Peers reject workplace rights-for-shares scheme

Ministers say the scheme will help economic growth

The government has been defeated in the Lords over plans to allow employees to give up workplace rights in return for shares in the company they work for.

Before the loss - by 69 votes - it was suggested that workers should get free legal advice before taking part.

The Treasury has tabled two new amendments offering to provide written details of any proposed scheme and a seven-day "cooling-off" period.

The proposals now return to the House of Commons.

This will result in "parliamentary ping-pong", meaning the Growth and Infrastructure Bill goes back and forth between the two Houses until a resolution is reached.

'Unrealistic'

Ministers want to introduce a new owner-employee contract, which allows business owners to award shares worth between £2,000 and £50,000 to their staff. They say the change would cut red tape and help businesses.

In return, the employee would give up certain rights, including unfair dismissal, redundancy, training rights and also the right to ask for flexible working.

But the measure, first proposed by put forward by Chancellor George Osborne at last year's Conservative conference, has met strong resistance.

During the debate, QC and independent crossbencher Lord Pannick branded the scheme "unrealistic" and warned it would be "damaging to industrial harmony to allow employers to buy off basic employment rights" such as the right to statutory redundancy pay and the right for parents and other carers to request flexible working.

He said it "frustrates the very purpose of employment rights" and insisted it could not be right to allow an employer and an employee to contract out of rights which Parliament had seen fit to guarantee.

But business minister Viscount Younger of Leckie insisted the new employment status was "wholly voluntary" and people could not be coerced into accepting revised contracts.

He acknowledged the new option would be "right for some but not all" and told peers that by offering more choice to employers and employees it would be "good for growth".

The House of Lords first defeated the government over the issue in March.

On Monday, peers also rejected plans to change the role of the Equality and Human Rights Commission.

They voted by a majority of 30 to defeat the government for a second time on the issue.

Peers insisted on keeping a general duty on the Commission underlining the need to protect human rights and promote equal opportunity for all in society.

The Enterprise and Regulatory Reform Bill will now return to the Commons.