Employee shareholder plans defeated by peers

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The government suffered a significant defeat as peers rejected its plans to allow employees to give up some of their rights in exchange for shares in the company that employs them.

Employees would be able to give up rights including unfair dismissal rights and the right to statutory redundancy pay in return for shares of a value between £2,000 and £50,000 under the terms of the Growth and Infrastructure Bill, which was debated for a third day at report stage on 20 March 2013.

Introducing an amendment to delete the clause, crossbencher and human rights barrister Lord Pannick claimed there was "very little enthusiasm indeed" for the new employee status.

"The clause is objectionable," he said, "because employment rights were created and have been protected by all governments - Conservative and Labour - precisely because of the inequality of bargaining power between employer and employee."

Several Conservatives spoke against the government including Lord King of Bridgwater, employment secretary under Margaret Thatcher, who argued the power would be "used by very dubious employers indeed".

Lib Dem Baroness Brinton pointed out that "the majority of micro and small companies do not make large returns for their shareholders in the early years" and the Bishop of Bristol said: "Basic safeguards against unreasonable employer behaviour should not have a price-tag attached."

'20 pieces of silver'

Crossbencher and former head of the civil service Lord O'Donnell asked: "In the old days the price of slavery was 20 or 30 pieces of silver - is it now £2,000?"

It was the view of former trade union leader and Labour peer Lord Morris of Handsworth that "you cannot create a first-class economy with first- and second-class workers".

From the Labour front bench, shadow Treasury spokesperson Lord Adonis told the House: "I don't think I've ever witnessed a government policy with less support."

The employee shareholder scheme was defended by Conservative Lord Flight, who found that "employment law has strayed across the barrier of discouraging employment".

Crossbencher Earl Errol addressed the bill's critics: "You're talking about large companies with large HR departments... The SME [small- and medium-sized enterprise] world which I live in a lot of the time is not like that."

Winding up for the government, Business Minister Viscount Younger of Leckie insisted: "We believe there is demand for a new employment status of employee shareholder, that it will be used and that it will benefit the employers and individuals and in turn help to grow the economy."

But when the amendment removing the clause on employee shareholders was put to a vote, peers backed it by 232 votes to 178.

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