Introduction
With the UK general election now set for 4 July 2024 and opinion polls predicting a Labour victory, employers are keen to understand what a change in government would mean for employment law and employment rights in the UK.
Labour’s ‘Plan to Make Work Pay’ was published on 24 May 2024 and promises to deliver “the biggest upgrade to rights at work for a generation”. This publication explores 10 of the key proposals, their impact if enacted, and what (if anything) employers can be doing now to prepare for anticipated changes.
1. Reform of employment status to create a single status of ‘worker’ for anyone who is not genuinely self-employed
What is the current law?
Currently, English law recognises three types of employment status: ‘employees’, ‘workers’ and ‘self-employed’. While employees have extensive statutory rights and protections, workers only benefit from some (for example, the right to holiday pay and a minimum wage) and the genuinely self-employed do not benefit from any of the statutory protections provided to employees or workers.
What does the Labour Party propose?
The Labour Party intends to consult on creating a single status of worker for all but the genuinely self-employed. They suggest that creating a single class of worker will clamp down on ‘bogus’ self-employment and create a much simpler framework for workers and employers alike.
However, while the Labour Party suggests that a two-tier system will be simpler, there is also recognition that a transition to this may not be straightforward. Labour has committed to consult in detail on how it might work and acknowledges that this proposal will take time to review and implement.
The Labour Party also intends to “support and champion” the self-employed, entitling them to a written contract, taking action to tackle late payments and ensuring they are covered by workplace health and safety and blacklisting protections. Additionally, Labour states that changes to trade union rights will benefit the self-employed.
What is the impact for employers?
Employment status is complex, and while the proposals would align employment law with tax law principles (where individuals are either ‘employees’ or ‘self-employed’), the last time there was a consultation on reforming employment status (as part of the Taylor Review in 2017), a decision was taken not to proceed because of the complexities involved.
If the reforms do go ahead as proposed, employers with higher numbers of staff classified as ‘workers’ will be most affected. The cost of engaging (and dismissing) these staff will likely increase significantly because of the additional employment rights and protections afforded to them.
What can employers do to prepare?
Employers should consider carrying out an audit of their entire headcount to determine the number of people in each of the current three status categories and the impact of having a single status of worker for all but the genuinely self-employed.
Employers should then assess the financial impact arising from their current ‘workers’ gaining additional employment rights and benefits. Employers should also consider what implications this will create for the business; for example, whether any negative financial repercussions are sustainable (and how they can be mitigated).
Impacted employers should consider contributing to the consultation when it is launched so that they can have an input and attempt to influence any law reform in this area.
2. Day one right to claim unfair dismissal
What is the current law?
Currently, employees need to have completed two years’ continuous service with their employer before being eligible to bring an unfair dismissal claim (subject to a few limited exceptions).
What does the Labour Party propose?
One headline-grabbing proposal is that the Labour Party intends to remove the current service requirement and ensure that eligible individuals (which, following their overhaul of employment status, would include workers – see point 1) can bring such claims from the first day of their employment. They have said that this would not prevent employers from dismissing fairly or from using probationary periods with “fair and transparent rules and processes”, as a means by which to assess new employees.
What is the impact for employers?
While unsurprising that a Labour government would want to reduce the qualifying period to bring an unfair dismissal claim (it was one year under the previous Labour leadership, increasing to two years in 2012 after the Conservatives were elected), to remove length of service as an eligibility criterion altogether is a bold move.
While Labour suggests (in their original paper) that this will focus employers to make better recruitment decisions, it is unrealistic to think that it will always avoid the need for employers to terminate employment in the earlier stages of tenure, and employers will need to adjust their current termination approach to reflect the increased risk of claims.
The probationary period will likely take on a bigger significance although it is unclear how the probationary period will sit alongside the revised rules (e.g. whether employers will be able to dismiss with relative ease during the probationary periods (akin to the first two years of employment now) or if some minimum requirements will exist) or whether Labour will legislate or create guidance on what reasonable use of probationary periods actually means.
