On 17 July 2024, in the King’s Speech, the newly elected Labour government set out its proposals for two new employment law Bills; the Employment Rights Bill and the Draft Equality (Race and Disability) Bill. Both are intended to deliver on the policies set out in its pre-election “Plan to Make Work Pay: Delivering a New Deal for Working People”.
These Bills are due to be “introduced” within the first 100 days of the new Labour government, with final drafts expected by 12 October 2024. Though implementation is unlikely to be until October 2025 or April 2026.
Though both are still in the early stages, the current proposals are likely to have significant consequences for employers, if implemented. We set out below what we know so far.
- The Employment Rights Bill
- A ban on “exploitative” zero-hours contracts
Currently, casual, or zero-hours, contracts are usually structured in such a way that employers do not have to offer workers any minimum working hours (or a predictable work pattern), and workers are not obliged to take on any work offered. Often the power dynamic in such contracts is skewed towards the employer, which can leave workers with a high level of uncertainty and lack of job security.
Labour’s proposal is to end the ‘one-sided flexibility’ of zero-hours contracts, and ensure a baseline level of security and predictability for all workers.
How is this likely to affect employers?
- Employers are likely to be required to provide workers with a contract that reflects the number of hours they regularly work (over a twelve-week reference period).
- Employers are likely to be required to provide workers with ‘reasonable’ notice of any changes to their shifts.
- Workers may be entitled to ‘proportionate’ compensation for any shifts which are cancelled or curtailed.
- There is likely to be a reduction in the level of flexibility allowed in zero-hours contracts.
- Ending the practice of ‘Fire and Rehire’
‘Fire and rehire’ is a practice which is sometimes used by employers who wish to unilaterally vary the terms of their employees’ contracts, and are unable (or do not want to) obtain the employees’ agreement. This tactic is more common where the new terms being proposed are less favourable than previously.
Under current legislation, this practice can be lawful, subject to the usual rules around having a fair statutory reason and fair process for dismissal. However, the existing statutory Code of Practice on dismissal and engagement states that fire and rehire must only be used as a last resort, following consultation with employees; where there has been a failure to reach agreement by all other means.
Labour’s proposal is to reform the law in this area; to provide effective remedies for employees, and replace the current statutory Code of Practice with a revised version which places greater restrictions on employers and provides greater protections for employees.
How is this likely to affect employers?
- Employees may become entitled to additional, or more easily obtainable, remedies in circumstances where they have been fired and rehired.
- The revised statutory Code of Practice is likely to place stricter requirements on employers around seeking to obtain agreement to any changes proposed, consulting with staff, and only using ‘fire and rehire’ as a last resort.
- Any use of ‘fire and rehire’ is likely to carry even greater reputational risks than before, and employers should be careful to properly explore and exhaust alternative routes before deciding to implement the practice.
- Expansion of day-one rights, including protection from unfair dismissal
At present, employees are only protected from unfair dismissal if they have been employed continuously for two years.
Labour’s proposal is to extend protection from unfair dismissal to all workers from day one of starting a new job, subject to probationary periods to allow employers the opportunity to assess new hires.
How is this likely to affect employers?
- Employers will have to be proactive and thorough in their approach to implementing and managing probation periods; ensuring fair and transparent processes to safeguard against potential legal claims.
- The extent to which employers will have to justify a decision not to confirm an employee in post, and on what grounds, is yet to be determined, but this will likely be a significant consideration.
Labour is also proposing to “make parental leave and sick pay” day one rights, but no further detail has been provided.
- Removing the earnings threshold and 3 day waiting period for Statutory Sick Pay (SSP) entitlement
Under current law, an employee must have average earnings at or above £123 per week, to qualify for SSP. They are also unable to claim SSP for the first three days of sickness absence.
Labour is proposing to remove this lower earnings limit, to make SSP available to all workers, and to abolish the three-day waiting period.
How is this likely to affect employers?
- These changes may simplify administrative processes for some employers, by removing the need to verify eligibility for SSP.
