Government proposes employee shareholder concessions as House of Lords rejects scheme again

It amended its original proposal last week to make it clear that jobseekers would not be forced to give up unemployment benefits if they refused to apply for, or turned down offers of, employee shareholder jobs.

Among the new amendments is seven-day 'cooling off' period, during which an employee cannot accept an offer of an employee shareholder job. Companies making an offer of a job under one of the new contracts would also have to provide written statements setting out the rights that the employee is giving up in exchange for shares, and full details of the shares being offered including any dividend or voting rights attached to them.

'Employee shareholder' status has been proposed as a third form of employment status, alongside 'employee' and 'worker', taking effect as a new form of equity-linked employment contract. In exchange for giving up certain employment rights, employees will become owners of a stake in the business they work for by being given shares in the employer company worth between £2,000 and £50,000. Any profit on employee shareholder shares not exceeding £50,000 in value at the time of acquisition will be exempt from capital gains tax (CGT) when the shares are sold.

In exchange, an employee shareholder will not have certain rights which a 'standard' employee would have, including those in relation to unfair dismissal, redundancy and certain statutory rights to request flexible working and time off for training. Employee shareholders will still be protected from 'automatic' unfair dismissals, such as those stemming from discrimination or as a result of whistleblowing. Existing employees cannot be forced to take up employee shareholder status, but employers will be able to choose to offer only the employee shareholder status to new joiners.

In a debate in the House of Lords, Lord Pannick said that the scheme as proposed "frustrates the very purpose of employment rights".

"We can, and do, disagree around this House and in the other place as to what the content of employment rights should be," he said. "That is entirely proper ... However, over the past 50 years all Conservative and Labour Governments have recognised that an employer and an employee cannot be allowed to contract out of those employment rights which Parliament has seen fit to guarantee."

He added that the "freedom" to contract away employment rights, although voluntary, would not "protect the worker or the job applicant who lacks basic bargaining power" when compared to an employer. This was particularly true of jobseekers, who had "no practical choice" in the current economic climate, he said.

"We would not envisage for a moment allowing a manufacturer of goods to contract out of his, her or its obligation to the consumer simply because the latter chooses, voluntarily, to pay a lower purchase price," he said.

The Growth and Infrastructure Bill, which contains the proposals, will now return to the House of Commons for further debate, including debate on the new amendments. However, share plans expert Matthew Findley of Pinsent Masons, the law firm behind Out-Law.com, said that the new proposals would be unlikely to affect take up of the scheme.

"It is widely known that the Government intends to press on with the proposal," he said. "The concessions would appear to be the latest attempt to smooth the process."

"The key change is the introduction of the need to provide a 'written statement' setting out the rights attached to employee shareholder shares. This will, however, simply compel companies to do what most would have been likely to do anyway - that is, to explain the terms and conditions attached to the shares. It will not affect take up in any way," he said.