Employment Rights Bill

Contrary to the expectations of some, the Bill does not impose an outright ban on zero hours contracts. Instead, it takes a measured approach to prevent exploitative practices associated with such contracts. Workers who enjoy the flexibility that a zero hours contract can bring them will be allowed to continue to work in that way. 

However, the Bill gives workers on zero hours or contracts with a low number of guaranteed hours the power to request a more stable contract that reflects their actual working hours (calculated as an average over a reference period). The threshold for making the request, and the period over which an average will be calculated, are yet to be determined. 

When faced with a valid request for guaranteed hours (and there are only limited exceptions that will permit an employer from refusing the request), the employer must offer the worker either an amended contract or an entirely new contract that reflects the reality of the worker's relationship with them. The worker will then have some time (again, yet to be determined) to consider the offer. If the employer dismisses them or causes them to suffer detriment because they have made the request, the worker will be able to bring claims against the employer. 

In order to protect workers whose contracts do not allow them to have notice of when they may be required to work, the Bill introduces provisions that ensure workers receive reasonable notice of shift changes and compensation for cancelled shifts. The compensation amount is likely to be scaled based on the length of notice provided, offering a safeguard for workers against sudden changes to their work schedules. The exact compensation will be determined via secondary legislation. However, it seems clear that workers will be protected if they turn down work offered at the last minute, or if they lose work that was previously promised to them.

In a move that champions work-life balance for workers, the right to request flexible working is now accessible from the first day of employment. Until now, employers have been able to refuse requests for flexible working only if they can rely on one of a limited number of reasons, set out in statute. Providing the employer follows a rudimentary procedure and can point to a reason that justifies the refusal, the worker can do little about it if their request is rejected. 

When the Bill comes into force, employers will still be required to cite one of these prescribed reasons. However, they will be tasked with the additional responsibility of demonstrating that any refusal of such requests is reasonable. In effect, this introduces a new test of proportionality to the decision-making process: essentially, the employer will need to show why the available reason outweighs the hardship faced by the worker making the request. 

We have seen that employers are beginning to push for the 'great return', following the pandemic. More and more workers are being asked to attend the office for a minimum of three, four or five days per week. It will be interesting to see the extent to which this change in the law will curb the momentum of the ongoing shift in working patterns.

SSP will undergo significant changes, most notably being available from the first day of sickness absence. Additionally, the lower earnings limit that previously restricted eligibility has been removed, ensuring that more workers have access to sick pay during times of ill health, but the exact percentage of earnings to which they will be entitled when off sick has yet to be determined. 

The Bill brings about a more inclusive approach to parental leave, making it a day one right and introducing greater flexibility in paternity leave arrangements. Bereavement leave is also set to be expanded, covering a wider range of family members and circumstances.

The Bill contained a couple of surprises when it comes to the law on unlawful harassment – not least as some were expecting these to be contained in separate legislation dealing more specifically with discrimination under the Equality Act 2010. The first was that the new duty to prevent sexual harassment, which at the time of writing has yet to come into force, will be strengthened. The duty currently will require employers to take reasonable steps to prevent harassment – something that was a little out of kilter with the corresponding statutory defence against harassment, which requires all reasonable steps to be taken.  The amendment aligns the two duties, so that employers must now take all reasonable steps. 

The second surprise was the reintroduction of the concept of third party harassment to the statute books. This was last seen in October 2013, when section 40 of the Equality Act 2010 was repealed. The old law allowed claims to be brought by workers against employers if they had been subjected to harassment by third parties in the course of their employment (such as customers or suppliers) on at least three occasions, regardless of whether they were being harassed by the same person. The new law goes much further.  It allows workers to bring claims after the first incident of harassment. The employer's only defence will be that it discharged its duty to prevent the harassment from taking place. This very much aligns with the current trend to require employers to be proactive in their preventative steps.

The provision that grabbed many of the headlines in the run up to the publication of the Bill was the promised removal of the qualifying period for unfair dismissal. Currently, employees ordinarily need to be employed for two years before they gain the right to claim unfair dismissal. This qualifying period has varied from six months to the current two year minimum since the right was first introduced in the 1970s. However, for the first time, the qualifying period will be removed completely.  The Government has promised that this change will not be brought in until the autumn of 2026 at the earliest. As such, the qualifying period will effectively shrink over the next two years.

In order to address the concerns of employers, the Government has introduced the concept of a statutory probation period. Called the 'Initial Period', this will be available to employers who are considering dismissing employees by reason of capability, conduct, illegality and 'some other substantial reason' that is connected to the employee. The duration of the Initial Period is to be determined, but the Government has indicated that it is considering nine months. However, employers should beware.  Rather than providing a no-questions-asked escape route for employers who change their mind about a recent hire, it is likely that further legislation will set out the basis on which a dismissal will be considered fair during the Initial Period (and will probably involve at least a rudimentary fair process). Further, it is important to note that redundancy and 'some other substantial reason' that is not connected to the employee will not be reasons to which the Initial Period will apply. As such, employers will need to conduct fair processes when dismissing recently hired staff if they are facing a downturn in work, and we can envisage employees arguing that the real reason for their dismissal was not their poor performance but, instead, the redundancy of their role. We can also anticipate that employers will face difficulties when deciding whether to pool employees who have only just been hired (and potentially deliberately hired only for a short period) with long serving staff.

