July 8, 2024
In the lead up to the election, the Labour Party proposed extensive reforms to UK employment law as part of “Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People.” Legislation is expected to be put before Parliament within the first 100 days of the Labour Party’s entry into government.
On July 5, 2024, the Labour Party was announced to have won a substantial majority in the UK General Election that was held on July 4, 2024, marking an end to the Conservative Party’s 14 years in power. In the lead up to the election, the Labour Party proposed extensive reforms to UK employment law as part of “Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People” (the “New Deal”), and legislation is expected to be put before Parliament within the first 100 days of the Labour Party’s entry into government. In this update, we outline these anticipated developments in UK employment law.
A brief overview of the potential developments which we believe will be of interest to our clients is provided below, with more detailed information on each topic available by clicking on the links.
1. Implementing Workforce Changes(view details)
We summarise changes proposed to an employer’s ability to terminate employees who have acquired less than two years of service, as well as the impact on employers of proposed changes: (i) to the controversial practice of dismissing and re-hiring employees as a means of changing terms of employment; and (ii) designed to strengthen employee rights and protections in connection with both collective redundancy situations (lay-offs) and business transfers, strategic sourcing transactions, and other transfers subject to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (“TUPE”).
2. Enforcement of UK Employment Law (view details)
We summarise proposed reforms to the practice of enforcing UK employment laws, including the establishment of a single enforcement body and the extension of the time limit for bringing the majority of employment claims before the Employment Tribunal. We also consider the potential new ability for employees to collectively raise grievances about their workplace with Advisory, Conciliation and Arbitration Service (“ACAS”).
3. Discrimination, Diversity, Equity and Inclusion (view details)
We summarise the proposed new obligations on employers to address the gender pay gap, reduce workplace harassment, strengthen whistleblower rights, extend the gender pay gap regime to include race and disability, and carry out ethnicity and disability pay gap reporting. We also consider potential changes to family-friendly rights.
4. Working Arrangements (view details)
We consider the proposed changes to an employer’s ability to engage workers on “zero hour” contracts, changes to national minimum wage (“NMW”) rates, and the introduction of fair pay agreements to the adult social care sector. We also summarise the potential new right for employees to disconnect from work outside of working hours, enhancements to the right to flexible working, and the strengthening of trade unions.
5. Employment Status (view details)
We consider the possible move away from the three-tier system of employee, worker and self-employed contractor that currently exists in the UK towards a simpler two-part framework of employment status, and the proposal to strengthen the rights and protections of the self-employed.
We will provide a further update once the Labour government publishes draft legislation implementing these changes. In the meantime, we will continue to work with our clients to navigate the changing employment landscape in the UK.
APPENDIX
Unfair Dismissal
UK employees with less than two years of continuous service do not currently benefit from protection against unfair dismissal, except in certain limited circumstances. Unfair dismissal protection restricts an employer’s ability to terminate their employment other than for reasons of: (i) capability; (ii) conduct; (iii) redundancy; or (iii) some other substantial reason, while also requiring employers to follow a fair dismissal process.
The Labour government has indicated that a form of unfair dismissal protection will be extended to employees from day one of their employment to ensure that new hires are not terminated without cause. In response to protests from employer organisations, the Labour government has suggested that employers will still be able to operate probationary periods to assess new hires, although for how long such probation periods may last remains to be seen.
Dismissal and Re-engagement
The Labour government has also committed to ending the practice known as “fire and rehire” as a lawful means of imposing unilateral changes to an employee’s contractual terms of employment. This was an area that the previous government attempted to reform by implementing a Statutory Code of Practice on Dismissal and Re-engagement (the “Code”) which employers should follow when seeking to change employment terms and conditions using the method of dismissal and re-engagement. This Code was expected to come into force on July 18, 2024, although it is yet to be seen whether the new Labour government will implement it in its current form.
Instead, it is anticipated that the Code will be replaced by new laws designed to regulate the practice of firing and rehiring employees in order to change their terms of employment.
Redundancy and TUPE
Currently, UK employers are required to follow a collective consultation process when proposing to make at least 20 redundancies in a single establishment (often interpreted as one workplace) within a 90-day period. The Labour government has committed to strengthening employee redundancy rights and protections, which includes making the right to redundancy consultation determined by the number of people impacted across the business rather than in one workplace.
Employees who are subject to TUPE processes also currently enjoy protection from termination of employment and/or changes to their contractual terms that are imposed by reason of a TUPE transfer. The Labour government has stated that they will strengthen existing rights and protections under TUPE, although it is not clear in what way these rights would be strengthened.
Establishing a Single Enforcement Body
Save in relation to equality and human rights, the current enforcement of UK employment rights relies on individual employees or trade unions bringing a claim before the Employment Tribunal. The Labour government plans to establish a single enforcement body to enforce workers’ rights going forward, to include not only equality and human rights but other areas of employment law such as health and safety, minimum wage, and worker exploitation. This body will have strong powers to undertake targeted and proactive enforcement work, such as carrying out unannounced inspections, following up on anonymous tip-offs, and bringing civil proceedings to uphold employment rights.
Employment Tribunal Claims
The time limit for bringing many types of UK employment claims in an employment tribunal currently expires three months from the date the claim arises, subject to an extension of up to six weeks for pre-claim conciliation. The Labour government plans to extend the time limit to bring all UK employment claims to six months.
