On Thursday 10 October 2024 the highly anticipated Employment Rights Bill was published. Shepherd and Wedderburn held a webinar the following day, which was hosted by Partners Morag Hutchison and Andrew Knight, to discuss the changes set out in the Bill.
Described as the biggest change to worker's rights for a generation, Morag and Andrew took listeners through many of the key proposals contained in the Bill, which relate to:
- day-one rights (including the headline-catching introduction of day-one unfair dismissal rights);
- flexible working;
- zero-hours contracts;
- protection from harassment;
- collective redundancy;
- fire and re-hire; and
- trade union rights.
In this article, we explore some of these key proposed changes.
It is important to note at the outset that this new Bill now commences its Parliamentary process, and the second reading of the Bill will take place on 21 October 2024. It is quite possible that changes to the Bill will be made following Parliamentary scrutiny.
It is also important to recognise that one of the most prominent features of the Bill is its lack of detail in key areas (for example, in relation to the parameters of the statutory probationary period mentioned below). It is proposed that this detail will follow in regulations to be introduced by the government at a later date.
There will now follow various consultation exercises on different parts of the Bill throughout 2025, therefore it appears that it will likely be 2026 by the time the majority of these new proposals and employee protections come into force.
Day-one rights
One of the biggest reforms proposed by the Employment Rights Bill is the introduction of several day-one rights.
The most significant of which is the right of an employee to not be unfairly dismissed, which is currently reserved in most cases for employees with two years' service or more.
The Bill proposes that, from the first day of employment, an employee will have the right not to be unfairly dismissed.
To alleviate the impact of this for employers, the government has proposed to introduce a statutory probationary period during which the unfair dismissal protections will be relaxed (although not removed completely). As ever, the devil will be in the details and the Bill leaves the details to be set out in future regulations.
What we are able to glean at this stage is:
- the probationary period will not apply to redundancy dismissals, so all employees (regardless of length of service) will benefit from unfair dismissal protection in redundancy cases;
- the length of the probationary period is still to be determined – the government has said that it currently favours nine months, but that could change following consultation; and
- it is very unlikely that the probationary period will give employers carte blanche to dismiss for any reason without fear of repercussion, as dismissal will most likely need to be for reasons personal to the employee in question and some level of process (and evidence) will be required.
Although these changes won't be introduced until 2026, and much of the detail is still awaited, employers should focus now on sharpening up their policies and strengthening their processes.
Flexible working
The Bill proposes to enhance flexible working rights, giving an employee the ability to request a flexible working pattern, which must be granted, unless the employer can demonstrate both that one or more of the statutory grounds for refusing the request applies (e.g. cost, impact on quality, impact on performance, etc.) and that it is reasonable to refuse the request on those grounds.
Recent changes to the flexible working regime mean that an employer is currently under an obligation to consult with an employee about their request before it is rejected. The Bill proposes to bolster this by requiring the employer to notify the employee of the grounds for refusal and to explain why the employer considers its decision is reasonable.
The maximum penalty which can be applied to employers for breaking the rules remains the same at eight weeks' pay. However, higher compensation may be awarded if an employee successfully combines a claim for breach of the flexible working rules with another type of claim (most often sex discrimination).
Zero-hours contracts
While Labour had outlined a desire to outlaw "exploitative" zero-hours contracts, the Bill stops short of banning zero-hours arrangements altogether. The provisions do, however, remove a significant level of flexibility and make this area more complex for employers.
The main proposed changes will see the introduction of obligations on the employer to:
- offer the employee guaranteed hours if they work regular hours over a defined period;
- give the employee reasonable notice of their shifts and changes affecting their shifts; and
- provide a proportion of pay to an employee for any shift which is cancelled, moved, or curtailed at short notice.
Much of the detail in terms of how the guaranteed hours provisions will operate will be set out in regulations to be introduced at a future date.
The new right will apply to a "zero" or "low" hours worker who, during a relevant reference period, worked a number of hours that satisfy certain conditions in respect of number, regularity, or otherwise. For qualifying workers, the employer will be obliged, subject to certain exceptions, to make an offer of guaranteed hours after the end of every relevant reference period, reflecting the hours the worker worked during that reference period.
Future regulations will identify conditions that will need to be satisfied in order to qualify for this right, for example:
- the length of the relevant reference period;
- how, when, and in what form the guaranteed hours offer must be made; and
- what information it will need to include.
The maximum compensation that may be awarded against an employer who fails to comply with the new rules will, once again, be detailed in future regulations.
Protection from harassment
There is a new legal duty to be placed on employers to take "reasonable steps" to prevent sexual harassment of their employees and workers in the course of their employment. This will become law on 26 October 2024 and was brought into force by the previous government.
The Employment Rights Bill proposes that employers must take "all reasonable steps" to prevent sexual harassment. Although this might seem like a subtle distinction, the reality is that the addition of the word "all" will significantly raise the bar for employers to meet their obligations.