- Care will need to be taken to ensure that any sickness absence policies are updated to reflect the new rules.
- Making flexible working the default for all workers from day one and requiring employers to accommodate this as far as is reasonable
Since 6 April 2024, employees have had a “day one right” to make a request for flexible working under the statutory scheme for any reason. Employers must consider such requests and follow a fair process when doing so, but can refuse them on the grounds of eight broad commercial reasons.
Labour are proposing to make flexible working “the default” from day one for all workers, and to require employers to accommodate this as far as is reasonable.
How is this likely to affect employers?
- Detail is short on how this change will impact the existing flexible working scheme. Presumably it will expand the scope of those who are able to make such requests from just employees to workers too.
- It is not yet clear whether the new flexible working request regime will also involve narrowing the grounds on which employers may refuse such requests, or increasing / specifying the circumstances in which such request must be granted.
- Strengthening protections for new mothers
Currently, though women returning to work from maternity leave do have greater protections against being made redundant (both during their maternity leave period and for six months on their return), these protections are limited to redundancy situations only, not other reasons for dismissal.
Labour plans to make it unlawful to dismiss a woman who has had a baby, for six months after her return to work, for any reason; except in specific circumstances.
How is this likely to affect employers?
- We do not yet have sufficient detail to understand how these changes will affect employers. For example, what the “specific circumstances” permitting dismissal will be, or the process that will need to be followed.
- Nor is it clear whether this protection would apply to the maternity leave period too – presumably it would, but this is to be confirmed.
- Establishing a new “Single Enforcement Body”, the Fair Work Agency, to enforce workplace rights
Labour plans to establish a new state enforcement agency called the Fair Work Agency. This new body will likely have powers to enforce working time, holidays, pay, sick pay, agency rules and ‘discriminatory practices against migrant workers’. This proposed change is partly due to the current delays and backlogs in the tribunal system.
How is this likely to affect employers?
- Employers should ensure documentation and record-keeping is carefully maintained to prepare for potential state enforcement.
Labour also intends to reinstate the School Support Staff Negotiating Body (to establish national terms and conditions, career progression routes, and fair pay rates), and to establish a Fair Pay Agreement in the adult social care sector.
- Strengthening trade union powers by updating trade union legislation and simplifying the process of statutory recognition
Under current legislation, union recognition has a high threshold. It requires that 10% of the workers in a proposed bargaining unit are members of the union and that 50% of the bargaining unit are likely to support recognition before an application will even be considered by the CAC. Recognition only follows if 50% of the bargaining unit are members of the union or, if that is not the case and so a ballot needs to be held, support is required by at least 40% of those entitled to vote.
The Labour party plans to remove restrictions on trade union activity and ensure industrial relations are based around good faith negotiation and bargaining. This will involve introducing a regulated route to ensure workers and union members have a reasonable right to access a union within workplaces, scrapping minimum service levels for public sector strikes, and simplifying the union recognition process. Employers will also be required to include in workers’ written statement of particulars that they have a right to join a trade union, and to remind them of this on a ‘regular basis’.
How is this likely to affect employers?
- Lowering the threshold for union recognition may mean that employers receive an increase in statutory recognition applications from unions.
- Combined, these changes will likely help unions to increase their membership and influence.
- The Equality (Race and Disability) Bill
Labour is proposing to enshrine in law the full right equal pay for ethnic minorities and disabled people, which it claims will make it easier for them to bring pay discrimination claims.
It will also introduce mandatory ethnicity and disability pay reporting for employers with 250 or more employees, to help close the ethnicity and disability pay gaps.
How is this likely to affect employers?
- Though the details are yet unclear, it is likely that this proposal will have significant consequences for employers, not least from an administrative record keeping and reporting perspective.
As these bills make their way through parliament, there will be a need for employers to update their policies and processes to reflect the new legal requirements as they come into effect over the coming 18 months. If you want to discuss where to start, please do get in touch.