UK: Government announcements - workers' rights post Brexit, employee representation on boards, employment of foreign workers, and review of modern employment practices

At the Conservative Party conference, Theresa May announced plans to repeal the 1972 European Communities Act, which gives direct effect to EU law in the UK, and to transpose all existing EU laws into domestic legislation. She also promised that "existing workers' legal rights will be guaranteed" during her premiership.

The conference speeches also built on the policy announced by Mrs May at the G20 summit to tackle corporate irresponsibility, "cracking down on excessive corporate pay and poor corporate governance, and giving employees and customers representation on company boards".

The Business, Innovation and Skills House of Commons Select Committee has launched an Inquiry (seeking views by 26 October) on corporate governance, focussing on:

• board composition, including how greater diversity of board membership should be achieved and whether there should be worker representation on boards and/or remuneration committees, and if so in what form
   
• executive pay, including whether the current framework for controlling executive pay is effective, how executive pay should take into account a company’s long-term performance and if there is any evidence that executive pay is too high
   
• director duties, including whether company law is sufficiently clear on the role of executive and non-executive directors, whether the duty to promote the long-term success of the company is clear and enforceable and how the interests of shareholders and employees are best balanced.

As yet there is no detail as to how the proposed employee representation might work or what size of company will be covered. It is possible that a two tier board structure might evolve similar to that in Germany, with employee representatives on a supervisory board sitting above the management board;  another suggestion made by a Conservative MP is for a mandatory shareholder committee (comprising the largest five shareholders who have held shares for more than 12 months) to approve pay policy and packages proposed by the remuneration committee (prior to their approval at  AGM) and for the chairperson of the main board and an elected employee representative to speak but not vote at those shareholder committee meetings.  Careful consideration would need to be given to the scope of the role and how the proposal might work in light of directors' statutory duties and potential conflicts of interest.

The outcome of the Inquiry is likely to influence the corporate governance proposals trailed by Theresa May as part of her leadership campaign which the Government intends to announce before Christmas.The Government is also considering proposals for mandatory publication of pay ratios of CEO total single-figure remuneration to median employee total pay, and an annual binding shareholder vote on the remuneration report.

Our Remuneration and Incentives Team's ebulletin on the executive pay aspects of the Committee’s Inquiry is available here.  Members of our team are involved in the Employment Lawyers Association working group responding to the Inquiry, so please do get in contact if you have particular concerns or views you would like to share.

Also proposed at the party conference was a plan to force companies to reveal how many foreign workers they employed, as a way to identify and improve skills shortages in the local workforce. Following much criticism, the initial proposal appears to have been watered down, with suggestions that the information would not be published or might be voluntary.

Finally, the Prime Minister has asked Matthew Taylor, a former policy adviser to Tony Blair, to lead an independent review into modern employment practices such as zero hours contracts and the gig economy - details are available here.