Labour publishes long-awaited Employment Rights Bill

The highly anticipated Employment Rights Bill was published 10 October - just within 100 days of Labour coming into government in July 2024, together with Next Steps to Make Work Pay - GOV.UK (www.gov.uk) and Employment Rights Bill: supporting documents. 

"The government is delivering the biggest upgrade to rights at work for a generation, boosting pay and productivity with employment laws fit for a modern economy" said Deputy Prime Minister Angela Rayner.

Updated 23 October 2024

On 21 October 2024 the Employment Rights Bill had its second reading in the House of Commons. Alongside this, the Department for Work and Pensions published four separate consultations, which will run until 2 December 2024. The first set of consultations cover zero hours contracts; collective redundancy consultation and "fire and re-hire"; trade union legislation; and statutory sick pay:

Zero hours contracts

The government consultation, Making Work Pay: the application of zero hours contracts measures to agency workers is specifically seeking views on how the government proposals might apply to agency workers, in particular (i) the right to guaranteed hours (reflecting the time worked during a reference period); and (ii) the right to reasonable notice of shifts and the right to payment for shifts cancelled or curtailed at short notice. The consultation considers in particular whether obligations with respect to agency workers should sit with the employment agency or end hirer. The government indicates that it will consult again at a later date on the implementation of these measures more generally.

Collective redundancy consultation and "fire and re-hire"

In Making Work Pay: Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire the government is seeking views on measures to strengthen the collective redundancy framework and protections for employees against fire and rehire practices. The consultation invites views on potentially increasing the maximum period of the protective award that a tribunal can award for collective redundancy to 180 days, or removing the cap entirely, and whether interim relief should be available to employees bringing claims for the protective award or for employees bringing unfair dismissal claims where their employer has sought to fire and re-hire.

Trade union legislation

The government consultation, Making Work Pay: Consultation on creating a modern framework for industrial relations explores Labour's proposals for achieving a positive and modern framework for trade union legislation. The consultation invites views on the principles which should underpin its industrial relations framework, as well as in relation to specific issues such as the trade union recognition process; political funds, industrial action ballots, repudiation of industrial action and the right of access.

Statutory sick pay

In Making Work Pay: Strengthening Statutory Sick Pay the government seeks views on the level of sick pay (by reference to a percentage of earnings) for those earning below the Lower Earnings Limit, who are not currently eligible for sick pay.

The government has also published 10 separate fact sheets: Employment Rights Bill overview; Adult Social Care Negotiating Body; Bereavement Paternity and Unpaid Parental Leave; Fair Work Agency; Fire and rehire; School Support Staff Negotiating Body; Statutory Sick Pay; Trade unions; Unfair dismissal and Zero Hours Contracts. With the exception of the fact sheet on Trade Unions in the Employment Rights Bill (which is more extensive), the fact sheets are fairly brief. They aim to support businesses, employers and employees to understand the measures in the bill and their impact by setting out the government's current policy/legal framework, the policy intent and how the bill is intended to work in the relevant area.

Employment Rights Bill – Summary

The headline points outlined in the Bill are below:

• Existing two-year qualifying period for unfair dismissal will be removed. But...

  • Employees who have not yet started work do not benefit from protection against unfair dismissal unless the reason (or principal reason) for the dismissal falls within a number of prescribed reasons (which include the current grounds set out in the Employment Rights Act for which there is no qualifying period of service required eg discrimination or maternity).
  • Employers may dismiss during the "initial period of employment" ie probation period and if the reason is capability, conduct, statutory contravention or “some other substantial reason”, then the provisions of s.98(4) of the Employment Rights Act may be modified. The details will be set out in secondary legislation and will be subject to consultation, but the Government has indicated a preference for a 9 month probation period, during which a lighter touch process would apply to give businesses more flexibility to terminate.
  • We anticipate that reforms of unfair dismissal law will take effect no sooner than Autumn 2026 following consultation and parliamentary scrutiny.