Coupled with the proposals to reform employment status, which would see unfair dismissal rights applying to all but the genuinely self-employed (see point 1), employers could expect an increase in claims alleging unfair dismissal. This can be mitigated to some extent by more robust and rigorous dismissal processes for all staff but as this essentially means adhering to formal procedures to demonstrate that a fair procedure was followed, there will be an increase in the management time required. An increase in claims will also have an impact on already stretched employment tribunal (ET) resources, meaning employers embroiled in ET litigation may have to wait longer for issues to get resolved.
What can employers do to prepare?
To help mitigate against the impact of this proposal, employers can prepare by:
- looking at their current recruitment practices and considering what processes can be improved to maximise hiring the right candidates;
- reviewing their current probationary periods and their approach to ending and extending them; and
- reviewing their performance management processes and the methods by which they monitor and assess employee performance (which is the most common of the potentially fair reasons for dismissal).
3. Enhanced redundancy consultation requirements
What is the current law?
Consultation is a key ingredient of a fair redundancy dismissal, and employers are required to engage in collective consultation (with representatives of affected staff) where there is a proposal to dismiss by redundancy 20 or more employees in one establishment within 90 days or fewer. Collective consultation requires the provision of prescribed information, a requirement to notify the government and minimum time periods before dismissal can take effect, with punitive financial penalties where employers fail to comply.
What does the Labour party propose?
Labour has said it will strengthen redundancy rights and protections and gives an example of ensuring “the right to redundancy consultation is determined by the number of people impacted across the business rather than in one workplace”. While not stated explicitly, the inference is that this relates to the interpretation of ‘establishment’ for collective consultation purposes – an interpretation that arose from protracted litigation when Woolworths closed having determined that an ‘establishment’ is each separate work unit.
What is the impact for employers?
To achieve what appears to be proposed, the Labour government will need to legislate to overturn the Supreme Court’s decision on the Woolworths case. It will have the biggest impact on multi-site businesses when they are proposing redundancies. Whereas under the Woolworths decision employers could assess the need for collective consultation by the number of proposed redundancies at each site, this would no longer be the case. This is likely to increase the probability of collective consultation and the associated additional burdens.
What can employers do to prepare?
Employers who operate across multiple sites and have been used to running small-scale redundancies without collective consultation will need to revisit their processes and assess where changes need to be made if this proposal is implemented.
4. Enhanced protection against dismissal for maternity returners
What is the current law?
Since 6 April 2024, pregnant women and those on maternity leave who have been selected for redundancy have been entitled to priority for suitable alternative vacancies (if they exist) during pregnancy and for 18 months after the birth of the child. Otherwise, outside normal unfair dismissal and discrimination legislation, pregnant workers, those on maternity leave and maternity returners do not have any additional rights or protection from dismissal.
What does the Labour party propose?
The intention is to legislate to make it “unlawful to dismiss a woman who is pregnant for six months after her return, except in specific circumstances”. It is unclear if this protection is limited to the period after someone returns from maternity leave or whether it also extends to pregnancy and maternity leave, and the paper is silent on what the specific exceptions would be.
What is the impact for employers?
It is hard to assess the impact of this proposal without knowing details regarding the scope of this change and the exceptions that will be in place. However, on the face of it, it will provide extra layers to laws surrounding unfair dismissal for employers to navigate.
What can employers do to prepare?
Like so many of Labour’s proposals, the devil will be in the detail but employers may want to assess the extent to which they have historically terminated the employment of pregnant workers, those on maternity leave or those within six months of return, and the reasons for their decision. Employers may also consider whether any changes need to be made to provide more support during these periods.
5. Enhanced requirements for pay gap reporting
What is the current law?
Employers with more than 250 employees are required to publish their gender pay gap on an annual basis. There is no mandatory reporting for any other characteristics.
What does the Labour Party propose?
Large firms will be required to develop, publish and implement action plans to close their gender pay gap and ensure that outsourced workers are included in their reporting so that outsourcing services cannot be used as a way to mitigate disparities in pay.
In addition, employers with more than 250 employees will be required to publish their ethnicity and disability pay gaps, with requirements to mirror the gender pay gap reporting requirements. However, it is currently unclear how ‘ethnicity’ and ‘disability’ will be categorised for reporting purposes.
