Labour enforcement agencies – six potential developments

 It also created the position of director of labour market enforcement.  Sir David Metcalf has been appointed to this post.  It is the director who is responsible for developing an overarching strategy for the three key statutory enforcement agencies; the Employment Agency Standards (EAS) Inspectorate, HM Revenue & Customs – National Minimum Wage and National Living Wage  and the Gangmasters Labour Abuse Authority.

He will play an important role in determining the focus, resources (both intelligence and financial) and priorities of these three enforcement agencies.

Earlier this week the government published the director’s introductory report on labour enforcement strategy and the consultation document that will inform the more comprehensive strategy next year.  Included in both are some useful indicators about how employment rights could be enforced going forward.

1. Joint and several liability in supply chains

The consultation is going to consider whether more can be done to enforce labour standards through supply chains.  A few ideas are floated, including:

• Voluntary accreditation of suppliers;
• Public procurement strategies to use the purchasing power of public funds to stamp out non-compliance in the private sector;
• Joint and several liability, which would mean workers can enforce their employment rights against companies at the top of a supply chain as well as their employer.

As we set out in our new report on insecure work, in recent years the UK labour market has become increasingly fragmented, with the emergence of long and complex supply chains.  The TUC is concerned that employers are increasingly using intermediaries in order to benefit from tax advantages and to avoid employment law obligations.  The law needs to change to ensure that the companies and organisations that are in practice responsible for undercutting employment standards or mistreating individuals are held to account. The best way to achieve this is to move towards a system of joint and several liability for employment law standards throughout supply chains.

Helpful precedents can be found in other countries.  The USA has adopted a ‘joint employer’ model. Under the Fair Labor Standards Act, which includes rights to the minimum wage and overtime pay, and the National Labor Relations Act, which contains trade union and collective bargaining rights, the law states that individuals can be jointly employed by two or more employers where there is evidence the companies are economically dependent and/or both employers are involved in directing or supervise the individual’s work.  Also, some European countries, such as The Netherlands, have systems that apply joint and several liability for the payment of wages through supply chains.

It’s welcome that public procurement is mentioned as public sector bodies should lead the way in this respect, ensuring that employers throughout their supply chain are paying the national minimum wage, offering all workers (who want them) contracts with guaranteed hours, and ensuring that they have access to sick pay and holiday pay

2. Closer working with the HMRC tax office

There are proposals for closer working between the enforcement agencies and HMRC revenue teams with responsibility for collecting tax from the hidden economy.  Serious cases of exploitation often take place in the hidden economy, so other organisations helping to shine a light on this is good

3. Review of licensing sectors, certification, registration

The director is asking for views on the licensing scheme that the GLAA currently operates.  He can, for example, recommend to ministers that licensing is extended to other sectors.  Interestingly, the consultation document suggests that the licensing scheme could be doing more than enforcing minimum standards in a licensed sector and that an effective licensing scheme could be driving up standards.  This suggests that a more rigorous set of licensing standards might be considered.

However, the report also flags up that there are alternatives to licensing and is seeking views on options “along the spectrum: licensing-certification-registration-nothing.”

Unions are strongly opposed to any watering down of the licensing system and the introduction of voluntary forms of accreditation.

The TUC would like to see the licensing model currently used by the Gangmasters Labour Abuse Authority (GLAA) in the shellfish-gathering, agriculture and horticulture sectors extended further across the labour market. We believe this is the most effective system for ensuring organisations comply with core labour standards. Licensing is an effective system for weeding out unscrupulous employers from the labour market. This is because only licensed labour providers can operate in a particular sector. Before they do so they have to prove that they comply with core licensing standards.

4. Resources

The director will decide whether current resources are adequate for the enforcement agencies to fulfil their functions, and how the overall funding envelope should be distributed between the enforcement agencies.

The EAS budget has been cut to £500,000 and the GLAA and HMRC NMW enforcement teams both have an expanded remit.  It’s important that enforcement agencies have enough money to do their job properly.  Part of the new strategy should involve a review of the resources at the enforcement agencies’ disposal and whether these are adequate to fulfil their enforcement obligations.

5. Sector specific solutions

The consultation document asks for suggestions for sector specific solutions to deal with sectors where there are high levels of non-compliance.

A similar recommendation came out of the Taylor Review which said that the Low Pay Commission should look at the lowest paid sectors and help to develop an effective industrial strategy which would drive up standards and productivity.

It’s clear that unions need to be at the negotiating table in any sector level solutions.  As part of the TUC Great Jobs Agenda the TUC is lobbying for government to get businesses, unions and government together to discuss pay, training and conditions in low paid industries.

6. Intelligence hub

The Labour Market Enforcement Office is developing a new intelligence hub.  The hub will bring together information from all enforcement bodies, including those not under the remit of the Director of Labour Market enforcement, such as the Health and Safety Executive.  Other types of information such as academic studies, reports from research organisations, and intelligence gathered from charities and unions will also be included.  This is a welcome development as it should result in better intelligence, less duplication of enforcement activity and more coordinated investigations by enforcement agencies.

The newly developed intelligence hub should help enforcement agencies to launch evidence led, proactive investigations.  A more targeted, proactive approach to enforcement could also reap enormous benefits.  Particularly in sectors where workers are unware of their rights or too afraid to raise complaints through fear of reprisals.