Employment Rights Bill to bring once-in-a-generation change for UK employers

Helen Corden of Pinsent Masons was commenting after the Bill – which makes provision for 28 different employment law reforms – was introduced into the UK parliament on Thursday.

Among the changes proposed are enhanced rights for workers around flexible working, and the extension of existing employment rights – including rights to sick pay, and to protection against unfair dismissal – so that they apply from ‘day one’ of employment contracts.

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Other proposals relate to industrial relations and pave the way for the removal of restrictions on strike action and statutory recognition whilst also providing for new obligations on employers to advise workers of their rights to join a trade union. Further reforms envisage employers taking further steps to address the gender pay gap and support employees through the menopause. The Bill also, among other things, provides for increased protection from sexual harassment in the workplace, going further than the new positive duty to prevent sexual harassment will when it takes effect on 26 October.

Most of the new rights and obligations to be created by the Bill are unlikely to be in force until 2026 and the government has outlined its intent to consult further on many aspects of the reform package, including the timetable for implementation. The Bill serves, in some areas, as mere framework legislation for secondary implementing regulations and statutory codes of practice to follow, where the reforms will be set out in more detail.

By publishing on Thursday, the new Labour government has met its commitment to set out a new Employment Rights Bill within 100 days of coming to power. The contents of the Bill reflect the ‘new deal for working people’ it set out before the general election as well as what was trailed in the King’s Speech in July.

Corden said: “Although none of the reforms are unexpected, including almost all aspects of the programme in a single bill, rather than a series of bills, is ambitious and shows the government’s commitment to deliver its employment plans in full. Only a few items from the manifesto agenda are held back, but even those appear in a ‘next steps’ document that was published to complement the Bill.”

Scott Wright of Pinsent Masons, a specialist in public policy, added: “While the Bill contains a range of policy measures, many of these measures will not be applied in the workplace for many months, with the UK government committed to publishing targeted consultation with stakeholders to inform next steps. Additional detail, particularly around more contentious provisions, will then be brought in through secondary legislation or amendments to the Bill as it progresses through the UK parliament. This will provide businesses with a number of additional opportunities to shape the legislation and the policies that are contained within it, to ensure that it delivers on its objectives and that the regulatory burdens facing businesses are minimised.”

Workforce structure

Although the previous government made the right to request flexible working a ‘day one’ right available to all employees in April this year, the Bill provides a framework to allow the new government to go further – to make flexible working the default, by allowing employers to push back against flexible working only where there is one of the current statutory grounds for refusing a request and if it is reasonable for the employer to refuse the application on that ground or grounds.

“Although the government believes this will boost UK productivity, employers often disagree, especially around the commerciality of compressed hours and significant working from home in certain business settings,” said Corden. “Employers will be pleased that the government has committed to further consultation on this reform to ensure any reasonableness test can incorporate commercial considerations and does not give employees a right to ‘demand’ their preferred working pattern and location.”

Employers will also be consulted on the Bill’s provisions aimed at prohibiting the operation of certain zero-hour and low-hour contracts that the government considers “exploitative”. The Bill provides for people to remain on zero-hours contracts where they prefer to but seeks to ensure those workers have a right to a contract that reflects hours regularly worked and are given reasonable notice of changes in shifts and compensation for shifts cancelled or curtailed. Consultation will also cover how these new laws will apply to agency workers.

“Employers will be keen to stress in further consultation that agility around workforce supply is sometimes needed to respond to variable market demands,” said Corden. “The previous government legislated for a right to request a more predictable contract and it was due to come into force in September, but this was shelved by the new government in favour of it bringing forward provisions in this Bill.”

Employers’ ability to ensure workforces remain aligned with changing commercial pressures will also be impacted by provisions to reform the law around ‘fire and rehire’. The Bill will replace and build on the statutory code of practice introduced by the previous government, which provides safeguards in this regard. That code came into force in July. The Bill will introduce measures to restrict the ability to use ‘fire and rehire’ by amending the law on unfair dismissal so that, where employees are dismissed for failing to agree to a change in their contract of employment, those dismissals will be treated as automatically unfair unless the employer can show evidence of financial difficulties and demonstrate that the need to make the change in contractual terms was unavoidable.

