Labour Party Election Plans for Employment Law

With his announcement on the 22nd of May this year the Prime Minister fired the starting gun on one of the most anticipated election campaigns of recent years.  With significant changes proposed by all parties, this is the first article in a series examining how such changes are likely to affect the motor industry.

At the time of writing, we are yet to see a detailed manifesto from the Labour party. However, we do have some details as to the general direction of travel from comments made at recent party conferences as well as a 2021 paper ‘A New Deal for Working People’. Here we examine a number of these in decreasing order of concern. 

Day One Employment Rights

Under current UK law an employee does not benefit from full employment law protection until they have been employed for a period of two years or more. If an employee has less than two years of continuous service, then an employer may dismiss the employee without the fear of pursuit in a claim for ordinary unfair dismissal. This remains true even if the employer does not have a “potentially fair” reason for the dismissal. 

In what would be a watershed change, the Labour Party has suggested that it will seek to dispense with this two-year period, meaning that all employees would automatically get full employment law rights from day one. 

The UK has never provided employees with such expansive protection. Indeed, the trend has been to increase the period from six months to twelve months to the current position of two years (introduced in 2012). Were employees to obtain full employment law protection from their first day on the job, there would be a significant increase in the administrative burden for both employers and the tribunal system. 

If Labour has its way, all employers will require a clearly defined and robust performance management process, and will have to ensure that prior to each dismissal they have undertaken a fair disciplinary process, including a face-to-face meeting with a right to be accompanied, and that dismissal would be an option open to the reasonable employer. This would be particularly onerous for new starters as it is currently unclear how the proposed changes would apply during any probationary period. 

Enforcement of Tribunal Awards

The Labour party has previously stated a desire to include tougher penalties for employers who breach tribunal orders, including instituting a personal liability for Company Directors. 

This suggestion has received very little attention, but in our opinion it would constitute the second most significant change currently under consideration. Whilst holding rogue directors personally liable has some appeal, in practice piercing the corporate veil and making directors personally liable for court orders will be highly controversial and fraught with danger. It is more likely to affect legitimate companies who accidently breach employment requirements than directors whose actions are designed to circumvent the legal protection of employees.

The devil will be in the detail here, and we strongly advise that members review any proposals and consider whether there is sufficient directors’ liability insurance. 

Expanding Employment Rights To ‘Workers’

Under current UK law, a person may generally be classed as an employee, a self-employed contractor, or a worker.  Employees have the most employment rights, while self-employed contractors (or ‘freelancers’) enjoy very few.  Workers fall somewhere in the middle and have some, but not full, employment rights. These include the right to receive the national minimum wage, paid holiday, statutory rest breaks, protection from discrimination under the Equality Act 2010 and protection for whistle-blowers under the Public Interest Disclosure Act 1998.

Labour’s Green paper in 2021 suggested replacing the three-tiered system for a two-tiered system consisting of Employed and Self-Employed. Such a change would likely result in a significant increase in rights for people formerly classed as workers. 

This ranks as third in our list of changes because it effectively amounts to a continuation of a trend in expanding workers’ rights through the courts, and the caselaw defining people in the “gig” economy as workers (Uber) as well as The Workers (Predictable Terms and Conditions) Act 2023 introduced late last year by the government. Indeed, a two-tier system is not new as HMRC has only differentiated between employed and self-employed for some time. 

How this change would impact your business will depend upon the percentage of your workforce currently deemed to be workers as opposed to employees, but it may be worth watching.

Ending Fire and Rehire

Fire and rehire is a common process where an employer can amend contractual terms and conditions by ending the old contract and rehiring employees under new terms and conditions. If the employee does not accept the new terms and conditions they can be dismissed, and the Employment Tribunal can be asked to adjudicate on whether the process was legitimate. Plenty of case law exists explaining the details of what makes a process legitimate or not, but it’s enough to say here that it is often upheld. 

During the Covid pandemic this process received especially bad press, generally because of incidents where it was misapplied. In any event, Labour has stated a desire to oppose ‘fire and rehire’ and act to end it. 

In fact the current government has introduced a statutory code of practice which allows for an uplift of 25% where it is breached. 

The Labour party has stated that it will,

‘Replace the inadequate statutory code brought in by the government with a strengthened code of practice and reform the law to provide effective remedies against abuse.’

It is unlikely that an outright ban on employers being able to change the terms and conditions of employment would be effective. Fire and rehire when used correctly is a valid and valuable tool. That said, if you are looking to make any changes to your employment contracts, it may be prudent to act sooner rather than later. 

Third Party Harassment

Labour has previously stated a desire to require employers to create and maintain workplaces free from harassment, including by third parties. 

In fact, the Conservatives have previously agreed with this.  In 2021, they included a duty to prevent harassment by third parties in the Worker Protection (Amendment to Equality Act 2010) Bill. This requirement was eventually dropped during the bill’s progress through the House of Lords. 

It is unclear whether Labour will seek to reintroduce this right and, if so, what steps employers will need to take. It is unlikely that there will be a strict liability, but care will need to be taken as to what steps are required to benefit from any defence. 

Increasing The Time Limit To Bring A Tribunal Claim 

Labour has previously stated a desire to increase the time limit to bring a claim in the Employment Tribunal, but has not said by how much. 

The current limit is three months, and this can be extended in certain situations. Given that Employment Tribunals are currently very busy, any increase in the time to bring a claim would have a significant effect on their workload. 

Until we have more details, assessing the impact of any change is challenging. In reality most employees will have formed their opinion as to whether not they should bring a case within the current three months. We do not see many claims struck out for being out of time. 

Bottom Lines

It may have been Niels Bohr or Yogi Berra who said it, but it remains true either way: “Prognostication is hard, especially about the future.”  Still, while we cannot predict the future with absolute certainty, we can prepare for it.  As the election approaches and parties clarify their positions, we stand ready to steer you through any changes and to help you understand new regulations, remain compliant and maintain the flexibility you need to run your business. 

As always, please remember that this advice is general in nature and provided for guidance and information only. Should you find yourself in any of the situations above, we strongly advise that you seek legal advice.