• A new obligation on employers to prevent third party harassment will be inserted into the Equality Act 2010. The new duty to take reasonable steps to prevent sexual harassment will be amended to require employers to take all reasonable steps to prevent sexual harassment; and regulations will specify further detail on the steps to be regarded as reasonable. Amendments to whistleblowing legislation so that a disclosure that sexual harassment has occurred will be explicitly identified as a protected disclosure.

• Stronger protection for pregnant women and new mothers returning to work including protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work. The current protection under the Employment Rights Act 1996 which applies to redundancy during the protected period of pregnancy or following a period of statutory family leave, will be amended to also cover dismissal during that protected period.

• A new protection for unfair dismissal for failing to agree to variation of contract will be inserted into the Employment Rights Act as a way of tackling fire and rehire. These provisions will make dismissals unfair where the reason (or principal reason) for the dismissal is that the individual did not agree to an employer’s requested variation of contract. There is a limited exception where the dismissals were intended to mitigate financial difficulties that could impact the employer’s ability to carry on the business.

• More robust right to request flexible work - but not an absolute right to work flexibly. Changes made by the Bill will mean that an employer can only refuse a request if it considers that a specified ground (as currently contained in the Employment Rights Act – and listed below) applies AND it is reasonable to refuse the request on that ground or those grounds. The Bill sets out limited grounds on which an employer can refuse a request eg

  • the burden of additional costs,
  • detrimental effect on ability to meet consumer demand,
  • inability to re-organise work among existing staff,
  • inability to recruit additional staff,
  • detrimental impact on quality, performance,
  • insufficiency of work during the periods the employee proposes to work,
  • planned structural changes and
  • any other grounds specified in regulations.

Essentially bolstering rights to work flexibly "where practical" as the employer will be required to notify the employee of the ground(s) for refusal and explain why their decision was reasonable.

• Day one rights for paternity and parental leave with the removal of the qualifying period of employment. Further details to be set out in regulations regarding bereavement leave.

• Statutory sick pay strengthened with changes to the lower earnings limit and removal of the waiting period so workers would be granted the right to claim sick pay from the first day of illness.

• Zero hours contracts - a new right for workers to be offered guaranteed hours subject to a qualifying reference period. Labour aims to end “exploitative zero hours contracts”. Details of how these new rights will operate in practice will be set out in secondary legislation including the length of the relevant reference period, how and in what form the offer of guaranteed hours must be made, and what information must be included. There is also a new right for individuals on zero-hours contracts to be given reasonable notice of shifts and changes affecting shifts; as well as a right to pay in certain circumstances for cancelled shifts. The new provisions are complex and we will provide further updates in due course.

• Strikes - repeals of legislation relating to minimum service levels.

• Trade union rights

  • Employers will be required to provide a statement of right to join a union.
  • Unions can request an “access to the workplace” agreement, with disputes to be handled by the Central Arbitration Committee (CAC).
  • Union recognition will be made easier with lower numbers required in the bargaining units to support recognition.
  • The burden of proof for time off for union duties will be reversed and placed on the employer, who must demonstrate that the time off requested is unreasonable.
  • Industrial action ballots will be simplified, removing limits required for voting.
  • Following a gap in s146 TULRCA there will be a protection against detriment for participating in lawful strike action. The government will consult on the types of detriment that will be prohibited.

• Collective Redundancy consultation - currently an employer proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less must carry out collective consultation and notify the Secretary of State. The reference to “one establishment” is being removed so that the thresholds will apply across the whole of the business. We shall update further on the implications of this proposed change.

• Equality Action Plans - regulations may require employers (with 250 or more employees) to develop and publish an equality action plan showing the steps they are taking with regard to gender equality, including addressing the gender pay gap and supporting employees going through the menopause.

