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/ 26 Apr 2013

Controversial Employee Shareholder Agreements Receive Approval

How much would you be willing to sell your rights for? That is the £2000 question according to the new Growth and Infrastructure Bill, which was finally accepted by the House of Lords on 24 April 2013.

Clause 27 of the Bill had been roundly criticised by both the House of Lords and a number of other organisations because of the effect it would have on employees.

The controversial Clause 27 sought to create “Employee Shareholders” whereby; in receipt of shares to the value of at least £2,000, new or existing employees would give up various rights including the right to:

1. request flexible hours;
2. request study leave; and
3. claim unfair dismissal in some cases.

Employee Shareholders would also be required to give additional notice to the employer in certain circumstances.

The final amendment, which the House of Lords accepted on 24 April 2013, means that employees can only become Employee Shareholders after having received independent legal advice. The cost of the advice will be paid for by the employer, whether or not the employee becomes an Employee Shareholder.

Other accepted amendments include:

1. a seven day ‘cooling off’ period;
2. a written statement with full details about the shares and the rights they carry must be provided;
3. the first £2,000 of shares will not attract income tax; and
4. existing workers are protected from detriment (including dismissal) if they refuse to become Employee Shareholders.

The bill is due to become law this autumn but it remains to be seen whether companies will encourage new and existing employees to become “employee shareholders”. However there may well be significant benefits to employers in doing so, particularly if it avoids the requirement to make redundancy or other potentially large payments as a result of dismissal.

If you are affected by any of the topics covered in this article, or are a company considering Employee Shareholder Agreements, then please contact our Employment Department, who can provide advice and assistance. Call 020 7228 0017 or email us on info@hanne.co.uk

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