“Most employers don’t object to the idea of dismissal and re-engagement being retained as a measure of ‘last resort’,” said Corden. “However, it’s still an option that many businesses need to rely on if negotiations to achieve changes to terms and conditions end without a position that is commercially viable. Employers will welcome the retention of a fair dismissal and re-engagement option instead of a complete ban.”

Enhanced collective redundancy protection has also been included in the bill. The Bill strengthens protections for employees against collective redundancy by amending current legislation to ensure that these obligations apply regardless of whether 20 or more redundancies are taking place at one establishment or not. Corden said this will significantly impact redundancy planning. The government wants to go further still and will consult on lifting the cap of the protective award if an employer is found to not have properly followed the collective redundancy process as well as what role interim relief could play in protecting workers in these situations.

Significantly, Corden highlighted, the government plans to reinstate and strengthen the two-tier code for public sector contracts, helping ensure that employees working on outsourced contracts will be offered terms and conditions no less favourable to those transferred from the public sector.

‘Day one’ and other employment rights

The Bill proposes new rights and protections from ‘day one’ of employment. This includes rights to paternity leave, parental leave, and sick pay, as well as to protection from unfair dismissal.

Under the government’s plans, the unfair dismissal right will be subject to the ability to dismiss during a probationary period if a “lighter-touch” process is followed by the employer. This is an area to be consulted upon, including the length of that initial statutory probation period. The government has stated its preference in this regard is nine months. Compensation for unfairly dismissed probationers may not be what is currently available to other employees and changes will not come into force earlier than autumn 2026.

“Employers will welcome the government’s commitment to specifically consult on how this will work and that probationary periods may be up to nine months instead of the six month period that had been anticipated,” said Corden.

Sick pay will be available from the first day of sickness as opposed to the end of the first three days of sickness. Rights to sick pay will also be opened up to workers who are currently excluded because they earn below the lower earnings limit of £123 per week, although a reduced rate will be payable to workers earning below the current flat rate of statutory sick pay and consultation on that point will follow.

“Implementation of ‘day one’ rights may have a bigger cost and administrative impact on smaller employers, as many large employers already operate entitlements that are more generous that minimum statutory entitlements,” said Corden. “Most large employers will also already risk assess all dismissals, even if the statutory right to claim unfair dismissal has not yet kicked in. This is because discrimination and certain automatic unfair dismissal rights, such as when a dismissal is linked to whistleblowing, can already apply without the need for any minimum service. However, all employers will need to diligently examine their use of probationary periods to thoroughly assess new hires, and where these are not currently used, employers may want to introduce them. Employers will also cautiously await the impact of the increased accessibility of unfair dismissal rights on the volume and cost of employment tribunal claims.”   

A framework to establish a new single enforcement body, to be known as a Fair Work Agency (FWA), is also provided for in the Bill, with a view to strengthening the enforcement of workplace rights, including holiday pay. The FWA will be able to issue fines and make prosecutions if employers do not uphold protections within its remit.

While the Bill does not make provision for a new ‘right to switch off’ – which concerns allowing workers to disengage with work and not be contacted by their employers outside normal working hours – the government said in its ‘next steps’ paper that it intends to provide for such a right via a new statutory code of practice.

Measures to extend the time limit for bringing claims to employment tribunals will also be added via amendment to the Bill at a later date, according to the government.

Industrial relations laws

The government has promised to consult on reforms to modernise and update trade union laws so they are fit for the modern economy, with the potential to inform further amendments during the Bill’s passage through parliament.

Pending that consultation, the Bill already makes provision for expected changes to trade union laws, with large sections of the Trade Union Act 2016, together with minimum service level legislation in its entirety – both of which were enacted by the previous government – to be repealed.

The 2016 Act required a minimum turnout for ballots on strike action – it introduced a 50% turnout requirement for strike ballots and a requirement for 40% of all workers eligible to vote to support strike action in relation to some public services. Other provisions in that Act that restricted trade union activity included: the doubling of the amount of notice unions had to give employers of industrial action from one to two weeks; introduction of a six-month expiry period for votes in favour of industrial action; and the increasing of the amount of detail needed on ballot papers.

