Labour’s landslide general election victory on 4^th July means that we can expect to see some of the biggest changes to employment law that we have seen for decades.

The proposals are far-reaching and touch on almost every aspect of employment rights. We anticipate that the next couple of years will be a very busy time for HR, employment lawyers and in-house legal teams.

We have covered some of Labour’s key proposals previously (UK general election: Change on the horizon for employment law? | Burness Paull). Since then, we have had the State Opening of Parliament and the King’s Speech. As part of that process, the Prime Minster provides briefing notes, which offer slightly more detail on how Labour plan to go about implementing their pre-election promises.

The briefing notes are lengthy and cover all aspects of Labour’s manifesto – health, national security etc. As such, the detail on the employment law reforms remains limited and we still have considerably more questions than answers at this stage.

In short, there are to be two new pieces of legislation, at least in the first instance. Those are:

1. the Employment Rights Bill; and
2. a Draft Equality (Race and Disability) Bill

In this update, we focus on what we can expect to see in the Employment Rights Bill and the Draft Equality (Race and Disability) Bill. We also touch upon what a Labour government may mean for business immigration law.

The Employment Rights Bill

The Employment Rights Bill is to be introduced to Parliament within the first one hundred days, and Labour states this “will represent the biggest upgrade to workers’ rights in a generation”. A bold claim, to say the least.

The briefing notes state that the Employment Rights Bill will deliver on the policies set out in Labour’s “Plan to Make Work Pay” paper that require primary legislation to implement.

What is not in the Employment Rights Bill?

Before we consider what is in the Employment Rights Bill, it is interesting to note what is not in the Bill (or at least not in the briefing notes to the King’s Speech).

• The Employment Rights Bill does not contain anything regarding Labour’s previous proposal to move towards a two-part system for employment status of ‘workers’ and ‘genuinely self employed’ (thus ridding ourselves of the confusion caused by questions of employment status between worker and employee).

The government appears to accept that this proposal will involve substantial change and consultation will be required prior to any change to the employment system. Therefore, this is a change we expect might take some time.

However, in the briefing notes, it does refer to certain new rights in the Employment Rights Bill being available to “workers” – for example, the right to claim unfair dismissal from day one (which we will come back to). However, as you’ll be aware, unfair dismissal protection is only applicable to employees. Therefore, the government’s intention on the timing of the new Employment Rights Bill being brought into force, reforming the employment status system, and how these two will interact, is unclear.

• Also, Labour had previously said they would introduce the right for workers to ‘switch off’. However, again, this was not mentioned in the King’s Speech.
• Likewise, Labour’s previous proposal to reverse the ‘Woolworths decision’ – so that collective consultation requirements will be triggered if redundancies reach a defined threshold across the business as a whole (rather than just looking at numbers across each individual site) – was not mentioned in the Kings Speech.
• Also, nothing was said about Labour’s proposal to increase tribunal time limits from three to six months…

What is in the Employment Rights Bill?

Labour have stood by their commitments to:

1) Introduce ‘basic individual rights’ from ‘day one’ for all workers – including unfair dismissal, parental leave and sick pay.

This was one of the biggest headlines pre election. What does this mean in practice? Well, for starters, it means we won’t get to ask every employment lawyer’s favourite question of “what length of service do they have?” because, the reality is, it won’t matter.

The fact that Labour wants to change the qualifying period is not surprising – it has been a political hot potato that seems to be impacted by every change of government – but the proposal to eradicate it altogether truly is radical. As long as unfair dismissal protection has existed in the UK, there has been a qualifying period. The shortest time it was ever reduced to was 26 weeks, when Labour was in government in the 1970s.

Likewise, the proposal to extend the right to workers is significant. After all, the reason a lot of employers engage workers is to retain flexibility and limit their exposure to such employment protections. The impact this may have on the gig economy in particular is likely to be vast.

The policy reason behind this change, Labour says, is that extending protections to workers from the commencement of their employment will encourage more workers to switch jobs, which, in turn, is associated with higher wages and productivity growth. Apparently, according to Labour, wage rises are around usually three-times higher for those who move jobs, compared to those who do not.

