“There may be trouble ahead” – what does the Employment Rights Bill mean for employers?
On 10 October 2024 the government published its Employment Rights Bill, fulfilling its promise to produce draft legislation within 100 days of a Labour general election victory.
Most of the proposals were widely discussed in advance and reported to be either:
- a necessary and welcome resetting of the balance of rights between employer and employee, or
- excessive far-reaching and anti-business measures which will tie employers up in red tape, affect productivity, efficiency and growth, and make it unreasonably burdensome to employ staff.
So where does the truth lie, now that the Bill has at last been published (158 pages comprising 119 sections and several appendices)?
It is important to remember that this is simply a Bill – draft legislation – which is to be subject to consultation with the public and businesses, and will need to go through the usual legislative process, being passed by the Commons and the Lords. As such, measures could change significantly. Most of these measures are unlikely to come into force until 2026. There is no doubt that many of these measures are significant and employers should be aware of them now.
The key parts of the Bill which will affect most employers are included in sections 1 to 27 of the Bill. The rest of the Bill relates to pay and conditions in particular sectors, trade unions and strike action, and 25 pages on “labour market enforcement”. In this blog we will focus on the initial provisions which all employers will need to think about. These include:
- The right to claim unfair dismissal.
The current 2 year qualifying period will be abolished. Instead of going back to the previous position (1 year) there will be no qualifying period at all. An employee dismissed after 1 day’s employment could bring an unfair dismissal claim. But, with exceptions, this won’t apply to “dismissals” before the employment actually starts
An important caveat is that the Bill permits regulations which will provide that different rules apply during a probationary period. However, it is not currently known what those rules will be, or how long a probationary period might be allowed. But it does appear that employers will more readily be able to dismiss for certain reasons during such a period, without following all the processes and procedural “hoops” that would currently be required when dismissing an employee who has 2 years’ service. There may be a lower level of compensation which can be awarded for dismissals during probation. Dismissals for discriminatory or “automatically unfair” reasons would still be unlawful.
Outwith a probationary period, an employer would need to follow the full process, irrespective of length of service – the employer will need a good reason for dismissal and to act fairly.
Separately, the Bill would allow the government to bring in Regulations protecting pregnant workers or new returnees from maternity leave from dismissal. There are already provisions which relate to redundancy, but this would be wider.
- Flexible working
This provision has attracted perhaps the most advance coverage but in reality, little is to change. The main changes are that the refusal of the application for flexible working must be “reasonable” and the employer must tell the employee why he considers the refusal to be reasonable.
- SSP
Currently there are 3 “waiting days” where no SSP would be payable. If the Bill is implemented there will be no waiting days and SSP would be payable from day 1 of any absence. The lower earnings limit would be scrapped.
- Collective redundancy consultation
Currently, employers must consult collectively about redundancies if they propose 20+ redundancies at one establishment within 90 days. The Bill would remove the reference to “one establishment” so that the trigger would be 20+ redundancies across the whole business. The collective redundancy consultation is therefore likely to be triggered far more frequently, with the risk of onerous penalties of 3 months’ pay per employee. Any manager who is handling redundancies will need to have insight into what is happening all across the business.
- Zero hours workers
There are complex provisions providing that zero hours workers, or those with very few guaranteed hours, will be able to insist on a contract with a guaranteed minimum level of hours reflecting what they actually work. Zero hours workers must also be given reasonable notice of shift patterns (or changes), and will be due compensation if shifts are cancelled. All of these rights would be enforceable by employment tribunal claim
- Changes to leave entitlement
Qualifying service requirement for paternity leave and parental leave is to be removed. The current right to parental bereavement leave would be extended to other bereaved persons (to be clarified in subsequent regulations).
- Preventing sexual harassment
Employers will be required (as of 26th October 2024) to take reasonable steps to prevent sexual harassment of employees. This would be strengthened to “all” reasonable steps, so a little more onerous for businesses
Additionally, the Bill sees the return of the previously short-lived concept of liability for harassment of employees by third parties (such as customers or suppliers). The employer will be liable if it failed to take “all reasonable steps” to prevent the third party from doing so. Regulations, to be published in the future, will set out what would potentially amount to “reasonable steps”. It is likely that employers will be expected as a minimum to assess risk, produce relevant policies, and handle complaints properly.
- Fire and rehire
It was known that the Bill would address “fire and rehire” but the Bill goes beyond what most commentators expected. It would be unlawful to dismiss an employee for refusing to agree a change to terms of employment, or to dismiss with the intention of re-hiring under new terms, unless that was reasonably necessary to enable the employer to carry on business as a going concern (i.e. to avoid a critical life-or-death financial crisis) – in that case there are various additional hoops to go through. This is a significant change which will remove an important option which employers currently have to change terms and conditions; and will make it more critical to seek and obtain employee agreement.
Summary
There are some important and far-reaching changes here. As ever, the devil is in the detail for many of these matters, and in some cases we await additional important to detail to be provided by regulations, codes of practice etc.
It is clear that these changes will be significant for employers, particularly in relation to:
- Unfair dismissal claims by those with limited service. But the “flip side” to that is that there may be fewer claims by such employees alleging discrimination and whistleblowing, in an attempt to ensure that some sort of claim can be pursued
- Liability for third party harassment. Employers are going to have to think very carefully about how to satisfy the requirement to take “all reasonable steps” to prevent harassment. Business development and other social events involving alcohol will be a minefield
- Inability except in extreme cases to terminate employment and re-hire on new terms.
These are all issues that good employers should be able to manage and mitigate the risks in their organisation. Employment law advice will be critical as these new provisions come into force (assuming they do).
Further down the track, but not in the current Bill:
- The much-hyped “right to disconnect” and
- A single status of “worker”, removing the current distinction between worker and employee
The government has made clear that these measures are still planned and will happen. The worker/employee issue in particular would be a vastly significant change to the employment landscape, but is probably unlikely to happen for at least a few years.
As always it pays to take expert employment law advice and our team is available at BTO’s Employment Law Team.
This update contains general information only and does not constitute legal or other professional advice.
Douglas Strang, Senior Associate: dst@bto.co.uk / 0141 221 8012 / Connect with Douglas on LinkedIn
