Employment Law +

Go ahead confirmed for uncapped unfair dismissal awards 

The government has confirmed that it will remove the cap on unfair dismissal compensation on 1 January 2027. Although this change was widely anticipated, it has now been formally confirmed in the government’s updated ERA factsheet on unfair dismissal. The factsheet also states that there will be no consultation on this – there was some residual hope of more engagement on the issue. In reality, the government had only committed to completing an impact assessment before introducing the commencement regulations for the wider unfair dismissal package. This confirmation now gives employers greater certainty for planning purposes but will not be welcomed by them. You will recall the debate pre-Christmas, that employers preferred to retain a cap while raising the overall limit. The minimum service requirement for unfair dismissal will also drop from two years to six months on the same date.

Media reports EHRC revisiting draft services code

The Guardian reported this week that the government is adapting guidance on how to implement For Women Scotland, the landmark Supreme Court ruling on gender and sex, to lessen its impact on businesses and to balance single sex spaces with the lives of transgender people. The EHRC has pressed the government to approve its updated draft code of practice for services, public functions, and associations, which it revised to reflect the decision confirming that the EqA defines “sex” as biological sex. However, the government has delayed approval, saying it needs to ensure the code is accurate and legally correct. According to the Guardian, EHRC lawyers are discussing with government lawyers how to guide businesses and other institutions on last year’s ruling. Observers believe the equalities watchdog may have shifted its approach since its new chair, Mary Ann Stephenson, took over late last year. In her first interview on 14 December, Stephenson stressed that employers must ensure everyone can access facilities, including those unwilling to use services aligned with their biological sex. She stated that organisations should not police single sex spaces and proposed practical measures such as clear signage or converting facilities with lockable cubicles into unisex options. The EHRC has not yet clarified whether/ when it intends to provide a final position for workplaces.

EAT highlights outsourcing-related discrimination risks

The EAT has delivered a significant ruling for transferee employers in response to claims from 80 cleaners who moved from an external contractor into Great Ormond Street Hospital under TUPE. Most of the cleaners came from BAME backgrounds and argued that they experienced indirect race discrimination because (1) the contractor paid them the London Living Wage rather than NHS rates, and (2) because GOSH did not place them on NHS pay immediately after the transfer. The EAT reviewed the pre transfer issue in light of the Court of Appeal’s decision in Royal Parks v Boohene. That decision explains that the EqA does not allow contractor employed workers to compare their pay with a principal’s employees. Applying that rule, the EAT rejected the cleaners’ pre transfer claim. It then turned to the post transfer position and reached a different conclusion. Once the cleaners joined GOSH, they could compare their treatment with other GOSH employees. The ET had already found that GOSH’s delay in extending NHS pay to the cleaners created a disadvantage for the predominantly BAME cohort when measured against the wider workforce. GOSH failed to provide an objective justification for that delay, particularly because the cleaners’ contracts contained a variation clause that allowed GOSH to introduce NHS rates. 

Although Boohene now settles one equal treatment risk when organisations outsource, customer organisations can still face risks when they treat contractor employed workers differently. When outsourced workers transfer to the principal or to a new contractor, this decision highlights how transferee employers should review post transfer terms closely and address any disparities that could expose discrimination risks. 

Additional safeguards will be introduced by the ERA:
• on 1 October 2026, a statutory code of practice will be introduced, with the aim of preventing a “two tier workforce”, where ex public sector and private sector employees work side by side on different terms and conditions; and 
• in 2027 (date to be confirmed), principals must include outsourced workers in their gender pay gap reporting. Upcoming ethnicity and disability pay gap regimes may require the same. These reporting duties will increase transparency and will focus greater scrutiny on outsourcing practices. 
Employers that rely on outsourcing strategies can reduce their exposure by taking a strategic, forward looking approach to identifying and managing these risks.

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