If this is the case, the reform could bring significantly increased costs for employers, not just in terms of wages, but also recruitment as more time and resource will have to go into identifying the right candidate. Employers will also need to increase focus on the retention of workers, to keep recruitment costs down.

From a practical perspective, ‘day one’ unfair dismissal rights will also mean a greater reliance on the use of probationary periods. Whilst the use of probationary periods is confirmed as permitted in Labour’s briefing notes, they offer no more detail. It is likely Labour will set a limit on the duration of probationary periods, or how much leeway employers will have to dismiss during this time. Notably, Labour’s ‘Plan to Make Work Pay’ paper provided that the proposed changes will help to ensure that newly hired workers are not fired ‘without reason or cause’. This suggests some kind of set reason may need to exist for dismissal, even in the probationary period. Presumably some sort of restriction is necessary, to ensure employers don’t exploit this option and undermine the ‘day one’ right.

If your company does not currently have probationary periods in its employment contracts, you should consider inserting these for new starts going forward, in anticipation of this major change.

2) Labour says the Employment Rights Bill is to “ban ‘exploitative’ zero-hour contracts, ensuring workers have a right to a contract that reflects the number of hours they regularly work, and that all workers get reasonable notice of any changes in shift, with proportionate compensation for any shifts cancelled or curtailed”.

Notably, Labour’s position on zero-hours contracts has changed slightly. Originally, Labour claimed that they would ban zero-hours contracts, but now it seems that rather than abolish zero-hours contracts altogether, they will give individuals the right to request contracts to reflect their regularly worked hours.

It appears Labour may have recognised that some individuals like the use of zero-hours contracts, and that flexibility can be a benefit both ways, and have therefore watered down their original commitment. Indeed, in the briefing notes, Labour says that “this will end ‘one-sided’ flexibility, ensuring all jobs provide a baseline level of security and predictability”. So, it seems their efforts are now focused on ensuring a more level playing field.

If that is the case, it is not clear how Labour’s proposed reform will differ from previous Conservative plans, and the new regime on the right to request a more predictable working pattern that was due to be introduced this autumn. Under this regime, similar to flexible working, employers will be able to refuse a request for a predictable working pattern on certain, statutory grounds. It is unclear if Labour will introduce this regime as planned and strengthen it, or announce new plans altogether.

Of course, limiting the use of zero-hours contracts may create resourcing challenges for a number of businesses. However, Labour have previously said fixed-term contracts will still be permitted, so we may see a greater use of these – for example, in terms of managing seasonal fluctuations – perhaps in conjunction with the use of overtime. Again, there is no more detail on this change in the briefing notes than we already know, and there is no mention of fixed-term contracts.

It would be worthwhile for employers to conduct an audit of their use of zero-hours contracts at present, to understand how any change may impact their business. No doubt the use of zero-hours contracts is more prevalent in certain industries, so some businesses will be harder hit than others.

3) Labour have said that they will make flexible working the default from day-one for all workers, with employers required to accommodate this as far as is reasonable, to reflect the modern workplace (so more than just a ‘right to request’).

The flexible working regime was already expanded in April this year, when it was made a day one entitlement, and the number of requests employees could make in a 12-month period was increased from one to two.

However, currently an employer may still refuse a flexible working request if they believe that one or more of certain grounds applies – but there is no requirement in the legislation for this belief to be reasonable, and little scope for employees to challenge an employer’s decision.

It therefore appears that some form of ‘reasonableness test’ will likely be introduced under Labour. We understand that there may be exemptions for jobs or sectors that are time critical, or where shift patterns mean that flexible working is not suitable, but again, we don’t yet have more detail.

4) Labour have said they intend to strengthen statutory sick pay by:

• removing the lower earnings limit, to make it available to all workers; and
• removing the waiting period, so that people benefit from it from day one, rather than having to wait until the fourth day of any absence in order to receive pay.

According to Labour, 1.5 million people currently earn below the lower earnings limit (currently £123 per week). Their view is that the current statutory sick pay regime disproportionately affects the lowest paid workers working part-time, or in multiple low paid jobs.

Of course, this will come at a greater cost to employers. Although arguably these changes will make statutory sick pay easier to manage from an administrative perspective.

