would mean should he take charge of the UK economy that create the greatest controversy. But it is the long years he has spent in considering how labour law should develop, working closely with luminaries of the IER, such as John Hendy QC amongst the labour lawyers and Professor Keith Ewing among the academics, that deserves close attention.

The use of sectoral agreements, though widespread 70 years ago and still common among leading EU nations, has almost disappeared in the UK since the 1980s. Pay is generally determined at local level and without reference to collective bargaining agreements. In the minority of cases – usually in larger, long-established companies in the production sector – where CBAs still determine pay and other conditions of some staff, they are negotiated at company or establishment level, not for a whole industry.

Since 1979, the number of trade union members in the UK has fallen from 13.2 million to 7 million. Union density in the private sector is now just 13.9%. The proportion of workers whose pay is settled through collective bargaining is less than one in six (16.1%) in the private sector.

The content of Labour’s June Manifesto closely reflects that set out by the IER a year earlier, in June 2016, in their short book, “A Manifesto for Labour Law: towards a comprehensive revision of workers’ rights”. Here we find more detail. The Ministry of Labour would have as its primary responsibility the promotion of collective bargaining on a multi-employer sectoral basis.

“Ultimately every worker and every employer of workers in this country should be covered by a collective agreement concluded at sectoral level.”

Observance would be mandatory, and the content of these agreements would range far beyond pay and conditions, covering procedures for handling individual as well as collective disputes, health and safety, training and pensions. That has never happened before.

Unions could win additional recognition for collective bargaining at workplace or company level where they can show that they have at least 10% membership and evidence of majority support within a ‘bargaining unit’. These local agreements would build on, and include more generous provisions than, the compulsory sectoral CBAs.

From being an uncontentious area in which Labour ignored pleas from the unions for a rolling back of legislation introduced by successive Conservative governments, this is likely to be one of the biggest areas, perhaps the biggest, in which a Corbyn government would impact business. It is surely ironic that this would mean the UK adopting a model of low membership but serious muscle for the unions which is widely regarded as a major disincentive to inward investment in France. This would be happening at a major turning point for both France and Britain. France has elected a President committed to tackling the laws that underpin what he sees as a failed model and to taking his country in a different direction. Meanwhile the UK, while committed to retaining the individual and collective rights to information and consultation stemming from EU laws, is set on leaving Europe in search of wider horizons – an objective accepted by Corbyn as well as May. In an era of accelerating globalisation it will surely need more than ever the greater freedom its current laws and labour relations arrangements currently offer to UK-based businesses to act swiftly and decisively.