A new set of amendments to the Employment Rights Bill have just been published, including a number of significant changes from the government covering key issues such as fire and rehire, guaranteed hours, non-disclosure agreements and miscarriage and pregnancy loss. Here's our take on the latest amendments and what they mean for employers.
The Labour government's flagship Employment Rights Bill is now part way through the report stage in the House of Lords. This may seem a little late to add significant new amendments - but that is what has just happened, including a whole new provision on non-disclosure agreements. Some 64 pages of amendments were published on 7 July. A number of these are opposition amendments which are unlikely to go ahead, so this article focusses on the government amendments which will almost certainly be passed.
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Here are the key points from the government amendments.
Fire and rehire
The ban on fire & rehire originally covered changes to any contractual term without employee agreement, no matter how outdated the term, how sensible the change or how unreasonable the employee's unwillingness to agree to it. The only exception was when the business was in extreme financial difficulty.
Softening of fire & rehire ban
The government has now relaxed its original position slightly. The fire & rehire ban will now only preclude dismissals to make changes to an employee's contractual:
- pay
- required number of working hours
- pension
- shift times and length
- time off rights, and
- other changes to be defined in regulations (note that this might include benefits)
In an anti-avoidance move, the ban also covers dismissals to impose a new flexibility clause covering the above changes - for example a clause under which the employer reserves the right to reduce an employee's hours or pay in future, without their agreement.
The new wording allows for accompanying regulations to:
- clarify that expenses are out of scope
- put certain types of pay out of scope, and
- define which changes to contractual benefits (other than pension) are in scope.
If an employee is dismissed and re-engaged to impose a contractual change which is not caught by the newly-worded fire & rehire ban then the dismissal will no longer be automatically unfair. Whether it is fair or not will be judged according to the usual tests but new wording requires tribunals to take account of the reason for the variation, any individual or collective consultation and anything the employee was offered in return for the change (all matters which tribunals would have considered in any case).
This softening of the fire & rehire ban marks a significant concession on the government's part at this late stage of the process and is a common-sense amendment. Much still depends on the new regulations, and how the exact scope of the ban is defined (on which there is likely to be consultation). However, the new wording is less likely to bite on certain key changes that reasonably come with the evolution of a business (such as the re-design and modernisation of job duties, the move to new premises or the scrapping of unworkable disciplinary procedures). As such, the new wording looks to be less restrictive of growth than the original.
The fire & rehire ban will nonetheless still present a major block to changing outdated or unprofitable pay, pensions and hours structures. Employers will be allowed to hire new recruits on different terms and make pay rises conditional on employees agreeing to change - but will not lawfully be able to terminate the contracts of existing employees to impose change unless the business is facing financial collapse.
Employers should pay careful attention to the new limitation on imposing flexibility clauses through dismissal and re-engagement. Employers will still be able to include flexibility clauses in contracts of new hires and rely on existing flexibility clauses in contracts of existing employees, but will be precluded from imposing new flexibility clauses on existing employees except in very limited circumstances. Employers should review the flexibility clauses in their contracts ahead of the new law coming into effect (which the government has said will be October 2026).
Extension of fire & rehire ban to cover fire & replace
Finally, and in a separate amendment, the government has extended the fire & rehire ban to cover the replacement of employees with self-employed independent contractors, workers who are not employees, agency workers or any other individuals who not employed by the employer, if the replacement is going to do substantially the same work.
This "fire & replace" situation is currently treated by law as a redundancy (because it is a reduction in the need for employees) and is potentially fair. It was always a little odd that the original fire & rehire wording did not cover this situation, given that it is what happened in the P&O ferries case, which was often cited as an example of the sort of practice the government wanted to outlaw. It is therefore unsurprising (if a little late in the day) to see the government closing this gap.
The new wording would mean that the replacement of a workforce with agency workers (or other non-employees) would be regarded as automatically unfair unless the employer was facing financial collapse and the measure could not reasonably have been avoided. Transfers of employment which are covered by TUPE would not be caught by this new rule (as the employees are not dismissed) and nor would dismissals which are wholly or mainly attributable to a reduction in work (it remains to be seen what this would cover).
Guaranteed hours
Once again, there is a raft of amendments to the guaranteed hours provisions, adding to the complexity of this regime.
The most notable amendments are those relating to how the requirements will apply to agency workers. Earlier this year, the zero hours reforms, including the right to be offered guaranteed hours, were extended to agency workers. The latest amendments would require end-hirers to make a guaranteed hours offer to an agency worker on terms which are no less favourable than those the worker had previously been working under. In particular, pay offered must be no less favourable than either the agency terms they'd been working on or those of comparable workers (who do broadly similar work). Given agency workers can often be engaged on different terms, depending on the assignment, this will require an audit of terms by the end-hirer to be able to justify the terms offered.
The amendments also clarify that when an agency worker accepts a guaranteed hours offer from an end-hirer, they will become a worker (rather than an employee). This is a helpful distinction for end-hirers but, of course, status would still need to be determined based on the overall working arrangements.
