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Having now let the dust settle on the 158-page Employment Rights Bill (“the Bill”) and the (important) accompanying ‘Next Steps to Make Work Pay’ government guidance (“the Guidance”), I have put pen to paper on my initial thoughts on what the most significant aspects of this new legislation will be.

This article is not an exhaustive review of all 28 reforms set out in the Bill, but an early assessment of those which I consider are likely to have most impact.

• Timing

Employers (and employment lawyers no less) have been worried that the Bill might seek to rush through significant reform that was (at worst) ill-thought out and (at best) gave little time to properly prepare. Those concerns have been largely put to bed:- the Bill introduces lots of reform, but most of it remains subject to consultation, further law and will not be introduced until summer of 2025 or, in some cases, autumn 2026. 

This also means that we must recognise the Bill remains subject to change. There could still be a twist and turn or two before this Bill becomes an Act of Parliament.   

• Unfair Dismissal rights

For many, the flagship manifesto commitment for the Bill was that it would give employees the right to claim unfair dismissal from day one (instead of the current law, that requires, in most cases, two years of service before such a right is earned). 

Whilst the Bill delivers this day one right, it is subject to the introduction of a new concept of a statutory probationary period, and the details for that will be the subject of hard-fought consultation and further law. The Government have confirmed in the Guidance that their preference is for a 9-month probationary period (and it would seem clear that this is the maximum duration it would be) but some of the trade unions are arguing that such a long period (or any period) is actually a breach of the manifesto.

We do not have much detail to assess at this stage, save that the Guidance indicates that employers will be able to make a “proportionate assessment of an employee’s suitability” during the probationary period and that employers would have access to a “lighter-touch and less onerous” process to dismiss employees on this basis.  It is also clear that this probationary period exception would only apply to performance, competence or suitability concerns – so for example, an employee dismissed for redundancy on day 1 would have full unfair dismissal rights.  

Impact? 

However the detail of the statutory probationary period ends up being delivered, this is a hugely significant change to employment law, of a magnitude rarely seen before (if ever).  Since the introduction of employment law, the right not to be unfairly dismissed has been tied to a qualifying period, and the lowest that period has ever been before is 6-months.  From 2026 onwards, employees will be able to bring claims from day one (and even dismissals made during the statutory probationary period can be contested via an Employment Tribunal claim) and one obvious consequence has to be that the volume of Tribunal claims will increase significantly. Will there also be unintended consequences?  To cite just one example, will an employer who is a little unsure if they have enough work to take a chance on a talented applicant that has speculatively approached them, take that chance?  Given that any redundancy dismissal of this employee from day 1 could be challenged at Tribunal, and that this employee could not simply be ‘let go’ during the probationary period, one wonders.

• Day 1 rights for sick pay, parental leave and bereavement leave

The manifesto promised day one rights in these areas, and they would appear to have been delivered.  Further, in relation to sick pay, the qualifying earnings threshold has been removed and significantly more employees will now be entitled to SSP from the first day of their absence.  

Impact?

This will bring about a new cost for employers, and a new benefit for employees – one’s view on the merits of this will depend on your perspective of the balance of rights between the employer and their employee.

• Fire and rehire

The manifesto had promised to reform the ‘scourge’ of the fire and rehire practice which was so criticised following the P&O Ferry debacle but was quite clear that the Bill would fall short of a total ban and hinted at a strengthened code of practice.  The Bill has, as a result, gone much further than many expected.

The Bill provides that it will be an unfair dismissal if the principal reason for dismissal is either that the employee refused to agree to a variation of the contract sought by the employer or to enable the employer to recruit another person (or rehire the employee) under new terms but with substantially the same duties. 

There is one exception. The Government says in the Guidance that businesses will be able to “restructure to remain viable” but the drafting of the Bill makes it clear this exception is narrow.  For a dismissal to be lawful the employer has to show that it was in financial difficulties which are so serious that its ability to carry on the business is in question. It must also show that it could not reasonably have avoided the need to make the variation. The drafting of the Bill would suggest the variation needs to be a last resort in the face of an existential threat to the business.

Impact?

The Bill brings about a major shift from the current position where the employer need only show that their dismissal was within the range of reasonable responses as ‘some other substantial reason’.  It seems to me that proving the exception applies will be a high hurdle to get over, and the Guidance also hints at toughening up the remedies that would be available to employees who were unfairly dismissed in large number in these circumstances.