5) Labour have said they will end the practice of ‘fire and rehire’ and ‘fire and replace’ by reforming the law to provide effective remedies.

We had already seen some change in this area under the last government. The Code of Practice on Dismissal and Re-engagement introduced by the Conservative government, came into force just last month. However, the Code does not of itself, make an employer liable to legal proceedings if they do not follow it. In other words, there is no standalone claim. Similar to the Acas Code of Practice on disciplinary and grievance procedures, it can be taken into account in legal proceedings and, if the employer has unreasonably failed to follow the Code, a tribunal can increase any award it makes by up to 25%.

Whilst a tribunal can award an uplift for certain claims, for example unfair dismissal, draft legislation to allow a tribunal to uplift a claim for a protective award for failure to follow collective consultation obligations when changing terms and conditions did not make it through in the wash-up period prior to the general election, and will require to be brought in by Labour if that specific power is to take effect.

Again, similar to the position in respect of zero-hours contracts, Labour originally claimed that they would ban fire and rehire. They have now said ‘it is important that businesses can restructure to remain viable, preserve their workforce and the company when there is genuinely no alternative, but this must follow a proper process based on dialogue and common understanding between employers and workers’. It is clear now that they intend to replace the recently introduced Code and introduce stronger penalties for employers who breach their consultation obligations.

Whilst we await further details of these changes, employers should at least ensure that they are familiar with the new Code when considering making any changes to terms and conditions of employment, as it remains the law unless/until it is changed.

6) Labour have said they intend to strengthen protections for new mothers by making it unlawful to dismiss a woman who has had a baby for a period of six months after her return to work – as opposed to simply obliging the employer to offer her alternative employment where there is a suitable vacancy – except in specific circumstances.

Unfortunately, no detail has been provided as to what these ‘exceptional circumstances’ might be.

Further, it appears that the intention is for this right to only apply to new mothers, which could lead to potential discrimination claims from same-sex parents taking adoption leave.

Commentary suggests that what this will likely turn into is a requirement for employers to demonstrate the dismissal of such an employee is genuinely for a reason that is nothing to do with pregnancy or maternity.

Since employers should already be very cautious of dismissing women returning from maternity leave due to existing discrimination risks, the extent to which there will be any real change in this area remains to be seen.

7) One of the more notable changes from Labour (which they have described as a key priority) includes establishing a new single enforcement body, also known as a ‘Fair Work Agency’, to strengthen the enforcement of workplace rights.

The briefing notes states that this body will have the power to enforce workers' rights, including strong powers to i) inspect workplaces and ii) issue fines. The intention is for the body to undertake targeted and proactive enforcement work and be able bring civil proceedings upholding employment rights.

Prior to the election, Angela Rayner – now Deputy Prime Minister – said the new body will have ‘real teeth’.

This could bring about a real seismic change, where workers can make complaints to a body which can investigate and bring proceedings against employers, meaning it will no longer only be up to employees to hold employers to account. It may be similar to how HMRC approaches enforcement of national minimum wage. At present, the exact remit of the body is unknown.

On a related point, Labour have said they will also take steps to strengthen and improve enforcement through employment tribunals to provide quicker and more effective resolutions. Arguably this is desperately needed, especially in light of the current backlogs in tribunals south of the border, and the fact that the pressures already felt by our current tribunal system will be compounded by Labour’s proposed reform.

8) As you would expect, Labour is also proposing to make changes to legislation affecting trade unions, in order to strengthen their rights and protections.

Unsurprisingly, Labour will look to repeal the changes made through the Trade Union Act 2016, which introduced higher ballot thresholds for industrial action, a time limit for industrial action following the ballot, and a requirement for more information on the ballot paper, as well as extending the notice of industrial action from one to two weeks.

They also plan to repeal the legislation which gives the government the ability to make regulations providing for minimum service levels during a strike in certain public services (health, fire and rescue, border security). It will also abandon plans to reintroduce regulations that allow businesses to engage temporary staff during a strike.

Labour is also seeking to simplify the process of statutory recognition (by removing the requirement that unions must show that the majority of workers in the bargaining unit are likely to support their claim for recognition before the process has even begun).