“Employers with union recognition may want to prepare for these changes by reviewing industrial action contingency planning procedures,” said Corden.

The Bill further provides for strengthened protections and facilities for trade union representatives and paves the way for the introduction of electronic balloting, with a working group to be formed to take this forward. Individual protections in respect of industrial action are also enhanced. Detriment protection for trade union representatives and members will be extended to industrial action and the cap will be removed on the number of weeks that an employee is protected for when taking industrial action, where the reason for the dismissal is taking protected industrial action.

The Bill also makes provision for a right for trade unions to have reasonable access to workplaces and for employees to be made aware of their right to join a union. A new duty on employers is also proposed, which would require them to inform all new employees of their right to join a union, and to inform all staff of this on a regular basis. The trade union recognition process is also simplified. For example, the Bill provides for the removal of the requirement at the application stage for a union to demonstrate that there is likely to be majority support for trade union recognition and the further removal of the 40% support threshold at the recognition ballot stage.

“Employers may want to strengthen alternative forms of employee engagement if they want to position themselves to better persuade employees in the future that existing information and consultation mechanisms mean unionisation is not needed,” said Corden.

The Bill also provides for new powers to be given to the government to introduce regulations to create a new Adult Social Care Negotiating Body, which itself could be given powers to intervene on matters pertaining to the remuneration, and wider terms and conditions, of social workers.

Family and equality

The Bill also seeks to make amendments to the Equality Act 2010 to empower the government to require private sector employers with 250 or more employees to create action plans to address gender pay gaps and support employees through the menopause.

The Bill also makes provision for new ‘day one’ rights to unpaid bereavement leave for all workers, replacing the existing right which only applies to parents of children under the age of 18.

In addition to the Employment Rights Bill, the government has also outlined its intention to bring forward a separate Equality (Race and Disability) Bill some time from “autumn 2024 onwards”. According to the government’s ‘next steps’ paper, that Bill will make provision for extending pay gap reporting to ethnicity and disability for employers with more than 250 staff, as well as measures on equal pay.

The Employment Rights Bill, however, contains important equality reforms of its own: it envisages new protections from dismissal for women whilst pregnant, on maternity leave, and within six months of returning to work except in specific circumstances. This builds on reforms by the previous government in April that extended redundancy protection for new parents.

“Employers will need to build the new protection into dismissal risk assessments when it comes into force,” said Corden.

Parental and paternity leave will become a ‘day one’ right.

With the Bill, the government also seeks to impose a new duty on employers to take all reasonable steps to prevent sexual harassment, including from third parties such as customers or suppliers. The Bill includes powers for the government to issue new regulations to specify more detail on what the requirement to take ‘all reasonable steps’ should look like in practice for employers. Further whistleblowing protections for those reporting sexual harassment have also been built into the Bill. Similar provisions were removed from existing legislation that implements the new positive duty to prevent sexual harassment, which will come into force on 26 October. Employers getting ready for the new duty may want to factor into their strategies the knowledge that further changes are now coming, Corden said.

What’s in the ‘next steps plan?

Although not contained in the Bill, the government has committed to consulting on:

• a right to switch off, preventing employees from being contacted out of hours, except in exceptional circumstances;
• the Equality (Race and Disparity) Bill;
• a single status of worker and transition towards a simpler two-part framework for employment status;
• parental leave and carers leave;
• surveillance technologies and negotiations with trade unions and staff representatives. The government will consult on how to implement these measures in a consultation on workplace surveillance technologies;
• TUPE;
• enabling employees to collectively raise grievances about conduct in their place of work.

The government also intends to bring into force the dormant “socioeconomic duty” and dual discrimination provisions in the Equality Act – claims based on a combination of two or more protected characteristics. For example, a black woman may allege dual discrimination not experienced by a white woman or a black man.

The Low Pay Commission has already had its remit extended to ensure a “genuine living wage” and also to remove age bands for adult workers under the national minimum wage framework.

Public procurement will also be used to raise standards on employment rights.