Employment Law Update – July 2024

This month’s update is a post-election special, looking at the potential impact of the employment law reforms that the Labour Party promised to make if it came into power.

Timescale for change

The Government have promised to:

• Introduce legislation within 100 days
• Consult fully with businesses, workers and civil society before legislation is passed.

This means that not every change will become law within 100 days (and some of them will almost certainly have a longer lead-in time). Precise implementation dates are awaited, but would be welcome for employers facing some considerable uncertainty.

Employment Security

The promised reforms involve a range of changes designed to improve employee security:

• Remove the two year qualifying period for unfair dismissal. This would mean that employees would have the right to claim unfair dismissal from day one of employment. The Government have said that “this will not prevent probationary periods with fair and transparent rules and processes”, but the detail of any exceptions for probationary periods are awaited. This could be a very important reform and will mean employers need to think very carefully about:
  • Their recruitment processes
  • Their performance review and management processes for new starters
• Reform to zero hours contracts. Exploitative zero hours contracts will be “banned” and everyone will have:
  • The right to a contract that reflects the number of hours they regularly work (based on a 12 week reference period)
  • Reasonable notice of any change in shifts or working time (with compensation that is proportionate to the notice given). 

These changes will have an impact on those employers who currently rely heavily on zero hours or casual workers. 

It could also impact on employees who have current contractual hours, but regularly work in excess of these (eg regular overtime) and their right to a contract that reflects such regular overtime.

• Changes to “fire and re-hire practices”. This is the practice of employers seeking to change employees’ terms and conditions by terminating their current contracts and offering employment under new contracts. The Government are concerned at abuse of this practice and that the Conservative Government’s proposed Code of Practice does not go far enough to protect employees. Rather than an outright ban on the practice, though, it appears that the current proposal is to “provide effective remedies against abuse”.
• Single status of worker. At present, earners are classed as self-employed, workers or employees. Workers and employees have different levels of rights and protections under employment law, but the legal distinction between them is not always clear. The Government proposes to “move towards a single status of worker and will consult in detail about this”.  Our inclination is that this is one of their more complex proposals and may take some time to be implemented. An example of the tension would be that if there is to be a single status of worker, then the presumption is that all workers will be protected against unfair dismissal (and, as above, from Day One). This one consequence alone could have a huge impact on the current flexible model operated by employers in a number of sectors, and the pressure will be on the Government to find a solution that works for workers and businesses.

Fair Pay

There are a significant number of proposals on pay:

• National Minimum Wage: the headline here is a removal of the discriminatory age bands. Employers who currently employ younger workers may need to do some cost modelling on the consequences of this
• Sick pay: the lower earnings limit will be removed so that all workers are eligible for SSP and the three waiting days will be removed, so Statutory Sick Pay will be available from day one of absence. Employer should be thinking now about:
  • Cost modelling of this change
  • Potential impact on attendance levels and procedures for dealing with intermittent absence
  • How company sick pay schemes will operate and whether they will reflect the changes to SSP
• Fair tips: legislation is already due to come into force in October 2024 requiring employers to have a policy in place for the fair allocation of tips. It is unclear to what extent the Government will intervene and amend this imminent legislation.
• Adult Social Care: to combat the high turnover rate and vacancy rate, there will be a “New Deal for Social Care Workers” and a consultation with employers and trade unions to reach a Fair Pay Agreement for this sector.

Family Friendly proposals

•  Flexible working: will change to “the default” (except where it is not reasonably feasible). Whilst we do not yet have the detail, it therefore appears that we will move from the current “right to request” model where employers have a fairly wide scope to reject requests to a landscape in which the assumption will be that a job can be done flexibly and it will be for the employer to show this is not the case.
• Maternity discrimination: it will be unlawful to dismiss a woman from pregnancy up to 6 months after return from maternity leave (except in specific circumstances). This sounds like it will go further than the recent reforms that enhanced protection from redundancy for pregnant women and those returning from maternity leave. As with the recent reforms in this area, it is important that employers have records of who has notified their employer of pregnancy and who has recently returned from maternity leave and who is therefore protected.
• Carers leave: April 2024 saw the introduction of one week’s unpaid carer’s leave. The Labour Government will “examine the benefits of paid carer’s leave,” but seek to balance this with the potential impact on small employers. Some employers are currently considering voluntarily introducing paid carer’s leave to attract and retain the increasing number of employees with caring responsibilities.
• Right to switch off: included within the “Family Friendly” section of Labour’s plans is a promise to introduce a right to switch off. It is unclear why this is a “family friendly” initiative as it could equally be of benefit to the mental health of those without families.  The proposals indicate that it will entail a constructive discussion between employees and employees to find policies and solutions that work for them: i.e it is unlikely to involve a one-size-fits-all set of rules in legislation

Equality

Large employers (currently defined as more than 250 employees) should plan for the following:

• Mandatory Ethnicity and Disability Pay Gap reporting
• Implementing Gender Pay Gap Action Plans
• Implementing Menopause Action Plans

Socio-economic Duty

The Government will implement the duty (which has always been in the Equality Act, but never enacted) for public bodies making strategic decisions to have due regard to the desirability to reduce the inequalities of outcome which result from socio-economic disadvantage. It will be interesting to see whether in the long-term, initiatives aimed at redressing socio-economic disadvantage and increasing social mobility in the private sector are introduced.

Collective employment reform

It is no surprise that there are a significant number of measures aimed at strengthening the position and visibility of trade unions under a Labour Government:

• Permitting electronic balloting of members (which currently has to be done by postal ballot)
• Simplifying the process of union recognition
• Providing rights for unions to access workplaces in a regulated and responsible manner
• Introducing a duty on employers to inform employees of their right to join a union
• Repealing recent Minimum Service Level legislation

Another reform that could have considerable impact on employers is the proposed reform of thresholds for consultation in redundancy exercises.  Currently, the threshold is 20 or more employees at one establishment. Large employers could have multiple establishments. The proposed reform is for the thresholds to be based on the total number of employees affected and not on a “per establishment” basis. This is likely to significantly increase the number of cases in which collective consultation about redundancy is required.

Enforcement

The new Government proposes three ways in which employment rights will be better enforced:

• A Single Enforcement Body tasked with enforcing all employment rights (which are currently enforced by a combination of agencies, eg HMRC, EHRC). This Single Enforcement Body will have significant powers.
  • Extending the standard time limit for raising Employment Tribunal claims from 3 months to 6 months.
  • Enabling employees to raise collective grievances

These reforms are likely to mean that employers face more enforcement action, more Tribunal claims and more grievances.

AI

There are no firm proposals at this stage, but there is a promise to “work with workers, unions, employers and experts to examine what AI and new technologies mean for work, jobs and skills”. Whilst the Government undoubtedly has a lot to do to implement its promised reforms, AI is an area that cannot be neglected and, if there is to be a strategic plan for workplaces over the next 10 or 20 years, this is an essential area to address.