Many employers are eagerly awaiting further details about the exceptions to these new rules. In addition to the provisions relating to "relevant terminations" (i.e. contractual terminations in various specified circumstances), the Bill already includes a very open-ended power to set out in future regulations further circumstances when an offer of guaranteed hours does not need to be made or can be treated as withdrawn. The recent amendments would require the Secretary of State to balance the benefit to the workers of receiving the offer against preventing the guaranteed hours regime from having a "significant adverse effect" on employers who are dealing with "exceptional circumstances". It is not yet clear what scenarios would be covered – what would amount to "exceptional circumstances"? – yet another key detail which will be left to regulations. It is, however, at least a nod to the fact that obligations under this part of the Bill will not only prove a significant administrative burden to employers but will also restrict operational flexibility as to how labour is managed.
There are also a number of proposed amendments from opposition parties which would significantly water down the guaranteed hours provisions, for example making it a right to request guaranteed hours by an employee (rather than a requirement for an employer to offer). Opposition have also proposed that the right to request would capture those who work 8 hours a week, over a 26 week reference period - a relatively low threshold, which would bring a lot of minimum hours workers out of the regime. As these amendments are unlikely to pass, we'll need to wait for regulations to find out where the government will set these key details.
Bereavement leave for pregnancy loss
The government has proposed an amendment to the Employment Rights Bill extending the new right to bereavement leave to include pregnancy loss that occurs before 24 weeks of pregnancy. This will entitle mothers and their partners to at least one week of unpaid leave. We have written in more detail about this here.
Non-disclosure agreement ban
In the biggest change to the Bill, a whole new section on non-disclosure agreements (NDAs) has been added which bans NDAs relating to harassment or discrimination. The accompanying government press release says, "If passed, these rules will mean that any confidentiality clauses in settlement agreements or other agreements that seek to prevent a worker speaking about an allegation of harassment or discrimination will be null and void. This will allow victims to speak freely about their experiences and their employer able to support them publicly."
There has been widespread concern for some time about abuse of NDAs, particularly where they prevent disclosures about sexual harassment. Our previous article looked at recent proposals to ban NDAs which prevent disclosures about crime. This article explained the background to regulation of NDAs, including EHRC guidance, Acas guidance and the warning notice on NDAs from the Solicitors Regulation Authority. We have also published a table of current legal and regulatory requirements. Restrictions that are very similar to the latest proposals are already in place in Ireland from November last year.
The new provisions are quite wide, and will have a major effect on settlements of harassment and discrimination allegations. Any agreement to prevent a worker from making an allegation or disclosure relating to harassment or discrimination will be void. This is not limited to sexual harassment or specific types of discrimination. The voiding of NDAs also extends to disclosures about the response of the employer to the harassment or discrimination, or the response of the employer to the making of the allegation or disclosure. There is power to make regulations extending the ban to agreements with other individuals such as independent contractors and those in work experience or training.
There is also power to make regulations on "excepted agreements" where the ban does not apply. There is no indication as yet as to what agreements may be exceptions. In Ireland, the concept of an "excepted NDA" provides that employers can enter into such NDAs provided it is at the request of the employee and, prior to entering into the agreement, the employee has received independent legal advice in writing which is provided for at the reasonable expense of the employer. An excepted agreement cannot restrict certain kinds of disclosure, e.g. to a trade union official or legal practitioner. It may be that the regulations will follow the same approach. The Irish provisions, however, allow employees a "cooling-off period" to withdraw from a signed excepted agreement, which is not currently mentioned in the proposed changes to the Bill.
It is worth noting that the new provision expressly only covers harassment or discrimination which is conduct by the employer or fellow worker. The victim of the conduct must also be the worker themselves or a fellow worker. The limitation to conduct by the employer or a colleague seems to mean that the NDA ban does not cover the new right to make a claim about harassment by third parties, which is already part of the Bill. It is unclear why NDAs would be banned for disclosures about harassment by colleagues but not for disclosures about harassment by third parties.
As currently drafted, the provision does not expressly cover a failure to make reasonable adjustments for a disability. It also does not cover victimisation (where someone is treated badly for making allegations of harassment or discrimination, or helping others to do so). The wording does apply to the response of the employer to an allegation/disclosure, which looks like it would prevent an NDA covering victimisation for making that specific allegation or disclosure – but it is not clear why victimisation more widely is not covered.
It is not currently stated when this ban will come into effect (as the provision was not included in last week's roadmap for implementation of the Bill). The change will have major implications for confidentiality wording in contracts and policies, as well as settlement agreements. The reform may be welcomed by many if it stops the "hushing up" of serious allegations which allows harassment and discrimination to be repeated. It may, however, have the unintended consequence that employers become less willing to settle harassment and discrimination claims – particularly commercial settlements where the employer feels confident of defending the allegations in tribunal.
What next?
Further sittings in the House of Lords are due to take place between 14 and 21 July. There will then be a third reading, following which the Bill returns to the Commons for consideration of any amendments before Royal Assent. Our best guess is that this means the Bill will not be passed until early September, before the Labour party conference.
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