In addition, Labour plan to change the rules governing the final ballot, in which workers vote on whether to recognise a trade union, requiring unions to only gain a simple majority to win. Currently, in a recognition ballot, recognition will only be awarded if both the majority of employees in the ballot vote to recognise the union, and at least 40% of the employees in the bargaining unit vote to recognise the union, which is a significant hurdle.

Labour have also said that they will reform trade union legislation to:

• ensure those working in the gig-economy have a right to organise through trade unions;
• create a new duty on employers to inform employees of the right to join a trade union, and give unions greater access to workplaces for recruitment and organising;
• introduce electronic and workplace balloting, rather than simply postal balloting;
• strengthen protections for trade union representatives; and
• strengthen blacklisting laws.

Overall, these changes represent very significant reforms to trade union law and will mean that employers may see more industrial action. Further, some employers who have never had to deal with union recognition before may well be faced with collective bargaining.

As a result, employers who do not currently recognise a trade union may wish to consider whether they are at risk of trade union recognition, and whether there is anything they can do to proactively engage with their employees on workplace issues – for example, via an employee forum – so that trade unions don’t later fill this void.

Management and HR will also likely need training on effective employee engagement and trade union rights.

9) Lastly, Labour intends to establish a fair pay agreement in the adult social care sector and assess how and to what extent such agreements could benefit other sectors.

Labour have said that they will ‘consult widely’ on the design of the fair pay agreement. Labour’s view is that this will empower workers and the trade unions that represent them to negotiate fair pay and conditions, including staff benefits, terms and training.

Labour initially said they would establish sector specific fair pay agreements for all workers and subsequently backtracked from their initial proposal, although by committing to assessing to what extent such agreements could benefit other sectors too, they have clearly not ruled out fair pay agreements in other sectors altogether.

As Labour have stated that they will consult widely on the fair pay agreement, it appears that this change will not be introduced quickly, but rather the power to establish a fair payment agreement in the adult social care sector will be introduced, followed by consultation on secondary legislation.

Proposed changes to the living wage/national minimum wage

Separate to the Employment Rights Bill, the briefing notes state that Labour will deliver a genuine living wage through changes to the Low Pay Commission (LPC) and will remove the national minimum wage age bands to ensure every adult worker benefits.

The updated remit for the LPC has now been published. Labour have asked the LPC to take account of the living wage but also said that other factors such as business competitiveness should be considered. The remit says the LPC should ensure the rate does not drop below two-thirds of UK median earnings for workers aged 21 and over, a recognised measure of low hourly pay. Further, age bands will be removed over a longer time frame, with steps being taking year by year to move to a single rate for over 18s.

There is a concern from some that businesses won’t employ younger people when they can pay those with (often) more experience the same wage.

The LPC will make its recommendations on the 2025 national living wage rate in October.

Draft Equality (Race and Disability) Bill

The second piece of legislation that Labour plan to introduce – the Draft Equality (Race and Disability) Bill – again is pretty radical in its potential impact.

Its primary purpose is two-fold:

• to extend the current equal pay regime, so that it covers race and disability, as well as sex; and
• to extend the current pay reporting regime for employers with at least 250 people, to include ethnicity and disability, as well as gender.

Equal pay

In respect of the proposed extension to equal pay, we have heard a number of well-founded concerns. Because of the complexity of equal pay legislation, a lot of the case law in this area gets bogged down in technical arguments about jobs of equal value, appropriate comparators etc, which prevent quick resolution of the real issues at play and means cases can be stuck in the tribunal system for years.

This complexity gives rise to issues of access to justice, with it being much more difficult for employees to adequately represent themselves in such litigation.

Questions also arise as to how you could find a comparator for the purposes of a disability claim – would a claimant have to compare themselves with someone who doesn’t have a disability under equality law, or will comparisons between different disabilities be permitted, and, if so, how would this work?

Similar, and sensitive, issues likewise arise when trying to draw comparisons amongst different ethnic groups.

Furthermore, discrimination law (as it stands) already provides an employee with the opportunity to raise a claim for direct or indirect discrimination on the grounds of race or disability, if there is unequal treatment. Unlike equal pay claims, compensation in discrimination claims can include an injury to feelings award, and is also not subject to any upper cap.

