Employment Eye – October 2024

On 13 June 2024, the Labour Party published its manifesto Change, which confirmed that a Labour government would implement its Plan to Make Work Pay: Delivering A New Deal for Working People, which was published in May 2024.

The King's Speech, delivered in Parliament on 17 July 2024, set out the Bills the government intended to bring forward. At the time the government also published Background Briefing Notes on the announcements made in the speech. 

The two key employment Bills mentioned were:

• The Employment Rights Bill 
• A draft Equality (Race and Disability) Bill 

The Employment Rights Bill (the Bill) was published on 10 October 2024, together with the Plan to Make Work Pay paper. The reforms set out in the Bill are being described as “the biggest upgrade to workers' rights in a generation.” Below we have considered some key areas/proposals.

“Day One” rights

Within its Plan to Make Work Pay, the government stated that "basic individual rights" would be provided from day one for all workers, "ending the current arbitrary system that leaves workers waiting up to two years to access basic rights of protection against unfair dismissal, parental leave and sick pay." 

The Bill has delivered on this promise, with parental and bereavement leave, entitlement to sick pay and unfair dismissal protection all becoming "day one" rights. 

Unfair dismissal

Currently employees must have at least two years' continuous service to bring ordinary unfair dismissal claims. This requirement will be repealed and, as stated above, unfair dismissal will become a day one right.

The Bill refers to ‘an initial period of employment’ where it will be possible to dismiss new hires so long as the reason for dismissal falls within one of the prescribed fair reasons, which are conduct, capability, statutory restrictions and some other substantial reason relating to the employee. Meaning that employees will be protected from “day one” for redundancy dismissals and dismissals for some other substantial reason (if not related to the employee). 

When dismissing for a potentially fair reason during the ‘initial period of employment’, the Bill states that employers will have to take “any steps specified in the regulations.” It is anticipated that the regulations will set out the dismissal process, which is likely to include a meeting where the employee could be accompanied. The Next Steps paper refers to a “lighter-touch” process, and the government has said that it will fully consult on how the “lighter-touch” process will interact with the Acas Code of Practice, which does not currently refer to probationary periods. It isn’t clear at the moment how this will operate in practice, and what will happen if the employee disagrees with the “potentially fair” reason given by the employer. The Next Steps paper states that the government will consult on the length of the ‘initial period’ which will effectively be a probationary period. At one point there was talk of a period of 6 months, but now the government’s preference is 9 months. 

This significant change has raised concerns regarding an increase in claims from new hires. In light of this prospect, the Next Steps paper explains that the government intends to support employees to make sure they have the resources they need, and to also make it clear when claims will be unsuccessful. 

The Bill does, however, clearly highlight that the right to claim unfair dismissal will not apply to employees that have not started work. Interestingly, there is an exception where the reason or principal reason for dismissal “is, or relates to, the employee’s political opinions or affiliation.” However, it is not clear what is meant by “political opinions or affiliation.” 

The impact of removing the qualifying period of service for unfair dismissal claims is going to be very significant for employers, whilst there are provisions for probationary periods, it will still be harder for employers to dismiss during the initial period of employment than is currently the case. Employers will need to ensure they have very robust recruitment procedures in place, as these procedures will be the key, as far as they are able, to ensuring that new hires are right for the job before they are taken on. We will also have to see whether this change will encourage some employers to consider using temporary agency workers to fill gaps in personnel as opposed to permanent hires.

Parental, Paternity and Bereavement Leave 

Currently employees need one year’s continuous service to be entitled to receive up to 18 weeks’ unpaid parental leave per child (subject to various conditions/limitations). For paternity leave, employees need to have been employed for at least 26 weeks up to any day in the “qualifying week.”

Parental and paternity leave will become a day one right, but we will have to wait and see what impact this change has in practice, as the right to statutory paternity pay remains unchanged. One interesting development is that employees will be able to take paternity leave and pay even if they have taken a period of shared parental leave and pay. Currently, employees lose the right to paternity leave and pay if shared parental leave is taken before they have used all of their paternity leave.

Unpaid bereavement leave will also become a day one right. The current parental bereavement leave provisions in the Employment Rights Act 1996 will be replaced with wider provisions, and the regulations will specify the relationships that qualify.

Flexible working 

The Plan to Make Work Pay stated that “default flexible working” would be required, except where it is "not reasonably feasible", and this is what has been reflected in the Bill. The government clearly intended to build on the changes that had been introduced by the previous Conservative government. Under the Conservative government, the right to request flexible working became a day one right on 6 April 2024.  The Bill stipulates that it will still be possible to refuse flexible working requests, so long as the refusal is “reasonable” satisfies one of the prescribed grounds. If the employer refuses the request, it will need to give reasons for the refusal.

Statutory sick pay 

Statutory sick pay will be available from the first day of illness, meaning there will no longer be the requirement to wait three days. Sick pay will also be made available to workers that earn below the lower earnings limit (currently £123 per week), although the government proposes to consult on the rate to be paid for those earning less than the current flat rate of statutory sick pay. The Next Steps paper states that a new Fair Work Agency will be given responsibility for ensuring statutory sick pay enforcement.

