Employment Update
Labour's Employment Law Policy
Further to our previous update in May, we have summarised below the new Labour government’s key proposed changes to employment law (outlined in its New Deal for Working People, published on 24 May 2024) and potential issues for employers to be aware of. Labour have pledged to introduce implementing legislation (the Employment Rights Bill) within 100 days of entering government, following consultation with businesses, workers and civil society.
New single status of “worker”
This new employment status will seek to remove the existing differentiation between “worker” and “employee”, putting all workers into one category of employment status, except for those who will continue to be “genuinely self-employed”.
The Government will also consider measures to provide accessible and authoritative information for people on their employment status and what rights they are owed.
The idea behind this proposed reform is to remove ambiguity (and associated employment disputes) as to which category individuals fall into, and ensure all workers have the same basic rights and protections including in respect of sick pay, holiday pay, leave, and protection against unfair dismissal. This would represent a significant structural change to employment law.
Unfair dismissal protection
This proposed reform will largely act in favour of employees by:
- removing the two-year qualifying period for employees to bring a claim for unfair dismissal and instead making it an immediate right from the outset of employment; and
- extending the limitation periods for claims to be made in the Employment Tribunal from three months to six months.
This may cause an influx of unfair dismissal claims, and a greater burden on employers to both prevent and deal with litigation. The proposed changes will not prevent dismissal for reasons of capability, conduct or redundancy, or probationary periods with fair and transparent rules and processes.
It is possible that the Labour government may impose a maximum probation period in an employment contract to prevent employers circumventing the new unfair dismissal rule by implementing, for example, one-year probation periods.
Notably, the New Deal does not address the removal of statutory caps on the compensation individuals can receive from a successful claim, a proposal which was initially put forward in Labour’s Employment Rights Green Paper.
Flexible working
Flexible working will be the default for all workers from day one, except where it is not reasonably feasible.
Labour have acknowledged that the previous Government implemented some changes to the framework for flexible working. However, the Labour proposals appear to go further in seeking to build on this baseline and ensure that flexibility is the genuine default.
While the law currently enables employers to refuse requests for flexible working for business reasons, under Labour’s proposals the right to request flexible working will be strengthened with the introduction of the reasonableness concept. Hence, it will be harder for employers to refuse requests.
Right to "switch off"
Workers will have a new right to “switch off”, aiming to allow individuals to disconnect from work and only be contacted within agreed hours.
It is unclear how an employee would enforce this right in practice and what exactly the nature of the right would be.
Furthermore, there is a potential conflict between flexible working and the right to disconnect where employees increasingly work from home more with flexible hours. Employers will need to implement clear policies and communicate with workers to manage those who have “switched off”, including being able to contact them outside of core hours if necessary. It remains to be seen whether there could be a waiver out of the right to disconnect, which may be particularly relevant for professional firms.
Outsourcing / TUPE
Labour will strengthen the existing set of rights and protections for workers subject to TUPE processes. The government also aims to “bring about the biggest wave of insourcing of public services in a generation” and ensure that outsourcing of services cannot be used to avoid paying equal pay.
Redundancy rights
Redundancy rights and protections will be strengthened, for example by ensuring the right to redundancy consultation is determined by the number of people impacted across the business rather than in one workplace. This is likely to impact businesses with more than one site and mean that collective consultation is required in further instances.
Equal pay
A regulatory and enforcement unit for equal pay with involvement from trade unions will be implemented and Equality Impact Assessments for public sector bodies will be strengthened. Labour have also pledged to protect the ability to draw on equal pay comparators where workers’ terms and conditions can be attributed to a single source, ensuring provisions that were previously derived from EU law remain enshrined in UK law.
Key takeaways
Labour’s proposed employment reforms should be kept at the forefront of employers’ minds in respect of almost all areas of their employment practices and processes.
Employment contracts and internal policies will need to be updated when the proposals are introduced. New and extended employee rights, and how exactly they are to be effectively accommodated in practice, will need to be given thorough consideration. For example, it is clear that enhanced measures will need to be implemented for employers to communicate expectations around flexible working and the right to disconnect.
There may also be increased compliance obligations and administrative costs for employers as a result of many of the proposed reforms. In particular, the proposed new single status of “worker” is likely to mean that more individuals are entitled to minimum worker’s rights.
Given the significant nature of Labour’s proposed reforms, extensive consultation with business leaders and other key stakeholders will be required before they can be fully implemented, notwithstanding Labour’s commitment to introduce legislation in Parliament within 100 days of entering government. In any event, businesses should take note of the planned accelerated timeframe and start preparing for fundamental changes to employment law in the coming months.
