Lord Pannick (Crossbench) opened the debate by explaining Clause 27 saying: 'Clause 27 allows employers to buy off employment rights otherwise enjoyed by employees. Under this clause, employees can agree to receive shares worth at least £2,000, in return for which they will lose the right to claim unfair dismissal, the right to claim statutory redundancy pay, the right to request flexible working and the right to request time off for training.'
He explained his amendments: 'Amendments 81D and 92 seek to ensure that if we are to have Clause 27 at all, the employee and the prospective employee must at the very least be given the minimum necessary protection to understand what it is that they are giving up. The minimum necessary protection that Amendments 81D and 92 would provide is that the statutory rights could be lost only if the agreement satisfies three essential conditions.'
Outlining the three conditions he said: 'The first is that any agreement in this context must be in writing and must set out the rights being traded and the value of the shares that are to be received... Secondly, the individual must receive legal advice on the consequences of the agreement from an independent lawyer... The third essential protection is that the individual must have received financial advice from an independent adviser - who must be a regulated person - as to the value and the prospects of the shares that he or she is about to receive and for which they are giving up those basic employment rights.'
Baroness Brinton (Liberal Democrat), declared an interest as her foster son is an employee owner, and she advised St John's College, Cambridge, as it created the St John's Innovation Centre in the late 1980s and was a non-executive director at the centre until 2010. She voiced her concern for the high-technology rapid-growth small companies the clause targets saying: 'Having talked to the directors of these small but high-growth companies, I know that many already offer shares... They, as directors, do not understand why an employer would want to do so in return for a reduction in employment rights.'
She continued: 'One of their key issues as the company grows is to keep the morale of the staff going during the difficult times... Proposing that staff should give up their rights to redundancy pay is an issue, as not all early-stage companies survive and so redundancy is a real possibility.'
Baroness Brinton (Liberal Democrat) and Lord Tope (Liberal Democrat) proposed Amendments 82A, 82B and 91. She said: 'We believe that employee shareholders under Clause 27 should have access to independent legal advice. More than that, we think that the employer should have a duty to ensure that the employee has a right to receive the appropriate legal advice and that the employer should make a contribution towards that legal advice.'
Lord Flight (Conservative) supported the clause, saying: 'If you wish to be an employee entrepreneur, here is the chance to benefit with equity on an extremely tax-attractive basis, but you are going to be taking risks just like the entrepreneur himself. One of the problems with small-company share schemes, as I have experienced in my own career, is that they are very limited. Where options have to be used they end up being taxed at nearly 60% and are not particularly attractive. The carrot of tax-free capital gains is attractive... If someone is not a natural risk taker, this is clearly not for them, and they should not look to accept a job with this sort of deal.'
He added: 'I hope that the proposers of these amendments will reconsider them and wait to see what suggestions the government come up with, at least to provide codes and arrangements that achieve some of their objectives but without having to use the complexities and expenses of the law, which are very costly for very small businesses.'
Viscount Younger of Leckie (Conservative), parliamentary under-secretary of state and government spokesperson for the Department for Business, Innovation and Skills, explained the purpose of creating an employee shareholder saying: 'The government are creating a new form of employment contract that companies limited by shares can use... The government are taking this action to offer companies and people more choice, and are giving choice to companies on how they structure their workforce to ensure maximum growth and flexibility, more choice for people in the type of jobs that are on offer to them and new opportunities to benefit from growth and meet their long-term aspirations.'
He explained: 'This clause is not about making a new employment status compulsory for all. It is about adding to the employment statuses that already exist... There is nothing in the clause that prevents individuals from seeking independent advice. This is about creating a new voluntary employment status and not about creating additional burdens for employers...The shares are treated as taxable income, although they are shares, so there would be tax at whatever level payable on the shares received.'
Lord Pannick withdrew the amendment but asked for the government to withdraw Clause 27 before report stage.
Members also examined local authority proposals for business improvement districts.
The bill will begin report stage, further detailed scrutiny, on 27 February.
Previous stages of the Growth and Infrastructure Bill
What is committee stage?
Detailed line by line examination of the separate parts (clauses and schedules) of the bill takes place during committee stage, starting from the front of the bill and working to the end. Any member of the Lords can take part.
It usually starts no later than two weeks after the second reading and can last for one to eight days or more.
The day before committee stage starts, amendments (changes) are published in a marshalled list - in which all the amendments are placed in order.
During committee stage every clause of the bill has to be agreed to and votes on the amendments can take place. All proposed amendments can be discussed and there is no time limit, or guillotine, on discussion of amendments.
Growth and Infrastructure Bill summary
The bill looks at the following areas:
- the use of infrastructure
- the carrying-out of development, and the compulsory acquisition of land
- how rating lists are to be compiled
- the rights of employees of companies who agree to be employee owners.