Unless the Government introduces other legislation, we envisage employers deploying agency staff in order to avoid the problems that come with being unable easily to reverse out of bad hiring decisions.

The controversial 'fire and rehire' practices of some employers are now under strict scrutiny, with the Bill making such actions automatically unfair unless the employer is in financial distress and has exhausted all alternatives after proper consultation. This creates a very high bar indeed for employers. It means that employers must show that they are facing an existential threat from financial difficulties that puts their business at risk of being unable to continue as a going concern. Employers who insist on employees agreeing to new terms on pain of dismissal will be caught, as well as those who dismiss their workforce in favour of cheaper alternative labour, willing to perform the same duties as their current staff. 

Employers of over 250 staff must not only publish their gender pay gaps, but they must also set out the action plans they intend to implement in order to close those gaps. In reality, many employers will already do this, but this makes it mandatory. In addition, employers who are required to publish gender pay gaps must also set out menopause action plans – a move that may eventually benefit millions of workers.

The P&O debacle in 2022 exposed some structural flaws in the law relating to collective redundancies. The Bill now introduces legislation that attempts to repair some of those flaws relating to ships' crews.

The Bill also makes a significant change to the statutory consultation process that applies when large scale redundancies are proposed. Currently, a business must start a statutory process when it is proposing to dismiss twenty or more employees at any establishment within a rolling 90 day period. The concept of what constitutes an 'establishment' is a little nebulous, but essentially it refers to a discrete part of a business and allows employers to treat different divisions or sites separately when it comes to collective consultation. The Bill abolishes the concept of 'establishment'. If a business has (for instance) stores in Glasgow, Birmingham, Reading and Exeter, and it proposes to dismiss five people by reason of redundancy from each of those stores in a 90 day period, this will trigger the duty to consult with employees' appropriate representatives. A failure to consult can lead to protective awards of up to 90 days' gross pay per affected employee and, if the business failed to notify the Insolvency Service of the redundancies, a criminal conviction and an unlimited fine. Employers will therefore need to keep careful count of the number of dismissals taking place across their organisation to avoid inadvertently falling foul of the rules. This may be particularly challenging if they have dedicated managers or HR teams working autonomously in different divisions, without communicating their plans with each other. 

New rules allowing sectoral bargaining for workers in the adult social care sector and for school support staff will be introduced by the Bill, meaning that terms can be set across the entire sector rather than in individual businesses.

One of the most radical changes contained in the Bill is the reversal of many years of anti trade union legislation.  The Trade Union Act 2016 has effectively been removed from the statute books, as have various other measures that have been fettering the unions' power in the workplace. 

The Bill will require employers to give employees notice of their right to join a union as part of the onboarding process.  This, together with the grant of a right of access to almost any employers' premises (unless the employer is based in a dwelling) gives the union a significant advantage in raising its profile and generating support. 

However, one of the most significant developments is the removal of the thresholds required for both union recognition and for industrial action. Until now, arguably one of the biggest challenges that unions have faced is inertia. For example, the current rules relating to union recognition are fairly byzantine, but unions need to show that at least 10% of the proposed bargaining unit (the section of the business that they are looking to represent) are union members. If the union cannot demonstrate that the majority of the bargaining unit are members of the union (in which case, it will usually be granted recognition automatically), the statutory recognition process also requires at least 80% of the workforce in that bargaining unit to vote in a ballot to determine whether the union should be compulsorily recognised, and the union must win the majority in that vote. This can be a daunting prospect for a union facing a disparate and unmotivated workforce. The Bill dilutes these requirements. The initial 'seed' percentage will be revised - potentially down to 2% - and the union must simply win a majority of the votes cast.  Similarly, the thresholds for taking industrial action have also been removed. The apathetic voter now becomes a problem for the employer, rather than the union. If the union can motivate a core group of employees, they may be able to carry the vote, irrespective of whether they enjoy the support of the majority of the bargaining unit. 

Various other measures contained in the Bill effectively resets the power balance between unions and employers. We anticipate that the next five years will see significant increased union involvement in the workplace across all sectors.

A new enforcement body, the Fair Work Agency, will be established to oversee the adherence to various employment rights. It replaces a patchwork of different agencies with responsibility for policing a variety of regulatory obligations, bringing them all under one roof. Its responsibilities will include ensuring the collection of unpaid tribunal awards, signalling a new era of accountability, as well as the policing of holiday pay, SSP, Modern Slavery Act obligations, the Conduct Regs for recruitment businesses, payment of the National Minimum Wage, and those matters currently under the remit of the Gangmasters and Labour Abuse Authority. 

