Commentary on Sections Economic measures Section 31: Employee Shareholders
131.Section 31 amends the Employment Rights Act 1996 (“ERA 1996”) to create the employment status of employee shareholder.
132.Subsection (1) inserts new section 205A into the ERA 1996. Under new section 205A(1) an employee shareholder agrees to have different employment rights to employees and receives fully paid up shares of a minimum value of £2,000 in the employing company or its parent company. The company is required to give the employee shareholder a written statement of particulars which must contain the details set out in new section 205A(5). An individual must give no consideration for the shares other than agreeing to become an employee shareholder.
133.New section 205A(2) to (4) provide that an employee shareholder does not have:
	a general unfair dismissal right (new sections 205A(9) and (10) state which unfair dismissal rights are retained);
	the right to statutory redundancy pay;
	the statutory right to request flexible working (but new section 205A(8) provides an exception in respect of a return from parental leave); and
	certain statutory rights in relation to requesting time off for training.
134.Employee shareholders must give 16 weeks' notice before returning early from maternity leave, adoption leave or additional paternity leave.
135.New section 205A(5) sets out the employment and shares information that the statement of particulars must contain.
136.New section 205A(6) prevents an employee shareholder agreement between a company and an individual from taking legal effect unless the individual has received advice from a relevant independent adviser about the terms and effect of the proposed agreement, and until seven days have elapsed since the day on which the individual received that advice.
137.New section 205A(7) states that the company must pay any reasonable costs incurred by the individual in obtaining legal advice, irrespective of whether the individual takes up the job or not.
138.New section 205A(8) gives an employee shareholder returning from parental leave a period of 2 weeks from the date of the return to make a statutory request for flexible working.
139.New section 205A(9) and (10) limit the exclusion of unfair dismissal rights so that an employee shareholder will still have the right not to be unfairly dismissed for automatically unfair reasons, on the grounds of discrimination, and in relation to suspension on health and safety grounds.
140.New section 205A(11) and (12) give the Secretary of State power to make:
	an order to increase the minimum value of the shares to be offered as part of the employee shareholder status; and
	regulations relating to the buyback of shares given to the employee shareholder as part of that employment status.
141.New section 205A(13) defines terms used in the section. The definition of ‘company’ means that the employee shareholder status can be used by share capital companies registered under the Companies Act 2006, Societas Europaeas and overseas companies.
142.New section 205A(14) defines what ‘value’ means in relation to the shares to be offered to the employee shareholder.
143.Subsections (2) and (3) insert new section 47G into the ERA 1996 and amend section 48(1) of the ERA 1996 to give an employee a right not to suffer a detriment as a result of refusing to accept an employee shareholder contract. There is no qualifying period for this right.
144.Subsection (4) inserts new section 104G into the ERA 1996 to give an employee the right not to be unfairly dismissed as a result of refusing to accept an employee shareholder contract. The amendment made by subsection (5) to section 108(3) of the ERA 1996 has the effect that there is no qualifying period for this right.
145.Subsection (6) amends section 236(3) of the ERA 1996 to provide that the power to make secondary legislation in new section 205A(11) and (12) is subject to the affirmative resolution procedure.