MILS Employment Law Update Following Labour’s ‘New Deal for Working People’

Following July’s election results and Labour’s Sir Keir Starmer being elected as Prime Minister, there has been a great deal of speculation as to how and when Labour’s manifesto promises would come to fruition. Although Labour’s election manifesto gave a flavour of what is to come, the 17th July King’s Speech gave far more direction on what precisely the changes are going to be and when they are likely to become law for employers. In the King’s Speech, two proposed ‘bills’ were announced: The Employment Rights Bill and a draft Equality Race and Disability Bill. The full details of the Bills and expected dates of enactment will only be clear when the Bills are published around the 12th October 2024. 

With that said, this article will delve into the changes employers can expect to see with rough estimates of when they might come into force. Please note these are only informed predictions, we will update you in due course when the details and dates are more certain.   

Dismissals: Unfair Dismissal Day One Right and Fire/Rehire Restrictions 

Unfair dismissal- not until at least October 2025

The headline change proposed is the mooted removal of the day one right to not be unfairly dismissed, currently it takes 2 years of continuous service for employees to accrue said right. The change would mean that new employees would gain protection from unfair dismissal from their first day, in turn making it more difficult for employers to dismiss for reasons such as not ‘being the right fit’. With that said, employers will still be able to dismiss employees who fail a probation period for example as long as they follow a fair dismissal procedure. It is expected that the new Bill will include more details regarding probation periods, which will become a far more important part of new hire employment contracts. We are lacking full details until the Bill is formally published in October 2024, so keep your eye out for an update from us around that time. 

It is expected that employers will have to be even more cautious in terms of recruitment and employers may consider more fixed-term contracts or employing agency workers. The clearest risk for employers is an increase in Tribunal claims for unfair dismissal, so employers will need to be following dismissal procedures ‘by the book’. 

Fire and rehire- not until at least October 2025

Fire and rehire has been used as a tactic by employers, particularly gaining notoriety in recent years, when employees and employers cannot agree on contractual variations. The practice of firing and rehiring, under the Labour changes, will only be lawful as a last resort under circumstances where the business genuinely has to restructure to maintain its financial viability and to enable itself to continue employing its employees where no other alternative is available. Previously just having a ‘substantial reason’ was enough to be lawful. As always, it is far less legally risky and expensive to agree variations with employees before reaching a fire and rehire scenario. 

The outgoing Conservative Government enacted the statutory ‘Code of Practice on Dismissal and Re-engagement’ which the Labour Government has said needs to be bolstered. What form this will take is currently unknown. 

Redundancy Consultation Thresholds- within 2 years

There is an expectancy that Labour will alter the current legislation on collective consultations when there is a redundancy situation. Currently, collective consultation requirements (versus individual consultation) is triggered where 20 or more people are potentially going to be made redundant within a period of 90 days at one site or workplace. Instead, Labour are allegedly thinking about changing the threshold for collective consultation to where 20 or more people are potentially being made redundant across the whole business and not just one site. Many EU countries have legislation of this type so it is not a drastic change. However, note that this was not formally proposed in the King’s Speech so there is no certainty as to when or what final form this change may take.  

Diversity and Discrimination Updates

Draft Equality Race and Disability Bill- no time estimate

At this stage, only a draft Bill will be published in October 2024. One major part of this Bill is a proposed right for black, Asian and minority ethnic and disabled workers to make equal pay claims as currently this right is only available in sex discrimination claims. The legal mechanics of this new right will be complex and there are no details as of yet as to how this will work in practice. 

A more tangible change in this Bill is the introduction of mandatory ethnicity and disability pay reporting for employers with at least 250 people with the aim to close ethnicity and disability pay gaps. This will include outsourced workers too. For firms of this size, pay gap reporting will already be a practice undertaken each year anyway, but applying the practice to these sections of the workforce may be more complex. 

Zero-hours Contracts and Flexibility

Zero-hour Contract Ban- within 2 years

Labour are proposing a complete ban on zero-hours contracts (contracts where there is no guarantee of work nor set hours), with a new right to move to a regular hours contract. This new contract would be based upon the average number of hours worked in a 12-week period. As of yet, there is no news as to how many hours will be set as a minimum and what counts as ‘exploitative’ in the Government’s eyes. For employers, the ban on zero hours gives them less flexibility to adapt to changing demands on the business, such as seasonal fluctuations, and will almost certainly increase costs. With that said, it is foreseen that employers could hire temporary workers, self-employed workers, or enable current employees to work more overtime. 

