Poundland judgment neither a surprise nor a victory

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Last week, the Government lost a Supreme Court appeal over a ruling that its flagship 'back to work' schemes were legally flawed.

The Supreme Court’s decision in this case - Reilly v Secretary of State for Work and Pensions - is not particularly surprising, as it generally accords with the ruling of the Court of Appeal.

It was clear from the Court of Appeal's judgment that the Government had failed to comply with the Jobseeker's Act 1995 when drafting the 2011 Regulations and it is difficult to see how the Supreme Court could have ruled any other way.

In essence, the Supreme Court agreed with the Court of Appeal that the regulations failed to meet the legal requirements because they did not describe the schemes to which they applied. The Supreme Court also found that the Government had failed to provide the correct notification and sufficient information about the schemes.

At the same time, it seemed unlikely that the Supreme Court would find that these schemes breached the European Convention on Human Rights as Article 4 of the Convention, which prohibits "forced or compulsory labour", envisages serious exploitative practices.

The Government can still require people to take part in these schemes as the 2013 legislation has rectified the failings identified by the Court of Appeal and been upheld by the Supreme Court. However, it appears from the Supreme Court's judgment that this new legislation is now the subject of another legal challenge and so the future of the schemes is still uncertain.

With regards to the individuals who took part in the schemes before the 2013 legislation was brought into force, it is currently unclear whether or not they will be entitled to any compensation in respect of the benefits they lost as a result of the sanctions. The initial comments made by both parties suggest that they are unlikely to agree on this point and, as a result, there may be further litigation to decide this matter.

On the one hand, Iain Duncan Smith and the Department for Work and Pensions claim to have won the moral victory as the Court upheld the ruling that the schemes do not amount to "forced labour". On the other hand, the Court did find that these schemes were unlawful - which is what the scheme's participants were seeking to prove.

While both sides have claimed victory on this decision, the reality is that neither party is an "out and out winner". The Government is receiving unwanted media criticism and the ruling has provided yet another opportunity for critics of unpaid work schemes to air their views on the importance of paying workers fairly. Ultimately, though, the schemes can (at present) still continue. Neither side got what they really wanted.

From the perspective of employers involved in unpaid work schemes, a major concern is negative publicity arising from the Reilly case and other legal challenges. Organisations that have signed up for legitimate reasons, often with the intention of helping unemployed people, risk being portrayed as Dickensian industrialists hunting down cheap sources of labour.

The future of such schemes may depend more on the willingness of employers to participate than it will on the outcome of any further legal challenges. The media storm also serves as an important reminder to all employers, whether involved in the Government's work schemes or not, of the potential commercial and public relations costs of taking on unpaid interns.

Carla Davidson is an associate in the employment, reward and immigration team at Lewis Silkin

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