11 May 2018

David Metcalf, Director of Labour Market Enforcement, recommends that the brands at the top of supply chains should be named and shamed when employers in their supply chain flout employment laws.

In his review of labour market enforcement, published earlier this week, he proposed strategies to strengthen the might of the UK's three enforcement bodies – the Employment Agency Standards Inspectorate (EAS), HMRC, and the Gangmasters and Labour Abuse Authority (GLAA).

Reviewing international evidence on the risk to workers' rights presented by supply chain working, he said: "I believe that that UK labour law has failed to keep up with new business models and that some changes are necessary in this area to improve labour enforcement."

"Joint liability could be an effective tool for improving compliance throughout the supply chain," he concluded.

He proposed that where enforcement agencies become aware of non-compliance to workers' rights in their remit (such as minimum wage laws), both the brand at the top of the supply chain and the employer involved should be given three months to rectify the problem, and if they fail, they should both be named and shamed.

However, he stopped short of recommending any financial or legal penalties. While the Institute of Employment Rights also recommends joint liability for supply chain heads when it comes to certain employment laws – including health and safety – we argue that without the threat of penalty, the law will not be tough enough to prevent non-compliance.

Further, he recommended that law-breaking companies should initially be approached privately, which raises questions over how transparent his proposed process would be.

Speaking to the Guardian, the TUC's employment rights expert Hannah Reed explained that employees who complained about breaches to their rights may be left in the dark as to what action has been taken if the employer's privacy is to be prioritised in this way.

She warned that the proposals "won't have the teeth" to properly regulate the labour market and called for a full joint liability approach, which "ensures that employees can fully recover compensation and wages owed to them from companies at the top of the supply chain".

Elsewhere, Metcalf called for higher financial penalties and more prosecutions against employers who exploit workers; that the HMRC should be given responsibility for enforcing holiday pay; and that the remit of the EAS should be expanded to include umbrella companies and intermediaries. The EAS should also receive further funding to ensure it has the resources to effectively conduct this wider role, he urged.

Many of the recommendations Metcalf made relate to improving workers' awareness of their rights; including a mandatory requirement to provide workers with a statement of their rights in their first week of work, information provided on social media and other channels; workplace notices similar to those used for health and safety legislation; and extending the right to a payslip to all workers, which should include detailed information on legal wage rates.

He also proposed introducing young people to workers' rights through the education system, including information on National Insurance notification letters, and improving clarity over which enforcement body workers should complain to.

The Institute of Employment Rights argues that putting the onus on workers to police their rights will inevitably lead to poor enforcement. Although Metcalf encouraged proactive inspection by the enforcement bodies, their current powers do not go far enough. In our Manifesto for Labour Law, we recommend the establishment of an independent Labour Inspectorate with the power to enter workplaces and issue cease and desist notices as well as order reinstatements; greater trade union involvement to identify and remedy breaches; and a new system of labour courts to properly enforce the law.

Other of Metcalf's proposals concerned 'phoenixing' – the practise of dissolving companies to avoid paying tribunal awards – which he said should be approached through collaborative working with the Insolvency Service; and Swedish Derogation abuses – paying agency workers less than colleagues doing the same job – which he said should be abolished if it cannot be effectively regulated.