Additionally, the Employment Rights Bill introduces the requirement for employers to take all reasonable steps to prevent the harassment of their staff (on the grounds of any protected characteristic) by third parties. This is a significant change which revives and significantly bolsters laws which were repealed in 2013.
The Bill will also extend whistleblowing protections to those who make protected disclosures relating to sexual harassment.
Collective redundancy consultation
The law currently provides that if there are 20 or more employees at a "single establishment" whom an employer proposes to make redundant within a period of 90 days or less, then the employer must undertake collective consultation through elected employee or trade union representatives.
Where an employer proposes to dismiss 20 to 99 employees as redundant within that period, no dismissals can take effect within the first 30 days following the commencement of consultation, and for 100 or more employees no dismissals can take effect within the first 45 days.
Employers can face protective awards (of up to 90 days' pay) per dismissed employee for failing to adhere to these requirements.
For employers with multiple worksites, the high-profile Woolworths case (where each store in a retail chain was considered its own establishment) served as a useful authority. However, the Employment Rights Bill essentially reverses that decision by removing the need for the redundancies to be at a single establishment.
Employers with multiple worksites will therefore have to keep a close eye on any redundancies which are proposed throughout their business to ensure that consultation obligations are adhered to.
Fire and re-hire
The government's early rhetoric had suggested a complete ban on "fire and re-hire" practices (which were at the centre of the scandal involving P&O Ferries in 2022). While the Bill stops short of an outright ban, it will in practice make it extremely difficult for employers to rely upon dismissal and re-engagement, or threatening dismissal and re-engagement, as a means of introducing detrimental changes to employment terms.
The new provisions will make it automatically unfair to dismiss an employee where the reason (or principal reason) for the dismissal is that an individual did not agree to an employer's requested variation of contract. The only exception to this will be (in simple terms) when the requested variation is designed to tackle any financial difficulties which are threatening the employer's future ability to trade.
Where this defence can be made out by an employer, the Bill includes a number of issues which must be considered by an employment tribunal when assessing whether the dismissal is fair, including the degree to which the employer has consulted with affected employees/ their elected or trade union representatives and whether the employees have been offered anything in return for agreeing to the variation.
Trade union reform
It is perhaps of small surprise that the Bill seeks to significantly enhance the ability of trade unions to influence the sphere of work.
Principal among the proposed changes is a new right for trade unions to access workplaces in order to:
- meet, represent, recruit, or organise workers (whether or not they are members of a trade union);
- facilitate collective bargaining; and
- establish a framework for entering into an access agreement with an employer.
When it comes to industrial action, the Bill will remove the requirement for at least 50% of those entitled to vote in a ballot for industrial action to do so. It will revert to the need for a simple majority of those who vote to ballot in favour in order for industrial action to be lawful. There will be no minimum turnout requirement.
A number of other changes are proposed to trade union laws. The totality of these changes will see the power of trade unions strengthened and the ability of employers to resist workers' collective bargaining attempts diminish significantly.
Gender equality action plan
Large private sector employers (with over 250 employees) and certain public authorities listed in the Equality Act 2010 will be required to produce gender equality action plans on how to address gender inequality, including addressing the gender pay gap and planned steps to support employees going through menopause.
Other proposals
Less headline grabbing, although equally important changes, introduced by the Bill are:
- the removal of the 26 weeks' service requirement for unpaid statutory paternity leave;
- the removal of the three-day waiting period and the lower earnings threshold for statutory sick pay; and
- the introduction of a right to unpaid bereavement leave for employees from day one (although the Bill does not currently specify what relationship the employee must have to the deceased in order to qualify).
Further reforms
A "Next Steps to Make Work Pay" document was published alongside the Bill, outlining further proposals in respect of a number of Labour's Manifesto promises, which are not addressed in the Bill, including:
- the right to "disconnect" from work during the evenings and at weekends;
- introduction of a single employment status (removing the distinction between "worker" and "employee");
- introduction of an employer's obligation to report any ethnicity and disability pay gaps;
- increase in the time limit for bringing employment tribunal claims from three to six months; and
- a review of the parental leave and carers leave provisions.
Conclusion
The Bill lives up to its hype in introducing the biggest set of proposed reforms to workers' rights in a generation.
A number of the changes it proposes to introduce (such as the day-one right to unfair dismissal protection and the trade union law reforms) will significantly alter the current industrial relations landscape. As ever, the real-life implications of the changes cannot be fully assessed until we have all of the details and, at least at this stage, the Bill is notably lacking in detail on certain issues.
With over 60 references to powers which the secretary of state "may" exercise (including the introduction of regulations), it is clear that the Bill will place significant powers in the government's hands which would not be subject to Parliamentary scrutiny.
Whether this can lead to meaningful improvements in the working lives of ordinary people, while ensuring the economic growth the government has promised, remains to be seen.
This article was co-authored by Trainee Sarah Harris.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
