“A New Deal for Working People”? – Labour Government Introduces Employment Rights Bill in the UK
Client Alert | October 16, 2024
An overview of the incoming rules on preventing sexual harassment as well as the steps the Labour government has taken and intends to take under the Employment Rights Bill.
In our last publication “What Employers Can Expect in the UK under the New Labour Government“ on 8 July 2024, we outlined the extensive reforms the newly formed Labour government had proposed to employment law during the General Election campaign and the potential consequences of these anticipated developments for employers. As expected, the Labour government has since published its Employment Rights Bill on 10 October 2024 (the “Bill”), providing a more fulsome insight into how its self-proclaimed “New Deal for Working People” will impact employers.
The publication of the Bill on 10 October 2024 means the Labour government has delivered on its commitment to put legislation before Parliament on its “Plan to Make Work Pay” within 100 days of entering office. Yet, while the Bill provides a broad framework for an eventual overhaul of the employment landscape, the measures outlined in the draft legislation do not require employers to make the immediate and wide-reaching changes to policies and procedures which might have been foreseen based on signals prior to the General Election. In fact, a significant number of original proposals have been omitted from the Bill – including, crucially, the proposed shift to a two-part framework of employment status – with the Labour government pledging to implement its further proposals after concluding extensive reviews and consultations with stakeholders. The consultation process is expected to begin in 2025, which means that the majority of reforms will not take effect until 2026. As such, the real scope and scale of the proposed reforms will not become fully clear until far later in the lifetime of this Parliament.
More pressing for employers will be changes to the law on preventing sexual harassment which were introduced by the previous Conservative government and which come into force on 26 October 2024.
A brief overview of the incoming rules on preventing sexual harassment as well as the steps the Labour government has taken and intends to take under the Employment Rights Bill is provided below, with more detailed information on each topic available by clicking on the links.
1. Incoming New Rules for October 2024 (view details)
We consider the new legal duty coming into force on 26 October 2024 which requires employers to take reasonable steps to prevent sexual harassment in the workplace (which is expected to extend to sexual harassment by clients, customers and other third parties), as well as the practical steps employers can take to ensure compliance.
2. Employment Reform Proposals under the Bill (view details)
We review the proposed reforms to the employment law landscape under the Bill, including:
- Workforce Changes: we summarise the changes proposed to enhance the “Day One” rights available to employees and to protect employees from unfair dismissal. We also summarise the proposals to restrict the controversial practice of dismissing and re-hiring employees as a means of unilaterally changing terms of employment.
- Discrimination, Diversity, Equity and Inclusion: we outline the measures which would impose further obligations upon employers to strengthen whistleblower rights; to address the gender pay gap; to extend the gender pay gap regime to include race and disability; and to support employees going through the menopause.
- Working Arrangements: we consider the changes proposed to employers’ abilities to engage workers on “zero hours” contracts and the potential enhancements to the right to flexible working. We also consider the proposals to negotiate pay arrangements in specific sectors and to strengthen trade unions.
3. Upcoming Employment Reviews (view details)
We outline the further reforms we expect the Labour government to implement following the successful passage of the Bill, based on the commitments made under its “Plan to Make Work Pay”. These further developments include comprehensive reviews of: (i) employment status; (ii) parental and carers’ leave; (iii) the processes and regulations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (“TUPE”); and the potential new right of employees to collectively raise grievances about workplace conduct with the Advisory, Conciliation and Arbitration Service (“ACAS”).
We will provide further updates as and when the Labour government publishes more details on the implementation of the changes proposed both under the Bill and through the related upcoming consultations. In the meantime, we will continue to work with our clients to navigate the potential developments explored below.
APPENDIX
Workplace Harassment
Our last publication noted that the previous Conservative government had introduced the Worker Protection (Amendment of Equality Act 2010) Act 2023, under which employers would be required to take “reasonable steps” to prevent sexual harassment in the workplace. Since coming to power, the Labour government has reaffirmed its support for this new duty, which is due to come into force on 26 October 2024.
