Billed as the most significant change in employment law in 30 years, the Employment Rights Bill has arrived in the first 100 days of this new Government, so that promise at least has been kept. But what about the rest?
The much-vaunted overhaul in rights is now subject to full consultation with trade unions and business leaders, with the Bill subject to further amendment and unlikely to become law until the middle of 2025 and the flagship reform to unfair dismissal not to be implemented before autumn 2026.
Nonetheless, the commitment to reform remains, with our Prime Minister seeking to reassure business executives at the International Investment Summit last week that far from these reforms being something to be feared, they should instead be celebrated as a necessary and essential driver of a more dynamic workforce and stronger economy.
For now, the Bill still includes significant changes:
Day 1 Protection from Unfair Dismissal
- The introduction of day 1 protection against unfair dismissal remains the most eye-catching of the proposed changes. How much this is a Day 1 right is less clear as the protection will be subject to an ‘initial period of employment’ or probationary period, reported as likely to be between 6 and 9 months. Any formal process would be suspended during that period with the only requirement that the reason for dismissal is capability, conduct or Some Other Substantial Reason.
- Certain questions remain. Redundancy dismissals are not subject to a probationary period and employers appear to be required to follow a formal process from Day 1 to avoid a finding of unfair dismissal. However, there is no corresponding right to a statutory redundancy payment, which is still subject to the 2-year qualifying period. Also, whilst the Bill makes clear that the right to claim unfair dismissal will not apply to employees who are yet to start work, less clear is whether existing employees who have passed their probationary period will be subject to transitional provisions or have the same protection as new hires.
Zero-Hours Contracts
- There is an end to zero-hours and low-hours contracts that exploit workers, with the onus on security of work and guaranteed hours instead. To that end, it is intended that employers will offer workers guaranteed hours and the same working pattern at the end of a given reference period, whether the workers refuse or accept such an offer. This guaranteed entitlement will only be triggered if the hours worked have sufficient number or regularity (yet to be determined), are not for a specific task or particular event where it would be reasonable to offer a limited-term contract and the employee has not resigned or been fairly dismissed.
- Likely remedies will include the right to bring claims in the Employment Tribunal for a declaration and capped compensation but not for an order of guaranteed hours.
- Whilst on the face of it beneficial to workers, there is a real risk that businesses will be less inclined to offer such contracts at all or more inclined to offer less hours to limit their exposure if the hours become guaranteed. This in turn will disadvantage those workers who genuinely want and value zero-hours contracts.
Notice of Shifts
- A requirement that employers provide reasonable notice of shifts cancelled or shortened to workers on irregular shift patterns or under zero-hours contracts. Remedies are likely to include compensation but with the amount still to be determined.
Fire and Rehire
- To combat the firing and rehiring of employees who refuse to accept a change to the terms and conditions of their employment, there is the introduction of a new right to claim automatic unfair dismissal. A dismissal will be unfair if the reason or principal reason was that the employer sought, and the employee refused a variation to their employment contract and/or replaced the employee with someone willing to accept the varied terms. An employer has a defence if they can show that the reason for the variation was to prevent, reduce or mitigate financial difficulties that could affect the business as a going concern akin to liquidation or other insolvency process. At first glance, an employer would have to overcome significantly greater hurdles than when dismissing for redundancy or Some Other Substantial Reason such as reorganisation, demonstrating the importance that the Government places on this issue.
Tips
- Whilst the current law requires that employers must fairly allocate tips with compliance left to a written policy and Code of Practice, the Bill expands that duty by creating an obligation to consult trade union or other worker representatives before producing a written policy. That policy must then be reviewed and consulted upon every three years and made available to all workers. Currently there is no exemption for small businesses, and it will be interesting to see if that changes during the passage of the Bill.
Collective Redundancies
- Obligations relating to collective redundancies shall be expanded to enable redundancies in separate locations to be covered by the duty to consult rather than limiting the duty to those redundant at one establishment. This is significant as it will enable employees in offices with less than 20 staff to claim protective awards for a failure to consult, provided that the total redundancies across the whole organisation are 20 or more.
Family Leave
- Parental and Paternity Leave will become Day 1 rights with paternity leave now able to be taken in addition to and following shared parental leave.
- Bereavement Leave will no longer be limited to the parent/child relationship (although the nature of the relationship is yet to be defined) and the amount of leave will be at least a week.
Statutory Sick Pay
- This right will be strengthened by being payable from the first day of sickness absence with the waiting period of 3 days removed and the lower earnings limit (currently £123 per week) also removed. Instead, SSP will be set at the lower of the full rate of £116.75 and a specified percentage of an employee’s weekly earnings (to be decided in legislation later).
Enhancement of Flexible Working right
- Whilst this was made a day 1 right by the last Government, the Bill has enhanced this still further by requiring employers that refuse an application not only to state the specific ground(s)under the legislation which it is relying on but also to explain why it considers it reasonable to refuse a request on each ground.
Protection from Harassment
- A new mandatory duty to prevent sexual harassment takes effect on 26 October 2024, the main details of which are here.
- The Bill extends the duty on employers to take ‘all reasonable steps’ to prevent the sexual harassment, with regulations to specify what those steps should be such as conducting assessments, publishing plans or policies, handling complaints and reports of harassment.
- Whilst the Bill also includes a new category of protected disclosure in relation to sexual harassment, this is likely to be less significant (bearing in mind the existing whistleblowing protection) than a reversal of the position on third-party harassment which will now be prohibited; an employer will therefore be liable for the harassment if it fails to take all reasonable steps to prevent the third party’s harassment. What those reasonable steps will be remains to be seen and will no doubt form part of the ongoing consultation.
Pregnancy and Maternity
- There is increased protection for new mothers with dismissal likely to be prohibited for up to six months after their return to work, except in extremely limited circumstances.
Fair Work Agency
- The Bill lays the groundwork for the creation of a Fair Work Agency, to strengthen the enforcement of workplace rights including the National Minimum Wage, statutory sick pay and holiday pay.
Return of Sectoral Bargaining
- The School Support Staff Negotiating Body is to make a return and together with a new Adult Social Care Negotiating Body will negotiate national terms and conditions, career progression routes, and fair pay rates in their sector.
- These negotiated terms and conditions will be incorporated into contracts of employment and prevail over existing terms.
Trade Union Power
- This is to be significantly strengthened with the amendment of trade union legislation to remove unnecessary restrictions on trade union activity and to ensure the principles of good faith negotiation and bargaining are upheld.
- The right to join a trade union will be extended by simplifying the process of statutory recognition and the introduction of a regulated route
Bearing in mind there is repeated mention within the Bill that employers will have to provide ‘Contemporaneous Justification Notices’ explaining their decisions, makes it more likely that employers will need to engage lawyers at an early stage to ensure their explanation is watertight. It may also be right for pro forma notices to be issued that cover every conceivable defence to avoid an employer being confined to the reasons set out in the Notice.
Whilst it will be some time before this Bill becomes law, it would be prudent for businesses and workers to engage with this legislation now to ensure that their contractual terms and policies and procedures are drafted to take note of the direction of travel.
The benefits to be gained are considerable, not least the promotion of a culture of fairness and wellbeing, the reduction of workplace disputes and ultimately Employment Tribunal claims.
