Employment law reform: Labour commits to strengthening worker rights

Polls suggest a Labour victory at the next UK general election on 4 July. This is likely to bring a wave of employment law reform. The Labour Party manifesto will be published shortly. In the meantime, “Labour’s Plan to Make Work Pay: Delivering A New Deal For Working People” (republished 24 May 2024) gives a clear indication of Labour’s plans to enhance workers’ rights.

The Labour Party is keen to present itself as both pro-worker and pro-business, with a promise to drive economic growth in partnership with trade unions and business.

Labour states that its aim is to tackle job insecurity, income inequality, discrimination, enforcement of employment law rights and low pay. An agenda it says is core to its mission for growth and raising living standards.

Perhaps in response to concerns in relation to some of the more radical proposals to strengthen trade union and collective bargaining and introduce “day one” rights to basic employment law protections, Labour states it will follow a proper parliamentary process for its legislative proposals, with a full and comprehensive consultation inviting businesses, trade unions, workers and civil society to input into how best to put its plans into practice.

What are the key proposed changes?

Unfair dismissal and employment status

The UK currently has a three-tier system for employment status: employees, self-employed and workers. Labour proposes to move towards a single status of worker and transition towards a simpler two-part framework for employment status which differentiates between workers and the genuinely self-employed. This is stated to be subject to consultation; it would have significant tax and other costs implications for business.

Labour proposes that all workers should have ‘day one’ rights (i.e. for unfair dismissal, sick pay, parental leave). At present, only employees (not workers) have protection against unfair dismissal; so this suggests unfair dismissal protection could be extended.

Employees currently need two years’ service to claim ordinary unfair dismissal, though there is no minimum service requirement where a dismissal is for discrimination or whistleblowing.

To allay concerns about the implications for business of “day one rights”, the New Deal states that employers can operate probationary periods to assess new hires. But after that, dismissal must be for one of the statutory fair reasons such as conduct, capability or redundancy. This might seem to enhance worker rights as they will be protected from unfair dismissal at an earlier stage, but could lead to a rise in temporary or fixed term engagements as businesses seek to avoid the perceived risks and burdens associated with permanent employment.

Alongside this, a Labour government proposes to extend the time limit for bringing Employment Tribunal claims to six months, bringing it in line with the limit applicable for equal pay claims. This appears to be a worker-friendly proposal, although with the current backlog in Employment Tribunals, there remain challenges with enforcement of rights.

Fire and rehire

Labour does not propose to ban the practice of “fire and rehire” but plan to strengthen the new statutory code of practice so that it is only used by businesses where there is “genuinely no alternative”. Restricting a business’ ability to fire and rehire staff may, on the face of it, seem to enhance worker rights, but it carries risk that some businesses may choose to simply dismiss and restructure, rather than re-hire workers on less favourable terms.

Zero hours contracts

Labour has pledged to ban zero hours contracts and contracts without a minimum number of hours, save where the individual worker requests such arrangement. It is envisaged that after 12 weeks an individual would have the right to a regular contract to reflect the hours normally worked and that they be given reasonable notice of a change in shifts or working time.

Trade union rights

Labour promises to empower unions and promote collective bargaining by repealing anti-trade union legislation and strengthening the right of entry for trade unions with a simplified process of union recognition, the use of secure electronic and workplace ballots, stronger protections for trade union representatives, duties on employers to inform employees of union rights and statutory rights for trade union equalities representatives.

Labour believes that strengthening union rights will build stronger industrial relations and result in fewer strikes and industrial action.

Fair Pay

Labour wants to widen the remit of the Low Pay Commission in relation to the recommendations it makes on the National Minimum Wage and London Living Wage, to enable them to take account of the cost of living. This change is likely to be introduced rapidly for its headline-grabbing potential although it may make little difference in practice.

DEI

Labour plans to introduce ethnicity and disability pay gap reporting for employers with 250 or more staff, and to introduce a socio-economic duty in the Equality Act 2010.

Large employers will be required to produce Menopause Action Plans setting out how they will support employees through the menopause. Again, we anticipate that introducing Menopause Action Plans will be seen as an “easy win” post-election – enhancing worker rights without placing a significant burden on business.

Support for home/family life and “right to disconnect”

Labour’s proposals include the introduction of a “right to disconnect”, based on the Irish and Belgian models. Alongside this, there are plans for the extension of statutory maternity and paternity leave and a review of the shared parental leave system to incentivise the sharing of leave. Labour also raises the possibility of building on recent reforms by introducing a right to work flexibly unless it is not reasonably feasible – currently there is just a right to request flexible work.

Technology

Labour recognises the advancement of technologies at work; it commits to working with trade unions, employers, experts and workers to examine what AI and new technologies mean for work, jobs and skills, and how to promote best practice in safeguarding against the invasion of privacy through surveillance technology, spyware and discriminatory algorithmic decision making.

Labour commits to ensuring that proposals to introduce surveillance technologies would be subject to consultation and negotiation.

Single Enforcement Body

The Conservative Government proposed this but it has never been implemented. The aim was to establish a single labour enforcement body to increase compliance with legislation such as National Minimum Wage legislation. Currently the burden is mainly placed on individuals to litigate their rights.

Comment

Labour's proposals seek to strike the balance between enhancing worker and trade union rights on the one hand, with avoiding costly additional burdens for business on the other.

Some of the more radical proposals raised in its earlier Green Paper, such as making compensation for unfair dismissal uncapped, do not feature in the New Deal. Other proposals are clearly stated to be subject to consultation with stakeholders; and Labour reiterates that it will follow a full parliamentary process for any legislative changes.

In terms of timing, there could be a few headline-grabbing changes announced immediately perhaps including increases to the London Living Wage and the introduction of Maternity Action Plans; and Labour could publish a high level Employment Bill, but it is likely that key detail would sit in implementing legislation subject to consultation and parliamentary scrutiny.