Subject to consultations, further proposed reforms include:

• A Right to Switch Off, preventing employees from being contacted out of hours, except in exceptional circumstances, to allow them the chance to rest and recuperate. NB this is likely to be implemented through a Code of Practice.
• A strong commitment to end pay discrimination by expanding the Equality (Race and Disability) Bill to make it mandatory for large employers to report their ethnicity and disability pay gap.  
• A move towards a single status of worker and transition towards a simpler two-part framework for employment status.  
• Reviews into the parental leave and carers leave systems to ensure they are delivering for employers, workers and their loved ones.
• A New Fair Work Agency: The creation of a Fair Work Agency to enforce employment rights and provide guidance is intended to increase companies' compliance with workforce legal obligations and make it easier for employers and employees to understand their respective obligations and rights.

Comment

1. Removal of the Two-Year Qualifying Period for Unfair Dismissal subject to probation: This change purports to allow employees to bring claims of unfair dismissal from day one of their employment, rather than needing two years' service. But we await further detail of how the new “initial period of employment” will work, during which the employer’s ability to terminate will be modified – presumably to make it easier for the employer to terminate without risk of unfair dismissal claims. Taking away the qualifying period of service for unfair dismissal could lead to an increase in the number of Employment Tribunal claims which employers face, and place further pressure on the Employment Tribunal system which already has significant backlogs. It may, however, reduce the number of speculative whistleblowing claims from those who do not have the requisite service to claim unfair dismissal.
2. Consultation on a new Initial Period of Employment (i.e. probation): Introducing a concept of "Initial Period of Employment" when the employer has more flexibility to terminate will be set out in more detail in Regulations following consultation. The detailed rules on length and conditions governing this initial period of employment will determine its impact.
3. Obligation to Prevent Third Party Harassment: The Bill introduces a new obligation on employers to prevent third party harassment ie harassment from clients, suppliers or members of the public. Many employers will already have engaged with ways to prevent third party harassment as part of their preparations for the new duty to take reasonable steps to prevent sexual harassment. But policies etc will need to be reviewed in light of this proposed reform.
4. Stronger Protection for Pregnant Women and New Mothers: Extending protection against dismissal to pregnant employees, those on maternity leave, and new mothers returning to work aims to enhance job security for women in these categories. Employers will need to exercise greater caution and ensure any dismissals are not related to pregnancy, maternity leave, or recent return from maternity leave.
5. Right to Flexible Work "Where Practical": The reform will mean that employers can only refuse a request to work flexibly if it is reasonable for them to do so, by reference to specified grounds set out in the legislation. The Bill does not grant an absolute right to work flexibly. This will be a relief for many businesses. Employers may still be able to justify any refusals, provided that they can prove the flexible work request is unreasonable by reference to specified grounds of refusal. This change may lead to more negotiations around working arrangements, and make it slightly harder for employers to refuse flexible work requests, but the change is not as dramatic as it would be if an actual right to work flexibly was included in the Bill.
6. Day One Rights for Paternity and Parental Leave: Extending these rights from day one reflects the Government's commitment to strengthen worker rights, protect work-life balance and family commitments. Employers will need to update their policies and procedures to comply with these changes if they come into force as set out in the Bill.
7. Strengthened Statutory Sick Pay (SSP): Removing the lower earnings limit for SSP makes more workers eligible for sick pay and making it accessible from the first day of illness could see greater numbers of people claiming sick pay, potentially also leading to higher numbers taking sickness leave.
8. Ending Zero Hours Contracts: New rules will provide workers with the right to be offered guaranteed hours following a qualifying reference period. The reform aims to provide greater job security and predictability for workers. Employers will need to assess practices once the new rules are finalised.
9. Repeal of "Anti-Union Legislation": Repealing legislation that includes the minimum service levels for strikes could strengthen the bargaining power of unions and lead to more frequent and potentially disruptive industrial action. Employers in sectors prone to strikes may need to develop more robust contingency plans.

We shall consider the legislation in more detail over the coming days and update you as it progresses through Parliament.