Is the future over before it has begun?

Earlier this year, Chancellor George Osbourne reiterated the government's intention to implement a new type of employment contract by 1 September 2013; the Employer Shareholder Contract. 

Formed as part of the Growth and Infrastructure Bill, this new form of contract does exactly what it says on the tin; it gives employees the option to have shares within a company.

The contract will allow an employee to receive shares with a value of at least £2,000 (and up to certain tax exclusion limits of £50,000) in exchange for that employee to waive certain employment rights.

But what rights would the employee ‘give up’ in return for that one-off share issue of as little as £2,000? Well, the waived rights have been outlined as follows:

• The ability to claim for unfair dismissal. It is important to note however that the shareholder employee would still be able to claim unfair dismissal in relation to nearly all of the automatically unfair reasons such as jury service, legal requirement for minimum wage among others such as whistleblowing (a situation where the employee has suffered a detriment at work following the disclosure of certain information about their employer). The shareholder employee will also continue to retain protection against discrimination, including discrimination in relation to dismissal

• The shareholder employee would lose the right to statutory redundancy pay

• The ability to make a statutory request to work flexibly (except on return from parental leave – the details of which have yet to be finalised)

• The ability to make statutory requests in relation to study or training.

Other conditions have also been imposed. An employee shareholder will have to give 16 weeks' notice to return early from additional adoption or paternity leave (as compared with eight weeks for normal employees on additional maternity and adoption leave and six weeks for normal employees on additional paternity leave.

So, who will these contracts benefit? The Chancellor has suggested that the companies who will benefit most from the use of these contracts will be fast-growing, small and medium-sized companies who 'want to create a flexible workforce'. Shortly after Mr Osbourne’s announcement, the Department for Business Innovation and Skills (BIS) issued a consultation document which developed and clarified certain areas:

• Employee shareholders who dispute that they have been issued with shares worth the minimum £2,000 will be able to challenge their employment status in an employment tribunal

• The employer will be able to require employee shareholders to forfeit their shares in contractually agreed circumstances (such as gross misconduct), as long as the forfeiture provisions do not reduce the value of the shares granted to below £2,000

In recent weeks however the entire proposal has been at risk of falling through. Following a vote in the House of Lords on the 21st March, the Lords voted against the concept of Employee Shareholder contracts.

At present, the entire proposal has returned to the House of Commons where the government has the choice of either accepting defeat or dramatically changing the proposal.

Time will now tell whether this radical new concept will be implemented by September or even implemented at all.

For 20 years, members of the Cohen Cramer Dental Division have been advising Dental Principals, Associates and Practice Managers from all over the UK on all of the legal aspects of buying, selling and running dental practices. With extensive experience in the dental sector the firm is ideally placed to understand and respond to the needs of dental practitioners and practice managers.

Please contact us on 0113 244 0597


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