Owner-employee contract could breach EU laws

A proposed new employment contract that would require employees to give up employment rights for shares in their organisation could still leave employers open to claims for unfair dismissal under European regulations.

The owner-employee contract, announced at the Conservative Party conference on 8 October by Chancellor George Osborne, could see employers offering employees between £2,000 and £50,000 of shares in the organisation, which are exempt from capital gains, in exchange for the employee giving up UK rights on unfair dismissal, redundancy, the right to request flexible working and time off for training. They would also be required to give 16-weeks notice of a firm date of return from maternity leave as opposed to the usual eight.

If the proposals go ahead, despite employees signing a contract relinquishing their rights on unfair dismissal, employers may still be faced with claims under European discrimination rules, which will remain in place.

Mark Hammerton, partner in the employment and pensions practice group at law firm DWF, said: “Employers will be well counselled not to assume they have a free hand due to the limited scope of employment claims which are being waived.

“Fire at will is too simplistic. So, while basic unfair dismissal claims and redundancy payments would not be available, there is a risk that disenchanted individuals will nonetheless allege that they have been exited because of sex, race age or disability discrimination. These latter types of rights will not be waived under the owner-employee contracts.”

The government will be launching a consultation on details of the new contract later this month. Legislation to bring the proposed contract in is expected to come later in the year, with the aim that organisations will be able to use them from April 2013.