Employees Can Become Shareholders

The Growth and Infrastructure Act is soon to become law with the employee shareholder provisions expected to take effect in autumn 2013.  Therefore, an employer and employee will be able to agree that the employee will give up their statutory rights to unfair dismissal protection (other than automatic unfair dismissal), redundancy pay and to ask for flexible work arrangements or time of for study or training, and will have to give longer notice if they intend to return early from additional maternity, paternity or adoption leave in return for fully paid up shares worth at least £2,000.

Before an employee can agree to having ‘employee shareholder’ status, the employer must provide a written statement with full details about the shares and the rights they carry, including, amongst other things, whether they carry any voting and dividend rights.

The employee will then have to take independent legal advice on the terms and effect of such an agreement regarding its effect on employment rights, the nature of the rights and obligations attaching to the shares and what will happen to the shares if the employee leaves.  The employer must pay the reasonable costs of obtaining such advice, even if the individual ultimately decides not to accept the offer.  Existing workers will be protected from detrimental treatment if they refuse to change to employee shareholder status.  And although an employer is free to insist on employee shareholder status for a new joiner, an individual will not lose any benefits if the reason for turning down a job is that they don’t want to accept such status.