Employment contracts

Zero hours contracts have been under the spotlight for a considerable period and, in 2015, a ban on exclusivity clauses in zero hours contracts was brought into effect. 

The Bill introduces the right to a guaranteed hours. This change will see employers being required to offer guaranteed hours to qualifying workers at the end of each reference period, although the worker will not be required to accept the offer. The reference period is yet to be defined, and this will be picked up within the forthcoming regulations, although 12 weeks has been mentioned. There will also be a consultation on reference and review periods. The government say the changes “will ensure that jobs provide a baseline of security and predictability so workers can better plan their lives and finances.” 

The Bill also includes provisions for shift work, which will see employers being required to give reasonable notice for shifts, shift changes and cancellations. Compensation will be available for cancelled, moved or curtailed “qualifying shifts.” The definition of a “qualifying shift” extends to shifts that workers are required to work, requested to work or they have suggested working (and the employer has agreed). We will have to wait for the regulations to understand what the notice requirements will be and how much employers will be required to pay in compensation.  

It seems clear that employers will need to review their employment practices to ensure compliance. Employers that experience significant fluctuation in workforce requirements are likely to be affected by this change and will be faced with the challenge of navigating these new complicated set of rules, particularly when one size will certainly not fit all workplaces.

Fire and re-hire

This is a practice whereby an employer, that is unable to agree changes to its terms and conditions of employment with their workforce, dismisses its workforce and subsequently re-engages them on the new, and often less favourable, terms.

The previous Conservative government introduced a statutory code of practice to provide guidance for employers on dismissal and re-engagement. However, Labour confirmed that whilst this code will remain in place for now, new legislation will be brought forward to end the practice of fire and rehire and a new, strengthened code of practice will replace the existing one.

The Bill’s proposals certainly restrict an employer’s ability to fire and re-hire in order to change employees’ terms and conditions of employment. A dismissal will be automatically unfair where the sole or principal reason for the dismissal is because the employer sought to vary the employee’s terms and conditions and the employee did not agree. Also, if the employer employs someone else, or re-engages the employee in question, under varied terms and conditions to carry out substantially the same duties as the employee, the dismissal will be automatically unfair.

There is an exception, but this is limited to an employer in financial difficulty and being able to show that it could not reasonably avoid the need to make the variation. 

This change will affect many employers that rely on fire and re-hire practices where changes are required to ensure the organisation remains commercially viable, but negotiations with the workforce breakdown and changes are not agreed. In these cases, employers may not be able to meet the financial difficulty test, which means they will not be able to fire and re-hire under the terms proposed within the Bill. 

Collective redundancy consultation

In its Plan to Make Work Pay, the government indicated an intention to strengthen redundancy rights, and again the Bill has delivered on this promise. Currently, collective consultation applies where employers propose to make 20 or more redundancies at one establishment within a 90 day period. However, the Bill removes reference to “one establishment”, meaning that employers will be required to collectively consult when 20 or more redundancies are proposed across the organisation as a whole.  

The Next Steps paper also states that the government is committed to lifting the cap of the protective award if the employer has not properly followed the collective redundancy process. However, it is not entirely clear what this will entail and we await further developments to see how this will work in practice. 

Pay

The Bill establishes the Fair Work Agency, and one of the areas it will be responsible for is minimum wage, holiday pay and statutory sick pay enforcement.

The government has said that it wants to ensure there is a "genuine living wage" and to do so it will remove the age bands (for adult workers) within the National Minimum Wage (NMW) framework, which it believes to be discriminatory. The National Living Wage (NLW) will be payable to all those aged 18 and over. Currently, banding allows employers to pay a lower hourly rate to under 21s. The government has also updated the remit of the Low Pay Commission. The Low Pay Commission will take the cost of living into account when recommending the NLW rate.  

The Bill also provides for the creation of an Adult Social Care Negotiating Body with a remit over remuneration, terms and conditions of employment and any matters specified by the Secretary of State, for social care workers. Agreements reached by the Negotiating Body would be able to be ratified by the Secretary of State, meaning that the terms of those agreements would become binding on employers. The government has promised to consult on the framework for Fair Pay Agreements and we await further publications such as the regulations and a code of practice. 

New protections for new mothers

Currently, in redundancy situations, pregnant women, throughout the ‘protected period’ have the right to be offered suitable alternative vacancies. The protected period is from when the woman tells her employer she is pregnant, and it lasts until 18 months after the expected week of childbirth (employees on adoption leave and shared parental leave also have protections). The government promised to strengthen those protections, and as a result, the Bill permits the government to introduce regulations that will expand the protections to include dismissals that take place during pregnancy, maternity leave or for a period of time when the employee returns to work (expected to be 6 months). Adoption leave and shared parental leave will also be covered. However, the Bill does not elaborate further and we will have to wait for the regulations to see how these provisions will operate.