What is the impact for employers?
These changes will increase the pay gap reporting burden significantly for employers with 250 or more employees, extending it to cover ethnicity and disability.
What can employers do to prepare?
Employers should start thinking about their ethnicity and disability pay gaps now, albeit the categorisations are unclear. Employers are likely to benefit from gathering and analysing preliminary data now to assess the extent of any apparent pay gaps and they should consider what steps can be taken to mitigate any existing pay gaps. Employers should ensure they have sufficient staff and adequate processes in place to comply with the reporting requirements.
6. Flexible and zero-hours contracts
What is the current law?
Zero-hours contracts are a form of casual contract whereby the employer does not guarantee a particular or minimum number of hours of work. There are restrictions surrounding the ability to prevent those on zero-hours or minimum-hours contracts from working elsewhere, and the Workers (Predictable Terms and Conditions) Act 2023, giving workers and agency workers the right to request more predictable terms and conditions, was passed last year and is currently awaiting regulations setting out the detail and a code of practice. These were expected by autumn 2024, but it is now unclear where the impending election leaves this.
What does the Labour Party propose?
The Labour Party wants to put an end to what it sees as “one-sided flexibility’ and ‘exploitative” contracts and provide more security and predictability for workers. It intends to do this by banning zero-hours contracts altogether and ensuring everyone has the right to a contract that reflects the number of hours they regularly work, based on a 12-week reference period. They intend to put anti-avoidance measures in place and ensure workers are adequately compensated if working hours are cancelled or curtailed without adequate notice. They do not intend to stop employers from offering fixed-term contracts for seasonal work, for example.
What is the impact for employers?
While many employers and workers benefit from the flexibility afforded by zero-hours contracts, others see them as exploitative and only offering one-sided flexibility to the detriment of workers. The current government introduced legislation to help provide more certainty for workers, giving them the right to request a more predictable contract, with employers required to follow a particular procedure before deciding whether to agree. In the absence of detail, it is currently unclear how different Labour’s proposals will be from the provisions arising from the Workers (Predictable Terms and Conditions) Act 2023, which we had been expecting to be in force later this year.
7. Fire and rehire
What is the current law?
Fire and rehire is the practice of dismissing an employee and offering them a new contract on new terms as a way to make changes to their terms and conditions if they have not consented to those changes. It is not currently unlawful, but the practice has hit the headlines and has been the topic of political debate in recent years. The current Conservative government has taken steps to crack down on unscrupulous use of the approach by introducing a statutory code of practice with expected standards of behaviour and best practice, which is due to come into force on 18 July 2024. (See our Employment Law Watch blog from 5 March 2024 for more details.)
What does the Labour Party propose?
The Labour Party has repeatedly said, and continues to say, that it is banning fire and rehire but their proposal does not do this in reality. Recognising that businesses sometimes need to make changes to remain viable, it proposes enhancing the law to provide stronger remedies against abuse and replacing the new statutory code with something stronger.
What is the impact for employers?
Despite protestations to the contrary, an outright ban on fire and rehire seems unlikely at the moment, and responsible employers with a genuine reason for needing to make changes and who follow the principles in the upcoming code of practice (unless and until that is repealed after the election) will be in good stead. Employers contemplating fire and rehire should follow the Acas Code of Practice. While this is not due into force until 18 July – after the election – we suspect it will remain in force until a Labour government has something to replace it with.
8. Enforcement of employment rights
What is the current law?
The majority of employment rights are enforced through the ET, where most claims should be brought within three months (with exceptions for statutory redundancy pay and equal pay, where employees have six months). In addition, certain compensation claims are restricted to a maximum amount. For example, employees who successfully claim unfair dismissal can only receive compensation up to certain limits.
What does the Labour Party propose?
In an effort to take pressure off the overstretched ET system and to allow quicker access to justice, the Labour Party proposes to introduce a single enforcement body for workers’ rights so that individuals know where to go for help. However, it is unclear exactly what remit this body will have in terms of enforcement – the ET is noted as being the better route for enforcement of complex cases and contractual disputes. There is a suggestion that the single enforcement body will be given power to inspect workplaces and take action against exploitation.
