Proposals to allow staff to waive their employment rights in return for equity in the business would fail to protect employers against claims from disgruntled workers, lawyers warn.
Chancellor George Osborne last week announced plans for a new ‘owner-employee’ scheme that could be in place by April 2013.
It would allow employers to offer contracts under which employees would give up their rights on unfair dismissal, redundancy, flexible working and time off for training. In return, they would receive between £2,000 and £50,000 in shares, free from capital gains tax.
Osborne believes such a scheme would help fast-growing small and medium-sized businesses to expand and build a ‘flexible’ workforce.
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But Chris Mordue, partner at law firm Pinsent Masons, warned that the Government’s ambitions to help employers could be frustrated by European law or even employment law in the UK
He said: ‘Some of the ‘‘protections’’ offered here to employers are illusory. Even if employees could not claim unfair dismissal, they would be free to bring other types of tribunal claim, particularly discrimination claims.
‘These reforms wouldn’t – and couldn’t under EU law – protect employers against those risks. So a woman dismissed for being pregnant, say, would still be able to sue for a discriminatory dismissal, even if her right to claim unfair dismissal had been ‘‘traded in’’.
European law requires employees to be protected against dismissal for exercising certain rights guaranteed under European Directives, such as taking maternity or parental leave or refusing to opt out of the 48-hour average working week.
Mordue said: ‘A similar problem exists with the idea of employees giving up a right to request flexible working. This is meaningless, as a refusal to consider flexible working requests can amount to indirect sex discrimination.
‘If employers are planning to use this as an insurance against employment claims, it may prove an expensive and clumsy option.’