This new duty creates a positive and anticipatory legal obligation on employers. It will require employers to prevent sexual harassment in the workplace, which guidance suggests will cover sexual harassment by clients, customers and other third parties. Under the new rules, the Employment Tribunal will have the power to uplift compensation for harassment by a maximum of 25% where an employer is found to have breached this duty – an uplift which could prove extremely costly for defaulting employers given the levels of compensation which can be awarded for discriminatory harassment.
In its updated technical guidance, the Equality and Human Rights Commission has provided guidelines on the reasonable steps employers can take to identify risks and prevent sexual harassment including: (i) developing effective anti-harassment policies; (ii) adopting a zero-tolerance approach; (iii) conducting risk assessments; (iv) training staff on dealing with potential incidents; and (v) monitoring complaints and outcomes.
We note that the Bill expands this obligation on employers to require them to take “all reasonable steps” to prevent sexual harassment in the workplace. In addition, the Labour government has codified the obligation on employers to prevent sexual harassment by third parties. Following the passage of the Bill, those amendments will therefore raise the compliance bar even higher on employers.
2. Employment Reform Proposals under the Bill
Workforce Changes
Unfair Dismissal
In our last publication, we outlined the Labour government’s intention for a form of unfair dismissal protection to become a “Day One” right for employees. Currently, employees with less than two years of continuous service do not benefit from protection against unfair dismissal, except in certain limited circumstances.
The Labour government has now made protection from unfair dismissal a “Day One” right in the Bill, removing the two-year qualifying period. Helpfully, employers will continue to be able to operate probation periods to assess new hires by providing a (yet to be determined) period during which the Labour government has promised that there will be a “lighter-touch” process for dismissals. A consultation on the length of this initial period is expected in 2025, however, the Labour government has indicated a preference of nine months. The nature and scope of the lighter-touch process for dismissals during the initial period, and safeguards to provide stability and security for businesses and employees, will be addressed as the Bill makes its way through Parliament. As a requirement for the dismissal process during the initial period, the Labour government has suggested the need for a meeting with the employee outlining the employer’s concerns. We stress that the Labour government does not expect the reforms to unfair dismissal to come into effect any sooner than Autumn 2026, until which time the current two-year qualifying period will continue to apply. This extended time period will allow employers to prepare and adapt to the new regime.
Dismissal and Re-Engagement
We had previously summarised the Labour government’s commitment to ending the practice known as “fire and rehire” (where the employee is dismissed and offered re-employment on less favourable terms) as a lawful means of imposing unilateral changes to employees’ contractual terms of employment.
The Bill renders this practice an unfair dismissal, apart from in certain limited circumstances. As the Bill currently reads, employers will continue to be able to engage in this practice (subject to further safeguards) if: (i) the variation to the terms of employment could not reasonably have been avoided, or (ii) reducing or eliminating financial difficulties which are impacting the employer’s ability to carry on the business as a going concern are the reason for the variation. These carve outs are intended to ensure that businesses can restructure to remain viable where business or workforce demands necessitate it.
Day One Rights
In addition to protection against unfair dismissal, the Labour government has acted on its promise to give employees the below basic rights from the first day of employment:
- Parental, paternity and bereavement leave:
- Paternity and parental leave (which are currently subject to a 26-week and a one-year qualifying period respectively) will become “Day One” rights.
- Statutory sick pay:
- Under current rules, an employee is only entitled to statutory sick pay if they earn at least the lower earnings limit (£123 in 2024/25). The Bill removes this lower earnings limit requirement, allowing all employees to be entitled to statutory sick pay. The Labour government intends to consult in the near future on the right level of statutory sick pay for low earners.
- The current 3-day waiting period for statutory sick pay is also removed by the Bill, making the entitlement to statutory sick pay a “Day One” right (as it was temporarily during the COVID-19 Pandemic). Businesses should be aware of the potential financial burden that the introduction of statutory sick pay as a “Day One” right will bring.
Discrimination, Diversity, Equity and Inclusion
Whistleblowing
The Bill also classifies sexual harassment as a protected disclosure, meaning that whistleblowing protections are now extended to disclosures relating to sexual harassment. Protections will be granted where an employee makes such a disclosure because of relevant failures to protect against sexual harassment by an employer and the employee reasonably believes there is a public interest concern to the disclosure. Protections extend to unfair dismissal and being subjected to detriment, as a result of the disclosure.
