Technology and the new employment practices it gives rise to are radically changing the world of work. Calls are therefore growing for a new Employment Relations Act (ERA) for the digital economy to shore up workers’ rights. But what can a new round of legislation realistically achieve, and what else might be required?
A big challenge is that regulatory frameworks lack the agility to accommodate the increasing pace of technological change. Digital technologies blur traditional definitions of workers and labour markets, challenging enforcement in complex supply chains where it may be unclear where ultimate responsibility for employment terms resides.
As our previous blog argued, legislation alone may not be enough to redress the imbalance of power in the digital labour market caused by the structural weakness of unions and the UK’s minimalist and individualised approach to employment regulation. The complexity of this challenge requires a multi-faceted approach.
Previous ERAs have tended to address legacy problems that have built up in the labour market over time. New Labour’s two ERAs, in 1999 and 2004, had their work cut out in strengthening employment protection and restoring a statutory route to union recognition after the extensive deregulation under Margaret Thatcher. There was help for low paid workers through tax credits, a raft of family-friendly policies, and also a national minimum wage which introduced a pay floor for the first time.
Yet this was still not enough to reverse the long-term decline in union membership. Much progress was then undone under the Coalition and Conservative governments, which weakened protection against unfair dismissal and clamped down on unions’ abilities to organise and take strike action.
Arguably, many of New Labour’s most significant reforms, for example on working time and part-time work, came indirectly through EU regulations imported after the UK signed the European Social Chapter, a route no longer available after Brexit. Indeed, worker protections enshrined in EU law, such as the 48-hour week, now face being ripped up as part of the government’s post-Brexit overhaul of regulations.
Securing adequate worker protections and proper avenues for representation of their interests means recognising that we are in a new world of work. For a new ERA to make a real difference it has to be both proactive and sensitive to employers’ need for flexibility. Rather than simplistic solutions like banning zero hours contracts, a new ERA needs to shore up workers’ ability to defend their rights where necessary through both new legal protections and collective action.
Of utmost importance is a legally watertight definition of a ‘worker’. The current definition dates from 1996 and courts have struggled to interpret it in line with a fast changing labour market. This ambiguity has allowed some employers, especially in the taxi and delivery sectors, to redefine workers as self-employed to avoid rules requiring them to offer sick pay. Rules should also be loosened on turnout for ballots for union recognition to help them organise workers in the gig economy.
But not everything can be covered in employment legislation. A labour market built on the precarity of digital platforms and gig work also requires new thinking about the social safety net and the role of employers.
Like most countries, the UK’s welfare state was custom-built for a world of permanent employment contracts and wage labour. In the digital age - where many jobs are replaced by tasks which are digitised and then algorithmically allocated to partners and platforms - Universal Credit and the Minimum Wage may need to be redesigned to take account of the new working practices.
Successful companies benefit from good workplace relations and eschew predatory employment practices. But, as TBI has previously argued, aspects of the UK’s financial and corporate governance systems can incentivise short-term profit-chasing over long-term value creation. Barriers to the exercise of long-term and responsible ‘stewardship capitalism’ – such as company law which prioritises fiduciary duty to shareholders, and the fragmented ownership structures of many public companies – need to be removed.
Ultimately, there is no trade-off between workers' rights, pay and productivity – the success of the egalitarian but highly competitive Nordic economies demonstrate this. A future ERA - and accompanying reform program - must rise to these challenges.