It therefore remains to be seen whether extending the current equal pay regime, rather than taking a different approach, is truly the best solution.

Pay reporting

Similar concerns have been expressed in respect of extending the current pay reporting regime.

Reporting on the gender pay gap is already a substantial task for employers, and extending this obligation to ethnicity and disability will clearly put a further burden on employer’s time and resource.

Whilst some employers may have started work on ethnicity pay gap reporting following the government guidance on voluntary reporting last year (New ethnicity pay gap reporting guidance for employers | Burness Paull), most employers will not have considered disability pay gap reporting. Difficulties arise in terms of obtaining the necessary data and, depending on the size and composition of an employer’s workforce, it may simply not have enough representation for meaningful reporting.

Unlike gender pay (where two categories can be contrasted), both disability and ethnicity give rise to a number of variables within those protected characteristics. Therefore, without getting too technical, difficulties will likely arise in terms of how sub-groups should be defined. This, in turn, will no doubt affect (and has the potential to skew) the results.

Employers should consider what data they currently collect and how they will gather further data, if required.

Dual discrimination

Lastly, it is worth noting that previously Labour’s manifesto mentioned the introduction of ‘dual discrimination’. That is, where someone claims that they have been discriminated against because of having two protected characteristics.

An example of this is perhaps women experiencing symptoms of the menopause, whose claims may be more likely to succeed if they can show they have been treated different as a result of both age and sex, rather than having to prove their symptoms amount to a disability, or their claims falling down if only allowed to rely on one characteristic.

However, there is no mention of dual discrimination in the briefing notes, so we will have to see the draft Equality (Race and Disability) Bill to understand exactly what it contains.

Other changes

There were other changes mentioned in the King’s Speech and briefing notes which will be relevant to employers, including the regulation of AI and modernising and strengthening the Information Commissioner’s Office.

Interestingly, the briefing notes do not address whether the Labour government will strengthen the new duty to prevent sexual harassment at work before it comes into force on 26 October 2024. Labour had previously said that they would strengthen the legal duty for employers to make it a duty to take ‘all reasonable steps’ to stop sexual harassment before it starts, rather than just ‘reasonable steps’. Meantime, employers will need to prepare for the new law and we are hosting a webinar on how to comply with the new duty this month.

When are the proposed changes likely to happen?

The government has committed to introducing the Employment Rights bill within 100 days of coming into power. In contrast, as the reference in the briefing notes is to a ’draft’ Equality (Race and Disability) Bill, we expect that it will be longer before we see the detail of this bill.

Nevertheless, even after either bill is ‘introduced’, it is not unusual for a bill to take some time to become law, given the rounds of parliamentary debate it is subjected to. ‘Introducing’ legislation is only the first step in a process which includes a number of stages, including both the House of Commons and House of Lords being given the opportunity to debate and propose amendments to the draft legislation. Only once both houses have agreed the final content of the bill, will it receive royal assent and become law. This can take several months.

Even once a bill is passed, it does not mean that any changes will come into force immediately, as they may need significant secondary legislation or codes of practice to flush out the detail. Realistically, we think significant employment reform is not likely to be implemented until the end of next year at the very earliest.

In any event, we would hope that the government would recognise that employers need time to prepare for the changes, and the employment tribunals need to find resources to deal with more claims than ever before. Of course, we will keep you updated on the progress of the changes.

Immigration

Whilst we don’t expect any immediate immigration changes, at least not related to businesses, it will still be useful for employers to take stock take of their recruitment needs. The Labour manifesto contained a commitment to reduce reliance on overseas workers filling UK roles, and specifically pointed to the health and social care and construction sectors, but other sectors may also be affected. The manifesto also stated that employers who don’t comply with the rules would be barred from recruiting from overseas. It therefore seems important to consider bringing forward sponsorship timelines, and ensuring compliance with sponsor licence duties, as well as with right to work checks to minimise potential issues in the future. The Home Secretary, Yvette Cooper, has also delivered a statement to Parliament setting out the new government's approach to legal migration to the UK. See here for more info .

If you require any assistance with preparing for the upcoming changes, please do not hesitate to contact us.

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