Structure of Employment Laws and Applicability of CSR on Corporations

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STRUCTURE OF EMPLOYMENT LAWSAND APPLICABILITY OF CSR ON THE CORPORATIONS

A business is a commercial activity that is carried out to earn a livelihood. In the corporate and commercial world, there are two broad sectors that play an important role that are employment laws and the corporate division. The aim of this essay is to provide a brief overview of the said two broad areas of law where firstly the employment laws of the United Kingdom (UK) will be evaluated in order to determine their scope and their inclination towards the employers or employees. Secondly, the corporate division will be discussed where the extent of CSR (Corporate Social Responsibility) applied to the corporations will be explained. This essay will provide an understanding of these two important areas of business laws to Mr. Sam which would help him in strengthening his knowledge.

This section of this essay will discuss the structure of the UK’s employment law. As the name suggests, employment laws are enacted to regulate the most important relationship between employers and employees. The employment law in England and Wales was derived from the Common law, Acts of Parliament, and the laws of the European Union (including the decisions of the ECJ (European Court of Justice)). However, with respect to the laws of the EU, the situation is not the same after Brexit, except for the retained EU laws. The employer hires the employees under the contract of employment which forms the basis of the legal employment relationship. Broadly, it is a legally binding contractual relationship wherein the parties promise to discharge their respective functions as agreed between them forming part of the employment contract which is usually in writing. The law provides various compulsory statutory rights to the employees irrespective of the contract. Moreover, the law of torts provides for provisions in relation to the employer’s liability in case of an act of employees and accidents that happened at the workplace. It is one of the important areas thus it was essential to offer a mechanism to redress the employment disputes, hence, in England and Wales three forums have the jurisdiction to decide the issues arising from the employer-employee relationship, namely, the Employment Tribunals, the Court’s (the High Court or County Court), and the Arbitration (ACAS Arbitration Scheme) (Colman Coyle Solicitors, 2017). Therefore, the employment law in the UK is well settled, offers multiple rights to both parties, is obligate duties to both parties, and offers wide options to redress their grievance.

This section will discuss the multiple rights available to employers and employees in relation to various statutory provisions and thereby draw the conclusion on the question that to whom the employment law favors the most, the employer or the employees. The Working Time Regulations 1998, provides a limitation on the hours of working where the employer is to ensure that the employees do not work more than 48 hours a week and the employer is obligated to maintain the said records for two years. This Act casts an obligation on the employer and at the same time protects the interest of employees from the dominating and influential employers. The National Minimum Wages Act, 1988, prescribes hourly wage rates which are beneficial for the employees (Gov.UK, 2022; Adams and Prassl, 2018). The Equality Act 2010, prohibits various types of discrimination like discrimination on the basis of race, caste, religion, age, gender, and other ‘protected characteristics’ (Mason and Minerva, 2020). The employer, in general, cannot deduct the wages of the workers, however, have the right to deduct in case the statute permit or contractual provisions allows for the same as agreed in the employment contract in writing. Thus, it can be construed that this provision also supports the employee as it prohibits the employer from arbitrarily deducting the wages of the workers. In addition, the law protects their unlawful and wrongful dismissal, though the employers have a right to terminate the employees, however, in no case it should fall under the types of dismissal above mentioned. The laws of the UK provide additional rights to women employees/ workers in the form of Maternity leave, and other benefits post-maternity leave.

This list is merely illustrative as there are various legislations that exist in the UK which broadly favor the employees, give minimal rights to the employer, and cast various statutory obligations upon the employer. The rationale behind favoring the employees could be the nature of their relationship, and the employer's position in the said relationship which is construed to be dominant, thereby influencing and suppressing the legal rights of the employees.

This section of this essay will shed light on the CSR activities and the extent of such responsibilities applicable to the corporations. CSR denotes the responsibilities of the business which it should undertake to contribute towards the benefits of the society and the environment as a whole. The concept of CSR is based on the rationale that the business exists in the community and utilizes its resources, thus it becomes a deemed responsibility to return the benefits to the society. In the UK, the adoption of CSR activities for companies is an optional and voluntary act. In addition, no legislation mandates the requisite spending on CSR activities in the UK. However, the UK incorporated a ‘Triple Bottom Line’ approach in the working of the corporations which provides for people, profit, and the planet. This approach advances the corporation’s commercial interest vis-a-vis achieving their obligations and responsibilities towards society. The Companies Act 2006 (the ‘Act’) prescribes certain requirements for the purpose of this approach.