Trade Unions 

The government has said that it wants trade union laws to be “fit for the modern economy.” The Bill therefore proposes to remove unnecessary restrictions on trade union activity, with the aim of developing relations based on good faith so that more people are empowered in the workplace. The minimum service level legislation (Strikes (Minimum Service Levels) Act 2023) will be repealed, and the Bill will see employers being required to provide written statements notifying workers of the right to join a trade union. There will also be new wider rights of access via legally binding “access agreements.” The trade unions will also be able to apply to the Central Arbitration Committee for it to order workplace access. The government has said that it is committed to working with stakeholders to make sure the new right of access system is effectively enforced.

There are also proposals for transparent frameworks with clear rules for union officials to meet, represent, recruit and organise members. Recognition will be easier and the balloting process will be simplified (with talk of electronic balloting). In addition to all of this, there will be protection from detriment for participating in lawful industrial action as well as strengthened protections for trade union representatives.

It has been suggested that the intention is to increase cooperation, compromise and negotiation with a view to avoiding industrial action.  The impact of strikes on public services cannot be denied. Strikes are always controversial given the significant cost to the taxpayer (a cost of 1.7 billion to the taxpayer for industrial action in the NHS in 2023 alone), and this is something the government will surely want to avoid.  

Equality 

Future regulations will require employers with 250+ employees to create and publish action plans to address gender pay gaps (as well as menopause action plans). Employers will therefore need to keep accurate data, which many employers do not currently have. Employers should start looking at what data they currently hold, and what steps they can take to secure the necessary data. 

From 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 (the Act) comes into force. This piece of legislation requires employers to take “reasonable steps” to prevent sexual harassment in the workplace. However, the Bill seeks to expand this obligation by requiring employers to take “all reasonable steps.” In addition, the Bill also expressly extends the obligation to include liability for third party harassment. This change reflects the view of commentators that have said the Act, as currently drafted, actually covers third party harassment.  

The Bill permits the development of further regulations to set out what is meant by “all reasonable steps” and we therefore await further clarification on this point.  

It is also worth noting that the Bill also strengthens whistle-blowers protection to include allegations of sexual harassment. 

What isn’t covered in the Bill?

Below is a list of the key topics. 

• Employment status – The government stated in its Plan to Make Work Pay that it would move towards a single status of worker and would transition towards a simpler two-part framework. Currently we have a three-part framework consisting of employees, workers and self-employed. This was not included within the Bill, although the government has said that it will consult on this matter from autumn 2024 onwards.
• Unpaid internships – The government said that it would ban unpaid internships, and although this was not mentioned in the Bill, a call for evidence is planned in 2025.
• Carer’s leave – Unpaid carers leave was introduced in April 2024, and in summary, provides that employees are entitled to unpaid leave to care for dependents (which includes anyone who relies on the individual for care) of up to the equivalent time the individual would work in a week. Importantly, an employer cannot refuse a request to take carers leave, but can request that the employee take it at a different time. The government has committed to reviewing the implementation of paid carers leave, and whilst this was not included in the Bill, the Next Steps paper states that carer’s leave will be reviewed, whilst being mindful of the requirements for smaller employers.
• Right to Switch off – There has been significant news coverage in this area recently, with countries across Europe legislating to allow employees to ignore communication from their employers at certain times of the day. Again, this has not been mentioned in the Bill, but the Next Steps paper explains the government’s intention to take this forward through a statutory Code of Practice.
• Time limits – The government talked about extending the current time limits (from 3 to 6 months) for presenting claims in the Employment Tribunal. Whilst this was not addressed in the Bill, the Next Steps paper states that measures to extend the time limits for lodging claims with Employment Tribunals will be added to the Bill via amendment.
• Collective grievances – Again, not referenced in the Bill, but the government has confirmed that this is one of its longer-term reforms, which will require a consultation with Acas - these consultations are expected to commence in 2025.
• The Equality (Race and Disability) Bill – This is expected to address ethnicity and disability pay gap reporting (for employer with more than 250 employees) as well as extending equal pay rights on the basis of race and disability. We await further details.
• Parental leave – This framework will be reviewed as the government states that the current system parental leave does not support working parents.
• TUPE – There has been a call for evidence on TUPE practices and procedures, this will allow for a holistic examination of the “wide variety of issues” relating to TUPE. 

What happens next?

The Bill will undergo a second reading in the House of Commons on 21 October 2024.

The government expects to start consulting on the reforms in 2025, meaning that the majority of changes will not take effect until 2026, with unfair dismissal no sooner than autumn 2026. The government has said that it understands that adjusting to these new reforms will take time and is committed to ensuring that all stakeholders receive appropriate time to prepare for these changes ahead of their commencement.

Whilst there is no immediate action for employers, it is advisable to be alive to the forthcoming changes and plan accordingly. If you or your organisation require any assistance, or if you would like more details on one or more of the issues referred to in this article, please contact a member of the Employment, Pensions & Immigration department who will be happy to help.

 

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