The real impact of this change may be more subtle:  many employers legitimately use the threat of ‘fire and rehire’ as a last resort when seeking to obtain agreement from the workforce to vary the terms of employment contracts.  Often those variations will not be because the business faces an existential financial threat, but to modernise working practices (for example, working hours).  Without being able to so readily use this threat, will employers find it far more difficult to ever vary their employment contracts? Once an employer has agreed terms with an employee, are they now going to be stuck with them and unable to force through a change? 

Though the P&O Ferry type case, which was used as the justification for these fire and rehire reforms, is actually quite rare, I do think there is a significant wider impact to this new law – which I am not convinced was the intention.  The drafting of contracts of employment and variation clauses may become an art form?

• Flexible working

Under current law, employees have the right to request flexible working.  Under the Bill, employees will have the right to have flexible working, unless the employer can demonstrate that one of the statutory grounds (which have not changed from the current law) for refusing the request applies and that the refusal is reasonable.  The employer will have to both state the grounds for the refusal and why they state it is reasonable to refuse the request. 

The Bill is relatively simple in its drafting and is effectively switching the burden of proof from the employee to the employer.

Impact?

This is a significant change to employment law and is giving employees a real right, which will open up legal remedies where an employer cannot prove its refusal was reasonable.  I also predict that there will be significant volumes of litigation as a battleground emerges between employers seeking to defend their ability to run their businesses and employees who believe their subjective needs are paramount, and now have a legal forum available to them to test that.

Time will tell how the Tribunals will assess the reasonableness requirement.  For example, consider the employer who refuses homeworking because their belief is that the office culture is more beneficial to the overall business.  It is almost certain that claims will come before the Tribunal on this issue: it will be important to see what test of reasonableness is going to be applied to that belief.  This will be a lawyer’s paradise…

• Zero hours contract

If I was to criticise only one aspect of the Bill’s drafting and rationale, it would be this.   The manifesto had promised that exploitative zero-hours contracts would be outlawed, and anti-avoidance measures introduced.  There might have been simpler ways to have achieved that.

The Bill sets out a complex process whereby employers must offer zero hours workers a guaranteed hours contract at the end of every reference period, and that the guaranteed hours contract must specify either the days of the week and the hours or the working pattern that will be offered, and that either of those offers must reflect the reference period hours in the relevant period. There are various formalities to be followed in that offer.

Further regulations are to be passed to define the reference period (though the Guidance says it should be 12 weeks).

The Bill also provides that employers who are using zero hours contracts must give employees reasonable notice of shifts and reasonable notice of cancellation of shifts.  There is a presumption that reasonable notice cannot be less than the duration of the shift itself, though there are various provisions which will impact what amounts to reasonable notice beyond the scope of this note.

Where an employer fails to make a guaranteed hours contract offer, employees will be able to bring a Tribunal claim.  Where an employer fails to give reasonable notice of a shift or of a cancellation of a shift, an employee can bring a Tribunal claim. 

Impact?

For those sectors where demand is variable, most obviously hospitality, catering and seasonal businesses, this is significant and complex reform.  The concern is that the new provisions create more uncertainty and questions than answers, and the concept of the offering of guaranteed hours contracts feels a trite academic in the context of how and why zero hours contracts are often used.  Ultimately, these reforms would bring about a material loss of flexibility for the employer, though this was the intended aim of the manifesto which wanted to make the flexibility of zero hours contracts an one-way concept to the benefit of the employee.

• Sexual Harassment and Harassment by Third Parties

The duty to prevent sexual harassment is changed by the Bill from taking “reasonable steps” (the current law) to “all reasonable steps”.    The addition of just one word is significant, as the employer must now do everything reasonable now.  That is a high bar.

Further, the Bill makes it unlawful to restrict disclosures about sexual harassment in any non-disclosure/confidentiality/settlement agreement (though arguably that is the case already).

Of most significance is that the Bill has included a duty upon employers to prevent harassment in respect of all protected characteristics (not just sex) of an employee by a third party, and that duty is again at the very high bar of taking all reasonable steps. 

Impact?

The new duty to take all reasonable steps is onerous, as is the duty to prevent harrassment of employees by third party. This will of course include customers, clients, and the general public, and was an extension which the previous Government has concluded went too far. Employers will need to review their policies and training provision and prepare for this new duty - as one can fully expect the volume of Tribunal claims now arising from harrassment will increase significantly.

• Redundancy rights

In a rather technical matter, the Bill amends the definition of an “establishment” for collective redundancy purposes.

Impact?

When Woolworths collapsed, each of the shops was treated in law as a different establishment which reduced the compensation available to redundant employees. The impact of this reform is that employers with multiple locations are going to be far less likely to avoid the onerous obligations of collective consultation and will face exposure to increased compensation claims from redundant employess if they do.