As discussed earlier, there are no mandatory obligations under any statute with respect to CSR activities however the existing company's law attempts to equate the CSR responsibilities to the director’s fiduciary duties. The Act post a duty on the directors to consider the interests of consumers, suppliers, employees, employment, and the community while carrying out the interest of the organization’s shareholders.

The following section will shed light on the relevant statutory provisions in the context of CSR obligations on corporations. A duty to act bona fide is the statutory duty of the directors which means they are expected to act in the company’s interest in whole and not for another sole purpose. Directors' duties are for the wider audience including shareholders, employees, creditors, and others. Section 172 of the Act embodied the principle of ESVP (i.e., ‘the enlightened shareholder value principle’), this is witnessed as an important legislative step toward sustainable decision making. As per this provision, the directors must work in the interest of shareholders and look for the corporation's long-term interest simultaneously encouraging the relations with the suppliers, society, employees, and the environment. A new section 414 A-D of the Act has been introduced which provides for making of a ‘strategic report’ to be prepared by the corporations (Legislation. Gov, 2022). The rationale behind making such a report is to improve corporate accountability and enhance the transparency of the commercial activities which has been identified as an important corporate disclosure necessity for a long. The provisions further provide for the matters to be included in such reports which include matters pertaining to the environment, issues related to employees, society, and community, and details pertaining to human rights conflicts that must also form part of this report (Zhao, 2017). The judiciary in the UK has, however, not mandated the spending on such activities but accepted the fact that the directors of the corporation must work in the interest of all stakeholders and not merely liable for their stakeholders.

There are other laws in the UK that emphasize CSR activities, however not mandate its spending. For instance, the large Public Limited companies are required to report on significant environmental matters as per Accounts Modernisation Directives. Thus, it can be construed that in spite of such prevalent laws, CSR is still a voluntary activity in the UK. However, the corporate environment of the UK has always recognized social impacts and responsibilities as an important part of the organizations functioning. The fact also cannot be denied that this concept is gaining importance throughout the nation which is evident from the act of incorporation of the FTSE4Good Index which is a series of standard indexes for ESG investors (Environment, Social, and Governance) which has a direct impact on the share price of the company and can influence the investment as a whole. The companies according to the current practice under the law have accepted the fact that the investments in social activities will have a positive impact on the profits in the long run and hence adopted willingly such activities in order to build up a good reputation in the market.

References

Adams, A. and Prassl, J., 2018. Zero-hours work in the United Kingdom. International Labour Office, Inclusive Labour Markets, Labour Relations and Working Conditions Branch.http://www.oit.org/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/publication/wcms_624965.pdf.

Colman Coyle Solicitors. 2017. An overview of Employment Law in England & Wales. https://www.colmancoyle.com/wp-content/uploads/2017/04/An-overview-of-UK-Employment-Law-document.pdf.

Gov.UK. 2022. The National Minimum Wage and Living Wage. [online] gov.uk. Available at: https://www.gov.uk/national-minimum-wage. [Accessed on: 26 April 2022]

Legislation.Gov. 2022. Companies Act 2006. [online] legislation.gov.uk. Available at:https://www.legislation.gov.uk/ukpga/2006/46/part/15/chapter/4A. [Accessed on: 26 April 2022]

Mason, A. and Minerva, F., 2020. Should the Equality Act 2010 Be Extended to Prohibit Appearance Discrimination?. Political Studies, p.0032321720966480.https://doi.org/10.1177/0032321720966480.

Zhao, J., 2017. Promoting more socially responsible corporations through a corporate law regulatory framework. Legal Studies, 37(1), pp.103-136.https://eprints.whiterose.ac.uk/99313/1/CSR%20FINAL%20clean.pdf.