Will a new workers’ watchdog make labour supply chain investigations harder to deal with?

Written on 11 Jun 2021

The proposed new UK body to protect workers' rights is a clear signal that further governance and enforcement is on the horizon and employers must ensure their processes are legally compliant

Workforce solutions companies (such as staffing and umbrella companies and online platforms) face the prospect of more protracted and complicated investigations around issues related to workers' rights and workplace abuses in labour supply chains when recently announced government plans for a new workers' watchdog are approved by Parliament and pass into UK law.

The Department of Business, Energy & Industrial Strategy in its latest consultation response confirmed that a "new workers' watchdog" will provide a "one-stop shop" approach to tackle modern slavery, enforce minimum wage rates and protect agency workers. Responsibility for these is currently spread across three different bodies: the Gangmasters and Labour Abuse Authority (GLAA), the Employment Agency Standards Inspectorate (EASI) and HMRC's National Minimum Wage Enforcement). The new body will also have "a significantly expanded remit".

The government intends this one-stop shop approach to help improve enforcement through better coordination and pooling of intelligence: effectively, where breach in one area is discovered, it is likely that compliance with other requirements will be checked as well.

An investigation is now likely to become a potentially more time-consuming and complex process, and the more friendly and collaborative approach of certain types of historic investigation in this area may become a thing of the past now that (currently GLAA-enforced) criminal matters will be within the standard remit of investigating officers.

Flexible sanctions

The new body will also have greater flexibility in the sanctions that can be issued to tackle the spectrum of non-compliance with an expansion to the reach of compliance notices and civil penalties. It will continue the existing Naming and Shaming scheme, which has an important deterrent effect and this enforcement activity will also be extended to cover other regulations protecting the pay of workers, including those employed through agencies. The government is also looking to replicate this approach for the enforcement of holiday pay for vulnerable workers and statutory sick pay avoiding individuals going through a "lengthy" Employment Tribunal process.

The new watchdog will enhance workers' rights by providing a "single, recognisable port of call for workers so they know their rights and can blow the whistle on bad behaviour". To help businesses understand the rules, the new body will provide guidance on best practice, complementing the work already carried out by existing authorities such as the Advisory, Conciliation and Arbitration Service. It will seek to build strong links with community and worker groups to spread awareness and support engagement with at-risk groups, including the low-paid and those in sectors at higher risk of abuse such as the construction industry.

Umbrella companies

The announcement indicates that the new body will be tasked with regulation of umbrella companies. Whether this will just cover holiday pay and National Minimum Wage issues, and the like, or also cover tax compliance issues remains to be seen. Given the objective of the new body it seems likely that the remit will extend to ensuring that workers know their rights and are paid in a transparent and compliant way.

However, at this stage it's not clear whether there will be a new regulatory regime for umbrella companies (which the consultation suggests the government is committed to – but let's see) or just better enforcement of existing regulation. Whatever the case, well-established umbrella companies will likely welcome good enforcement which will help them compete against unfeasibly cheap non-compliant competitors – the consultation document refers to the need for a level-playing field in this area.

It will also be interesting to see whether the GLAA regime mechanisms (which extend regulatory punishment to users of non-registered gangmasters) will be extended beyond agriculture, shellfish gathering and food processing so that end hirers of workers in certain sectors (such as garment manufacture) face sanctions for using non-compliant umbrella companies.

The government acknowledges the need to provide support for employers to understand how to comply with the law and it's likely that this will be provided in the form of technical guidance. However, it's clear that end users, and particularly brands, will be responsible both for carrying out due diligence on their supply chains and behaving in a way that promotes fair, legal working practices.

OC comment

While there will inevitably be a period of time before the new body is up and running (the plans will be subject to the usual government approval process and primary legislation will be required), this new announcement indicates a clear direction of travel towards greater governance and enforcement. In the meantime, employers must continue to ensure that their processes are legally compliant. (The government's consultation response is here.)