The Labour Party is also extending the time limit for bringing employment tribunal claims to six months and will make it easier for workers to raise collective grievances through Acas.
Whereas the original ‘New Deal for Working People’ contained proposals to remove statutory limits to compensation and have tougher penalties and potential director liability for breaches of law and failure to comply with tribunal orders, the revised paper is silent on both of these issues, suggesting that they have been dropped.
What is the impact for employers?
The apparent U-turn on proposals for removing the cap on compensation and potential director liability will be welcomed by employers, although the extension of time limits means employers will have uncertainty for much longer regarding whether any decisions they make will be litigated.
The comments about grievances going to Acas is an unusual one, as grievances are usually a matter between employer and employee. While the guidance in this area is drafted by Acas, they do not usually get involved.
9. Right to disconnect
What is the current law?
Rules that govern working hours place limitations on the maximum working week (although it is possible to opt out of this), rest breaks and entitlements to annual leave. However, there is no right to disconnect per se.
What does the Labour Party propose?
Labour intends to bring in a right to switch off. However, whereas initial proposals were intended to prevent workers from being contacted at all outside working hours, the current proposal (which follows models in Belgium and Ireland) is to allow scope for workers and employees to collaborate on a bespoke proposal that is mutually beneficial.
What is the impact for employers?
This watered-down proposal will be much less impactful than a complete right to disconnect. Employers will still need to be open and engaged in discussions and agreements regarding helping workers to achieve a better work–life balance, but the creation of absolute rights looks unlikely.
10. Increased power of trade unions
What does the Labour Party propose?
Unsurprisingly, the Labour Party proposes to significantly strengthen the power of trade unions and the rights and protections of trade union officials and members. It intends to overhaul current trade union legislation by repealing legislation that introduced thresholds for ballots and restrictions on picketing, minimum staffing levels in certain sectors and the right to replace striking workers with agency staff. They also propose reforming the balloting system to allow for this to be achieved electronically rather than by post, simplifying the union recognition process and creating greater rights to union access to the workplace. Employers will also be under a new duty to inform new starters of their right to join a trade union and to inform existing staff of this regularly.
What is the impact for employers?
Employers who currently operate in unionised workforces are likely to see an increase in activity from the enhanced powers provided to union officials although certain aspects of the proposals (such as access to the workplace) remain unclear. In the case of employers faced with ballots for industrial action, the switch from postal to electronic voting will make the process much easier for unions.
Employers who do not have much involvement with trade unions at present will also be impacted and should anticipate unions taking advantage of changes to recognition rules to establish themselves in new organisations. Employers will need to update their new starter paperwork to include a statement about their rights to join a union and set up a process for routine notification for exiting staff.
What else is the Labour Party proposing?
In addition to the headline points above, Labour is also proposing day one rights to parental leave and sick pay; strengthened protection for workers subject to TUPE; a new right to bereavement leave; a removal of age brackets for the minimum wage; enhanced rules on tips; a ban on unpaid internships except where this is for training or education; fair pay agreements in social care; making flexible working the default position; strengthened obligations around sexual harassment, including protection from third-party harassment and enhanced protection for whistleblowers of sexual harassment.
Labour also proposes a review of parental leave within the first year; a review of the impact of the recently introduced carer’s leave to assess whether to legislate for this to be paid; a review of health and safety legislation with a view to modernisation; and an examination of what AI and new technologies mean for work.
When might all this take effect?
The Labour Party has indicated its intention to move quickly with these proposals, starting the legislative process within 100 days of entering government. However, employment law reform will be subject to full consultation and the legislative process, and on a timescale subject to government and parliamentary priorities. This means that some proposals may not go ahead at all or in the form currently set out.
The Labour Party also notes how some legislation may have its detail set out in regulations. This is an approach we have seen of late with the current government and means that while legislation may in theory be on the statute book, further regulations are required to provide meaning and indicate when the changes will come into effect.
In-depth 2024-125
