Unpacking Labour's proposed employment law reforms

July 26, 2024

The newly elected Labour government promised a wide set of employment law changes in its election campaign. The government's Deal for Working People is set to be introduced within 100 days of its election success. The King's Speech last week, which covered the Employment Rights Bill, focused on zero-hour contracts, fire and rehire, additional day-one rights, establishing a single enforcement body and drilling down into trade union legislation. But what does that mean for employers? We explore what to expect from the proposed reforms.

Unfair dismissal: a day-one right?

Perhaps the most talked about part of the Employment Rights Bill is the expansion of current employment protections by removing the requirement of a minimum period of service for safeguarding against "ordinary" unfair dismissal and making it a day-one right. This will be subject to rules relating to qualifying probationary periods. It is still unclear exactly how it will work but it is likely to be quite tricky to navigate for employers and will also likely lead to a higher number of claims brought in the employment tribunals.

Making it subject to qualifying probationary periods means that employers may well make more use of probationary periods and start to bring in longer probationary periods to offset the impact of the higher protection for unfair dismissal.

Family-friendly rights

Family-friendly rights have undergone a wave of change recently, including the introduction of unpaid carer's leave entitlement and extended protection from redundancy under the Pregnancy and Family Leave Act and the Paternity Bereavement Bill.

The King's Speech announced that parental leave, which currently requires one year's service, would be a day-one right under the new Employment Rights Bill. At present, it is unclear whether the scope of this proposed change will only apply to parental leave, or whether other types of family leave, such as paternity leave, would also be reformed.

Bereavement leave may also be subject to updates from the government to make it more accessible and provide a clear statutory entitlement for all workers. The newly introduced unpaid carer's leave may be subjected to further changes to make the entitlement paid. It is also proposed that workers on maternity leave are to benefit from the government's enhanced protection against dismissal for six months upon return from leave (with certain exceptions) to provide them with greater certainty.

Zero-hour contracts

In terms of zero-hour contracts, the Bill is focused on banning exploitative practices that are promoted through such contracts, rather than a complete restriction. The proposed changes are aimed at allowing employees to have a contract in place that reflects their normal hours, based on a 12-week pattern. This may be supplemented by the right to a reasonable notice period when any changes to shifts or working time are sought to be implemented, along with a proportionate compensation for any cancelled shifts. Zero-hour contracts certainly present greater flexibility for both parties but are equally as challenging to manage as there is no guaranteed salary or working hours.

Fire and rehire

Labour has pledged to reform the practice of fire and rehire through the introduction of a more robust code of practice and a clearer statutory code with the aim of protecting employees from agreeing to disadvantageous terms, which we anticipate will be reflected in the forthcoming Employment Rights Bill. The code that came into force on 18 July of this year may therefore be replaced with a more stringent version. The proposed change may be a good opportunity for businesses to consider familiarising themselves with the code and to seek advice when a business need to fire and rehire arises to ensure that a genuine consultation with employees has been conducted.

Trade unions

The key takeaways in this area are:

• repealing the law on minimum service levels in relation to industrial action;
• simplifying the process of statutory recognition for trade unions; and
• introducing a right for workers and union members to access a union within workplaces.

Other considerations

Amongst the other proposed employment law changes, Labour intends to facilitate constructive conversations between businesses and employees on the right to switch off. This is particularly topical and could prompt a potential policy intervention in response to the return-to-office mandates that increasing numbers of employers have recently decided to enforce.

Further, the government's intention to introduce collective grievances should be on employers' radars. The Acas rules are intended to stay the same but include the ability to raise a collective grievance with the aim of putting a stop to bad practices altogether. An introduction of a Single Enforcement Body, also known as a Fair Work Agency, is also part of the plan. The idea behind it is to ensure greater protection of workers' rights and smoother cooperation between this Body, trade unions and businesses.

Lastly, the government has proposed to implement a new single status of workers to eliminate the complexities of the tiers of employment and to streamline the distinctions between employees and self-employed. Our recent blog explores this in further detail.

Key takeaways

While the government's plans are still in development, employers can re-evaluate the current contracts they have in place to identify which may potentially be caught in any new legislation on the topic of zero-hour contracts. Carrying out an audit-type of exercise can allow businesses to assess which policies may benefit from revisions to allow for a better alignment between the employee's needs of certainty and the business's needs to maintain a degree of flexibility. This can be particularly helpful in understanding which family-friendly leave entitlements can be revised in advance of any of the proposed changes. In the interest of efficiency, priority may be given to certain proposals over others, as the Bill appears to be far narrower in scope than the Make Work Pay Plan. Regardless, employers can use this opportunity to revisit some of their practices and engage in a productive conversation with employees to understand what their challenges are and to allow them to access better support at their workplace.