Behind the Government’s tough talk on tackling worker exploitation
This week the Government published its response to the consultation on tackling labour market exploitation. It plans to give new powers to authorities to enforce basic work rights and it promises a new cross-government approach to enforcement. The BIS Secretary of State, Sajid Javid, says the reforms “will leave no place to hide for those who abuse the system.” Few will probably take those claims at face value, given that Conservative ministers introduced employment tribunal fees while claiming that access to justice for all would be protected (there has since been a 70% drop in workers going to tribunal to enforce their employment rights), and behind the tough talk on tackling worker exploitation there are real concerns with some of the measures.
The TUC believes that the reforms the government is pushing through on the licensing of gangmasters actually risk making it easier for rogue gangmasters to operate without fear of detection.
The Gangmasters Licensing Authority was set up in the wake of the terrible Morecambe Bay tragedy in 2004. As a result, labour providers who want to operate in the farming and food processing sectors must apply for a license and they are inspected against a comprehensive range of standards, including compliance with core labour standards like the National Minimum Wage, working hours and rest breaks, health and safety, protection from discrimination, and the right to belong to a trade union. Inspections also cover other factors linked to exploitative business practices such as quality of worker accommodation, debt bondage, and compliance with PAYE, NI and VAT rules. These inspections have been key to driving up labour standards and uncovering and preventing the exploitation of workers. They have also tackled tax avoidance and increased tax receipts to the Treasury by clamping down on travel and subsistence scams, and they have ensured a level playing field for legitimate businesses and created confidence in supply chains for retailers, manufacturers and consumers.
This is why GLA licensing is widely supported not only by trade unions and charities working with victims of exploitation, but also by retailers, food manufacturers and labour providers (the Association of Labour Providers’ latest survey found 93% of those surveyed supported it). It is also why the TUC and others have called for this approach to be extended to other sectors like social care, hospitality and construction, where large numbers of workers are at risk of exploitation.
But despite the effectiveness and support for GLA licensing, the Government has announced that it intends to reform it to make it more “flexible”. In its response to the consultation, the TUC opposed a shift to a more flexible approach for fear that it would lead to a dilution of the scheme – the standards being cut back or inspections at point of entry being reduced. In fact, only 19 per cent of respondents to the consultation were in favour of a flexible approach. However, the Government is continuing with its plans regardless and it has laid amendments to the Immigration Bill, to be debated in the House of Lords on Monday, which would allow the GLA Board to make changes to the licensing rules without the need for a statutory instrument to be laid before parliament.
We can’t help but conclude that the Government is seeking this flexibility to dilute licensing requirements. The TUC has been engaged in efforts to defend the rigour of GLA licensing, along with businesses, labour providers and charities, since it was targeted as burdensome regulation under the coalition government’s red tape challenge. In 2013, it sought to cut back on inspections at the point of entry to the licensed sectors. As we blogged some time back, the GLA’s own analysis showed that if only those labour providers identified as being at risk of non-compliance by other government departments were inspected, then as many as one in five non-compliant gangmasters would gain a license to operate in the regulated sectors.
When the GLA was established it was recognised that strong stakeholder engagement was what was really needed to ensure that licensing kept on top of the changing nature of exploitation and responded to new risks, which is what the Government says is the aim of its current reforms for greater flexibility. However, since 2014, there has been no one with experience of representing workers on the GLA Board. We believe the Government must take steps to make such an appointment as soon as possible.
If the Government amendments go through, in future, changes to licensing will be subject only to Ministerial approval on the advice of the new Director of Labour Market Enforcement. This new Director will have considerable influence over all the work and resources of the GLA and the other enforcement authorities too: the HMRC’s NMW enforcement team and the Employment Agencies Standards Inspectorate. This is a second area of concern for the TUC. We welcome the Government’s moves to improve information-sharing and co-ordination across the enforcement authorities but we fear that the the Director, as the role is currently described in the Immigration Bill, could result in the work and resources of the enforcement authorities becoming too narrowly focused.
The Government described the Director in its consultation paper as being “a key figure for Ministers”, responding to high profile events and being the person “who connects the political perspective with the intelligence picture and translates it into action”. This suggests the post-holder could become driven by short-term political pressures or high profile media stories, probably linked to immigration and clamping down on illegal working. Remember that all these changes are being introduced in an Immigration Bill, alongside measures that will criminalise undocumented workers. As the TUC pointed out in its consultation response and as FLEX have pointed out links with immigration enforcement will be counter-productive to the goal of tackling exploitation as vulnerable migrant workers will become even more fearful of reporting abuses of work rights to the authorities. To try and ensure the new Director takes a balanced, long-term view of the whole spectrum of non-compliance with basic work rights, the TUC has called for the Director to have a duty to consult with stakeholders, particularly when determining their annual enforcement strategy and making recommendations on redistributing resources across the three enforcement authorities. The Government, in its response to the consultation, has said it is considering the issue but it has laid no amendments to the Bill requiring stakeholder engagement.
What is welcome in the Government’s package of reforms are the amendments that create new Labour Market Enforcement Undertakings and Orders. These are aimed at those businesses that repeatedly breach workers’ rights. They will be ordered to take steps to stop or prevent the abuses and those that fail to comply with an LME Undertaking or Order will face a potential prison sentence of up to two years. While all the enforcement authorities will be able to use these powers, the GLA’s remit is being extended so that its officers will be able to use these new powers to tackle breaches of basic work rights across the whole economy. Its name will change too to the Gangmasters and Labour Abuse Authority (GLAA) to reflect this wider remit.
Resources will be absolutely key to these new powers having any impact as they depend ultimately on non-compliant businesses being more likely to face investigation and there being a realistic threat of criminal prosecution hanging over them. But the resources of the enforcement authorities have been seriously stretched for a number of years and we do not want to see resources focused on important preventative work like licensing being taken away. At present, the GLA has 67 frontline inspectors – 25% fewer than in 2010/11. The Government has so far made no commitment to increase resources for the new GLAA to reflect its wider remit and new responsibilities, it just says it is considering the issue in its response. The EAS has 9 inspectors, whereas at its peak, before cuts were imposed by the coalition government, it had more than 20. The HMRC’s NMW enforcement team has had recent increases in funding, but it still fails to match the scale of the task. The TUC estimates underpayment of the NMW affects in the region of 250,000 workers and, by 2020, an additional 2.75 million workers will come within the scope of the new National Living Wage with more complex enforcement challenges due to the new 21-24 year old NMW rate. The criminal offences that already exist under the NMW Act have only been used ten times, partly because they are so much more costly than other enforcement mechanisms (the HMRC estimates that such prosecutions cost around £50,000 compared to an average cost of £1,850 for standard investigations of non-compliance).
Without a substantial increase in resources for enforcement the talk of rogue employers facing imprisonment and having nowhere to hide will soon come to be seen as hollow threats. Government proposals could also be improved by giving all the enforcement authorities powers to issue spot fines so that they are not solely reliant on criminal proceedings. And the TUC has repeatedly called for steps to be taken to deal with phoenix companies – a common route for many serial offenders – for example, by automatically and permanently disqualifying company directors where there is evidence they wound up one company to avoid employment and tax obligations.
Further reading: See the full TUC submission to the government consultation