Equality Action Plans
Regulations will require employers with more than 250 employees to develop, publish and implement action plans on how to address gender pay gaps and support employees going through the menopause. The Labour government has furthermore signalled the current gender equal pay regime will be expanded to cover ethnicity and disability pay gaps, with the widened system to be enforced by a Regulatory Enforcement Unit. These measures will be implemented through the Government’s Equality (Race and Disability Bill), with consultations on this legislation expected in due course and a draft bill to be published during this parliamentary session.
Working Arrangements
Engagement of Casual and/or Low Paid Workers
Before the election, the previous Conservative government had planned to implement a new statutory right to a predictable working pattern to limit the controversial practice of “zero hours” contracts. This right would have come into force last month but has now been superseded by the Labour government’s draft legislation.
Under the Bill, workers on “zero hours” contracts will have the right to a contract that guarantees the number of hours they regularly work based on a twelve-week reference period. Any such terms offered will need to be responsive to changing working patterns. If more hours become regular over time, employers must use subsequent reference periods to amend the workers’ contracts accordingly (and the Labour government has committed to consult with employers and workers to ensure any subsequent reference periods are reasonable and proportionate). The Bill also provides that employers must give workers reasonable notice of any change in shifts or working time, with compensation that is proportionate to the notice given for any shifts cancelled, moved or curtailed.
Sector Pay Arrangements
As anticipated, the Bill empowers the Secretary of State to establish specific pay arrangements in the school support and adult social care sectors, including creating statutory negotiating bodies with powers to broker fair pay, terms and conditions, and training standards within those sectors.
Right to Flexible Working
Expanding on the newly introduced right to request flexible working, the Bill makes flexible working the default for all workers from “Day One”. Where an employer refuses a flexible working application, the Bill requires the employer to state the grounds for refusing the application and to explain the basis on which the decision is considered to be reasonable. The specified grounds on which employers can refuse applications include: (i) cost; (ii) meeting customer demand; (iii) inabilities to reorganise work or recruit additional staff; (iv) detrimental impacts on quality or performance; (v) insufficiencies in the proposed arrangements; and (vi) planned structural changes.
Trade Unions
The Labour government has committed to repealing legislation introduced by its predecessor government aimed at restricting trade union activity, including the Strikes (Minimum Service Levels) Act 2023. With the aim of further strengthening trade union protections, the Bill simplifies the trade union recognition process by removing the requirement for a potential trade union to prove there is likely to be majority support for recognition. It introduces extended rights of access for trade union officials, as well as requiring employers to inform employees of their right to join trade unions.
As we have noted, the Labour government has slowed the pace of its proposed overhaul of the employment landscape to embark on comprehensive reviews of various measures which were contemplated under the original “Plan to Make Work Pay” but which have been omitted from the Bill in part or in full. While the Labour government has indicated these reviews will start from Autumn 2024, we expect this process to take several years given the number of stakeholders who will provide input on the proposals. In any event, a brief overview of the reviews which we believe will be of interest to our clients is provided below.
Employment Status
One of the most significant pledges under the original “Plan to Make Work Pay” was the proposed shift towards a single status of “worker” and a simplified two-part framework of employment status. Given the complicated implications of this proposal, the Labour government has indicated there will be a long review period prior to implementation.
As part of this review, the Labour government will also consult on how to strengthen protections for the self-employed, including through a potential right to written contract.
Parental Leave
Alongside the measures outlined above to make parental leave a “Day One” right, the Labour government intends to hold a full review of the parental leave system to facilitate this reform.
Carers’ Leave
The Labour government plans to assess the potential benefits of introducing paid carers’ leave against the potential impact on small businesses.
TUPE
The Labour government intends to holistically examine the TUPE regulations and strengthen existing rights and protections under TUPE.
Collective Grievances
The Labour government plans to consult with ACAS on enabling employees to raise collective grievances about conduct in the workplace.
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 (+44 20 7071 4067, [email protected])
*Josephine Kroneberger, a trainee solicitor in the London office, is not admitted to practice law.
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