Employers who have been reliant on employees not speaking out against poor industrial practices may now need to address their failings or face significant consequences. However, the success of the agency will depend very much on the extent to which it is properly funded. An obvious solution to this would be to allow it to self-fund through the fines it can collect, but we have yet to see how the Government proposes to address this problem.

There are new provisions relating to tips for those in the hospitality industry and outsourcing in the public sector.

On the same day as the Bill was published, the Government also released a policy document called 'Next Steps to Make Work Pay', which partly explained the content of the Bill but also reiterated the Government's commitment to implement the pledges made in the 'Make Work Pay' document.  Many of the pledges will require substantial consultation before they can move forward, and the timeline for some of these measures is unclear.  Some will be implemented by way of statute or secondary legislation; others may be brought about by Codes of Practice. However, employers should watch out for the following:

Equality (Race and Disability) Bill

This makes a number of changes to current issues relating to race and disability. It will establish a regulatory and enforcement unit, but also promises to introduce mandatory ethnicity and disability pay gap reporting, in addition to gender pay gap reporting. This could be extraordinarily difficult to manage: it remains to be seen how granular the detail of the ethnic pay gap report needs to be – whether it is based on a "white British" / non "white British" distinction, or whether an employer needs to separate out different ethnicities. This could be particularly challenging for those relatively small employers based in parts of the country with low levels of ethnic diversity, as preserving the anonymity of their worker's pay levels may be challenging. When the idea of ethnicity pay reporting was first proposed many years ago, there was some discussion as to whether to increase the size threshold of employers who needed to report.  However, this appears to have been set at 250, as for gender pay gap reporting. 

Similar challenges arise with regard to disability pay gap reporting. In addition, many disabilities are not visible, and assessing whether an individual meets the legal test of disability under the Equality Act 2010 is a nuanced process, often requiring expert support and advice from both medical and legal professionals. It remains to be seen what steps, if any, employers will need to take to flush out whether their employees identify as disabled when compiling their report. 

As well as closing the loophole on businesses who seek to avoid equal pay claims by outsourcing some of their workforce to third parties, the Equality (Race and Disability) Bill will contain a more fundamental and wide ranging change: the introduction of enhanced ethnic and disability equal pay rights. The current system of equal pay is, to most observers and practitioners, broken. It therefore seems surprising that the Government appears to be proposing to use the current legal model used to regulate the law relating to equal pay on the grounds of sex as a base for arguably the even more complicated areas of ethnicity and disability.

Other measures

These include:

• the extension of time limits in the Employment Tribunal – possibly allowing claimants to start the process of bringing claims within six months of the incident complained of (rather than the current three months);
• the right to 'switch off’ (probably via a Code of Practice), preventing employers contacting workers after hours (possibly 6pm) with non-urgent requests or enquiries;
• limiting potentially invasive surveillance for those working from home, to protect the privacy of workers;
• the Low Pay Commission has been tasked with setting a minimum wage that reflects the cost of living (thereby probably leading to a significant increase), and the Government has confirmed it intends to remove the current age bands that mean that teenagers and young adults receive a lower rate than those over 21;
• making it harder for employers to operate unpaid internships – a practice that is already quite highly regulated;
• bringing in some enhancements to carers' leave – presumably by introducing the right to be paid while taking the leave;
• reforming family friendly leave, such as maternity, paternity, adoption and shared parental leave;
• making it easier for employees to bring collective grievances against their employer and using the services of Acas in resolving those grievances;
• introducing the right for workers to be paid the national minimum wage on travel time;
• lifting the cap on protective awards in redundancy situations, particularly in circumstances where the employer has behaved particularly egregiously. It is not clear whether 'lifting the cap' means that the Government plans to abolish it altogether, or simply to increase it;
• reforming TUPE – it is unclear what the Government is intending in relation to this, but commentators are hoping for clarity as to whether workers (rather than just employees) will be in scope to transfer when a business is sold or a service provision change occurs, and what happens when a business is fragmented on transfer;
• more digitisation in the Employment Tribunals; and
• a reform of worker status, removing the distinction between 'workers' and 'employees'. 

Of the above list, the last two are particularly significant. The Government's ambitious plans will create additional rights and bolster existing entitlements for workers. However, the means by which people are able to enforce those rights are severely limited by the pressures faced by the Employment Tribunals and the Court system in general.  When claimants are sometimes waiting for more than two years before their claims can be heard, a priority must be to restore access to justice in order to allow justice to exist at all.  Digitising the Employment Tribunal service may help to clear the backlog of cases, but many are not convinced: recent 'improvements' to the IT in use by the Tribunal have proved unsatisfactory. More will almost certainly need to be done. 

The other significant plan is the reform of worker status. This is phenomenally complicated and some have queried whether this should instead have been the Government's first priority: employers will struggle to assimilate the raft of new changes that have already been proposed without having to then apply these to members of staff who previously have not been covered by the regulations.  For instance, seeking to apply unfair dismissal protection for a casual worker who has only come in for a few hours' work will be administratively unworkable and may lead to a further reassessment of the applicable legislation, relatively shortly after the changes described above have been implemented. This could lead to considerable uncertainty and confusion for employers and employees alike.