Collective Grievances
UK employees can currently formally raise individual grievances about conduct in the workplace with their employer through ACAS. The Labour government has stated that it will provide employees with the ability to raise collective grievances about conduct in their place of work directly to ACAS.
Pay Gap Reporting and Action Plans
UK employers with more than 250 staff are currently required to report their gender pay gap data by April 4 of each year. There is currently no mandatory requirement for employers to report on their ethnicity or disability pay gap.
The Labour government has stated that the publication of ethnicity and disability pay gaps will become mandatory for employers with more than 250 employees, mirroring gender pay gap reporting. Although not mentioned in the New Deal, the Labour government has indicated that it would implement new legislation to tackle structural racism, including the issue of low pay for ethnic minorities, with fines for employers not taking appropriate action on their pay gap data.
Large employers are expected to be required to develop, publish, and implement action plans to close their gender pay gaps, and to include outsourced workers in their gender pay gap and pay ratio reporting. Similarly, employers with more than 250 employees are expected to be required to produce Menopause Action Plans, setting out how they will support employees going through the menopause at work.
Another proposed policy, not mentioned in the New Deal but included in the Labour manifesto, is to extend the current gender equal pay regime to include race and disability. This will be enforced by a new regulatory unit with trade union backing.
Workplace Harassment and Whistleblowing
The Labour government has stated that it will “require employers to create and maintain workplaces and working conditions free from harassment, including third parties”, and will also strengthen the legal duty for employers to take all reasonable steps to stop harassment, including sexual harassment, before it starts. Although not mentioned in the New Deal, the Labour government also previously indicated that women who report sexual harassment at work would be provided with the same protections from dismissal and detriment as other whistleblowers.
The previous government also sought to implement a new mandatory duty to prevent sexual harassment in the workplace, which had been expected to come into force in October 2024, however this duty does not currently cover harassment by third parties. It remains to be seen if the new mandatory duty will be implemented in its current form.
The Labour government has committed to strengthening whistleblowers’ rights, and we await details of this new policy.
Family Leave Rights
Whilst UK employment law already provides for extensive family leave rights, the Labour government has stated it would make various enhancements:
The Labour government has also stated that the system of parental leave will be reviewed within its first year and that the implementation of the legislation for unpaid carers’ leave, which entitles employees to take up to one week every 12 months to help a dependent who needs long-term care and was introduced in April 2024, will be reviewed. The Labour government also plans to examine the potential benefits of introducing paid carers’ leave.
Engagement of Casual and/or Low Paid Workers
The Labour government has committed to:
The previous government had attempted to regularise the engagement of casual workers in the UK by implementing a statutory right to a predictable working pattern, which is expected to come into force in September 2024; it is currently unclear if the new Labour government will implement this provision.
The Labour government also announced various proposed enhancements to the NMW rate, which is currently split into age bands and is reviewed and updated each year. The Labour government plans to: (i) remove the age bands, which it considers discriminatory; and (ii) expand the remit of the Low Pay Commission, which currently reviews and makes recommendations on the NMW rate, to ensure that the rate considers increases in cost of living.
The Labour government has pledged to introduce a “Fair Pay Agreement” to the adult social care sector. This will offer social care workers stronger collective bargaining rights in pay negotiations.
Right to Disconnect and Work Autonomously
The Labour government has stated a new “right to switch off” would be introduced, which would give UK employees the right to disconnect from outside of working hours and not be contacted by their employers. This would follow models already in place in Ireland and Belgium, which give employers and employees the opportunity to work together on bespoke workplace policies or contractual terms that benefit both parties in this respect.
The Labour government has also stated that they will ensure that proposals by employers to use surveillance technologies will be subject to consultation and negotiation, with a view to agreement of trade unions or staff representatives.
Right to Flexible Working
The right to request flexible working recently became a day one right in the UK on April 6, 2024. The Labour government has stated that flexible working would be made the default for all workers from the first day of employment, except where not reasonably feasible, although it is currently unclear what this will involve.
Trade Unions
The Labour government plans to update trade union legislation so that, among other things, employers will be required to inform workers of their right to join a trade union. Additionally, recent legislation introduced by the previous government to restrict trade union activity, such as the minimum service level requirement in essential services, is likely to be repealed. Industrial action ballot requirements will also be eased, and limitations on union workplace access will be lifted.
UK employment law currently recognises three types of employment status: (i) employees; (ii) workers (which is inclusive of employees); and (iii) self-employed contractors. An individual’s employment status determines the statutory employment rights to which they are entitled to (if any), and employment status has become a hot topic before the Employment Tribunal in recent years.
The Labour government has committed to carrying out a consultation on employment status as part of a move towards a single status of ‘worker’ and a simplified two-part framework for employment status. The Labour government has also stated that they will strengthen the rights and protections of the self-employed, including the right to a written contract, action to tackle late payments, and extending health and safety and blacklisting protections to the self-employed, along with strengthening trade union rights.
Further updates
We will provide a further update once the Labour government publishes draft legislation implementing these changes. In the meantime, we will continue to work with our clients to navigate the changing employment landscape in the UK.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Labor and Employment practice group, or the following authors in London:
James A. Cox (+44 20 7071 4250, [email protected])
Georgia Derbyshire (+44 20 7071 4013, [email protected])
Olivia Sadler (+44 20 7071 4950, [email protected])
*Finley Willits, a trainee solicitor in the London office, is not admitted to practice law.
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