Flexible Working Pattern Change- potentially by April 2025

Regarding the right to ask for flexible working hours, this was recently (in April 2024) made a day one right. Employees can ask for reduced hours for example and can make two requests per year. Labour want to extend this entitlement from not just a right to ‘ask’ for a flexible pattern but instead an entitlement to flexible working which must be accommodated as far is reasonable. Currently employees can ask for flexible working and employers can reject this request if one of the prescribed reasons is relevant. The new change appears to make this right a lot less employer-friendly, making it an employee right to have flexible working patterns rather than just having a right to ask for a flexible pattern. Again, the full details of this proposal will not be known until October. 

Right to reasonable notice of work schedules- potentially by April 2025 

Labour has set out their intention to bring in a law about giving employees reasonable notice of shift times and then compensation if their shift is cancelled within certain time-frames. The inevitable consequence is for managers, who plan shift rotas, will need to be even more vigilant than usual when planning for the week(s) ahead. It is currently not clear what level of compensation will be available for cancelled shifts nor the amount of notice needed to avoid compensating employees. 

Statutory Sick Pay Changes

SSP Waiting Period Removal- potentially by April 2025

The current waiting period from when an employer can pay SSP is day four, which will be changed to day one. The lower earnings limit currently in place will also be removed so that the lowest earners can also claim SSP. Labour may well increase the SSP rate. As with many of the changes, this will increase costs for employers. 

Trade Union Rights

Right for Unions to recruit from the workplace- within 2 years

Giving appropriate notice (yet to be defined), Unions will have the right to enter workplaces and recruit and organise. Currently, Unions only have a limited right of entry. This might increase Union membership in the future but this will depend on how effective having more entry is for recruitment which is hard to predict. 

Family Rights Amendments

Enhanced rights for maternity returners- within 2 years

The Employment Rights Bill is expected to bring in a new right for maternity returners which will make it unlawful to dismiss those returning for six months after their return, except in specific circumstances which are yet to be detailed. For employers, this could mean better performing employees will have to take priority when deciding on redundancies potentially.

Other changes to leave types- potentially by April 2025

Unpaid bereavement leave is a statutory right for when a ‘dependent’ passes away, however paid bereavement leave is offered by many employers. Labour are looking to make paid bereavement leave a statutory right. Labour are also proposing to make carer’s leave paid, currently it is not obligatory to pay an employee who takes carer’s leave. There is also supposedly going to be a review into Parental Leave rules, but currently the details are sparse. 

Other Notable Changes

National Living Wage (‘NLW’)- potentially by April 2025

Labour will index NLW to the cost of living to make sure it rises in line with the current economic climate. Labour also want to remove the tiered system whereby under 21s are paid less NLW than those over 21. This change may well come in April 2025. 

No unpaid internships- no estimate

Labour is hoping to ban unpaid internships. 

Removal of the 3-tier system for employment status- no estimate

Labour wants to get rid of the UK’s current three-tier system for employment status and to create a simple framework where people are either workers or self-employed. Thus, they would be abolishing the current distinction between ‘employees’ and ‘workers’. There was no mention of this change in the King’s Speech and this is unlikely to be a quick change, it will certainly need further consultation.

Extension of time limits for bringing Tribunal claims 

Labour may look to change the time limit to bring an Employment Tribunal claim from 3 to 6 months. This would increase uncertainty after someone is dismissed or resigns but will also allow more time to resolve complaints before a claim is made at all. Overall, it is likely that this change will increase the amount of Tribunal claims.

Concluding Comments

Until the new Employment Rights Bill is published in October 2024, we are left to speculate on the final dates and details of each proposed change. However, we hope this article will give you a firm idea of the types of changes that can be expected. In terms of preparation, we advise that you hold off until the Bill is published. At which point, we will endeavour to provide an update with practical steps on what employers should do to be compliant. In any event, the mooted changes are incredibly employee friendly. It is widely believed by employment law practitioners that Employment Tribunal claims will become even more common than they are already. As such, it will be, more than ever, critical to follow best practice and procedure. 

Don’t forget, as a MILS member you have access to the MILS Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself with a query relating to the article above, contact us at any stage for advice and assistance as appropriate.