Employment Rights Bill faces criticism in the House of Lords

On 27 March 2025, the Employment Rights Bill (“ERB”) passed its second reading in the House of Lords; after a lengthy debate lasting almost six hours. The Bill runs to 300 pages, with a further 200 pages of explanatory notes.

The Labour government are claiming that the ERB will be “the biggest upgrade to workers’ rights in a generation”, which “seeks to benefit employers and the economy by levelling the playing field between good employers and those who already go beyond the measures in this bill, and the less scrupulous ones”.

However, the Bill came under criticism from various Peers, in respect to a number of its headline proposals, including in relation to:

1. The proposal to make unfair dismissal a “day one right”, which many saw as having the potential to cause sector-wide recruitment freezes and/or reductions in headcount, as employers avoided hiring new staff and/or reduced their number of staff due to the increased legal risks that employing them might entail; as well as a slowing of business expansion. It was also criticised in the context of the significant backlogs and delays (of as long as 18 to 24 months) already being experienced by Employment Tribunals; which this proposal is expected to exacerbate (in the absence of additional resources being provided to ETs).  However, others highlighted that workers already have day one rights in relation to protection from discrimination; the hope being that, by also making unfair dismissal a day one right, there will be a reduction in the number of unmerited disability discrimination claims being brought in an attempt to shoe-horn in claims for unfair dismissal in the absence of a qualifying period of employment (a common issue in Employment Tribunals). Calls were made for smaller employers to be allowed exceptions, and for more detail to be given around how probationary periods will work.

2. The “banning” of “exploitative” zero hours contracts; which will involve ensuring that workers are given guaranteed working hours, reasonable notice of shift changes and cancellations, and compensation for last-minute cancellations; was criticised for having the potential to stifle flexibility and balance within the job market, limit workers’ ability to choose temporary work which suited them, overregulate agency workers (who are already subject to the Agency Workers Regulations), and limit the number of job opportunities available to young people. However, others applauded these proposals as having the potential to provide greater job security and certainty of wages for some of the most vulnerable in the workforce; pointing out that many European countries have already banned zero hours contracts in practice.

3. The proposal to end “fire and rehire” practices, was criticised for having the potential to make it extremely difficult for employers to make even small, reasonable changes to contracts. However, others reiterated the ways in which these proposals seek to improve both job security and certainty of terms and conditions for many workers. Further clarification regarding the precise scope of these proposals was called for, as well as better support for small businesses by way of guidance.

4. The provisions regarding employer’s liability for third party harassment attracted particular criticism. Many Peers viewed the provisions requiring employers to take all reasonable steps to prevent third-party harassment of employees in the workplace as unworkable. Examples were given of the difficulties businesses in the pub, bar, retail and hospitality sector would have policing third-party “banter” in their workplaces. Some cited concerns that these provisions would effectively hinder free speech. In response, the Government stated that employers will not be expected to take the same measures as they would in respect of their own employees, or anticipate the unforeseeable. And supporters of these measures highlighted that it was hoped that they would help to overcome the systemic sexual harassment which is still so prevalent in many sectors. Further detail as to how these provisions will work in practice will be welcomed.

5. The absence of provision for paid carer’s leave in the ERB was highlighted by a number of Peers. Provision for paid carer’s leave had previously been tabled as a potential amendment to be made to the Bill but was rejected at the Committee Stage in the House of Commons. In response to criticism of this omission, the Government stated that it will examine the feasibility of introducing paid carer’s leave in an upcoming carer’s leave review.

6. The absence of provision for greater paid paternity leave was criticised by some. Particularly in light of the fact that the UK’s entitlement for paid paternity leave (of up to 2 weeks) falls significantly short of the UK’s entitlement for paid maternity leave (of up to 39 weeks) and is the lowest level of paternity leave and pay across Europe. Concerns were raised that this position reinforces an assumption that women will be primary care givers, which in turn contributes to the ongoing gender pay gap. The Government’s current position is that it has no plans to increase the amount of paid paternity leave.

7. The reliance on secondary legislation to provide the detail (at a later date) of how many of the new rights will work in practice (a practice known as “skeleton legislation”).  It was noted that there were 173 such delegated powers within the Bill; creating both uncertainty and administrative burden. Peers criticised the Government for allegedly having failed to carry out “fair, effective and comprehensive parliamentary scrutiny of this legislation” despite “the profound effects it is bound to have on British business”.

8. The number (over 200) and detail of the amendments introduced during the House of Commons Committee and Report Stage, suggesting that further amendments may be required, and that the Bill was therefore still a long way off being finalised and implemented.

Concerns over the potential impact of the ERB on small businesses, and the lack of detail surrounding many of the proposals, were common themes. The Office for Budget Responsibility also released a statement outlining concerns that the Bill could have a negative impact on the economy.

The Government’s impact assessment for the Bill (which claims that it will have a net positive impact on growth) was also criticised by Peers as being “fantasy economics” with little feel for, or experience of, the job market.  The Regulatory Policy Committee had previously identified eight of the Government’s individual impact assessments for the ERB as being “not fit for purpose”.

In response, the Government defended the Bill; stating that it would “strengthen the legal rights of countless workers currently feeling powerless and vulnerable”; and that it was “confident that it will result in ordinary working people having more money in their pockets, but also having the security to spend that money, because they don’t have to worry from week to week whether or not they will be in work, or how many hours they will get”. 

The ERB has now been sent to a Committee of the Whole House, for further scrutiny; from 29 April 2025. Once that stage has been completed, the Bill will progress to the Report stage, third reading and then consideration of amendments, before it receives Royal Assent. The dates for each of these stages are yet to be confirmed.    

As ever, the devil will be in the detail, and we await further comments and amendments with interest.