• Trade Union matters

Unsurprisingly, the Bill seeks to ensure that trade union recognition will be easier to achieve in the workplace and that more employers should support collective bargaining. 

The reforms are significant and detailed and beyond the scope of this note.  To summarise simplistically, it will be easier for trade unions to gain access to workplaces and to organise, seek members and to gain recognition.  Employers will need to tell employees that they have a right to join a trade union, and the thresholds for unions to gain legal recognition are now set much lower.

Impact?

These changes were predictable and repeal Conservative legislationt that has sought to weaken the influence of trade unions since the last Labour government. For those employers (and dare I say, employment lawyers and HR practitioners) who have largely operated in a Conservative gonvernment led, private sector environment, now will be the time to brush up on trade union law. The impact is likely, in time, to be significant.

Is there more to come?

Indeed there is. The much reported “right to switch off” is not being tackled at this stage but we are told is going to be consulted upon, and the highly complex move towards a single status of worker is also parked but is to be tackled at some point.   A review of parental leave and carers’ leave rights has also been put on the backburner as has a review of TUPE rights.  The requirement for large employers to publish ethnicity and disability pay gap data (in addition to sex based equal pay audits) is also coming, and the Bill provides for this, but the detail of that is going to be set out in the future in regulations that we have yet to see.

How has the Bill been received?

It was interesting to note that the Bill was met in equal measure with both praise and criticism from all quarters -  on the trade union side Unite have said it “has more holes than a Swiss cheese” whereas the TUC disagree, heralding it as being “good for workers, good for business and good for growth”.   Unite have made it clear that they will be lobbying the Government to go further.  

On the employer side, the likes of Sainsbury’s, Co-Op and Centrica have been quick to audibly signal their support for the Bill,  but the Federation of Small Businesses have said it is “clumsy, chaotic and poorly planned”  and that the Government are only thinking about unionised, bigger companies and not the many small and medium sized employers who will find this new regime “difficult to cope with”.  Certainly, it was telling that the Government were quick to name employers who support the Bill,  but that they are all huge employers who are already unionised – it will be interesting to see how many smaller employers feel as Co-Op (for example) do. That said, many of those larger employers currently use zero-hours contracts and so it will be interesting to see how they are intending to resolve that predicament. 

Concluding thoughts

In drafting this note, I have two prevailing thoughts at this stage.

Firstly, whether you think the Bill is a good or bad piece of legislation will entirely depend on how you assess the balance of rights between the employer and their employee and whether the country as a whole will benefit more if employees hold more cards, or less.  As employment lawyers who act for both employees and employers, we can see the respective arguments as acutely as anyone.

Secondly, what seems obvious is that with each of these new rights we are going to see an increase in the volume of Employment Tribunal claims.  Under current law,  it is estimated that almost 50% of employees whose employment is terminated lack a potential remedy at the Tribunal due to not having two years of service.  Those 50% will now have a claim (even if that claim is to context the legitimacy of their probationary dismissal) and so whilst the maths may be crude, it has to be possible that unfair dismissal claims will double in number.  That is before one considers all the new claims arising from zero hours contracts, cancelled shifts, trade union disputes and flexible working, to name but a few.

The Employment Tribunal system is creaking and has been for some time. There are not enough Tribunal rooms, not enough Tribunal staff, administrators, Judges - so on and so forth. The previous Government's solution to this problem (which they said was unsustainable) was to try and introduce Tribunal fees, to raise funds (or, some suggested more cynically, to deter claims in the first place).
It will be very interesting to hear from this Government (who are against the introduction of Tribunal fees) as to how they are going to ensure that the Tribunal system is funded and equipped to deal with an increase in claims, when it already struggles to deal with and fund the current volume?

Our advice to employers

For our clients and prospective clients, our advice at this stage is that you have time to take stock, and to consult with us in due course about what these reforms will really mean for you, and what you should best to do to prepare.  Some employers will want or need to update contracts and policies, whereas others may need a root-and-branch review of how they employ.  Almost all employers will need to start preparing, at the very least, for the new harassment duties and for how they will better approach probationary periods and flexible working. 

Not every reform will be material for every employer (for example the zero hour contracts reform will be irrelevant to some but paramount to others), and the Leathes Prior Employment Team will work with you to understand what the Employment Bill 2024 will eventually mean for you and, far more importantly, what you should do about it and when. 

Practical, pragmatic and bespoke advice is going to be required – not the one-size fits all solution that many will offer.

If you would like advice our specialist team would be happy to assist you further. Please email info@leathesprior.co.uk or call us on 01603 281153.

Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.