The Employment Rights Bill – our initial thoughts on key proposals

At a time when many people are starting to think about their Christmas wish list, the Government has set out its wish list of employment reforms in the form of the Employment Right Bill (the Bill), which it published last week.

Anticipatory not imminent

The Bill is a wish list of reforms; it is not set in stone. The Bill must pass through both houses of Parliament before it gains Royal Assent and may be changed along the way.

Much of the detail will be provided via regulations which won’t be passed until consultation with stakeholders has concluded. The Government doesn’t expect to start consultation until 2025, with the result that most reforms in the Bill will not take effect until at least 2026.

So, the bottom line is that the proposals in the Bill might well change and employers will have plenty of time to feed into the proposals and prepare for them.

What are our initial thoughts on some of the key reforms?

Unfair dismissal

The Bill proposes that the existing two-year qualifying period for protection from unfair dismissal will be removed, meaning that it becomes a “day one” right.

The Government will consult on introducing a new statutory probation period.  During that period, an employee could be dismissed using a ‘lighter touch’ process where the dismissal is because of capability/qualifications, conduct, contravention of a duty or for “some other substantial reason”. If the dismissal is because of redundancy, it seems that the employer won’t be able to use this ‘lighter touch’ approach.

The Government will consult on the detail. It has suggested that the ‘lighter touch’ process might require the employer to hold a meeting with the employee to explain concerns about their performance before deciding to dismiss.

Our thoughts – Whilst the process will be ‘lighter touch’ during the probationary period, some sort of process will still be required for an employer to avoid liability. This is likely to lead to more litigation as employers navigate this space. In practice, employers will need to rethink and possibly formalise their procedures for evaluating the performance of new hires to ensure that performance issues are dealt with pro-actively during the probationary period. For now, it’s a case of seeing what emerges through consultation; the Government have said that the reforms to unfair dismissal will take effect no earlier than Autumn 2026.

Zero and low hours contracts

The Bill does not ‘ban’ zero hours contracts as previously suggested. It proposes an obligation on employers to offer a ‘guaranteed hours contract’ to zero or low hours workers to reflect the hours they regularly work over a reference period.

There is no requirement for the worker to accept the offer. If more hours become regular over time, subsequent reference review periods will provide workers with the opportunity to reflect this in their contracts. The Government will consult with employers and trade unions on how these subsequent review periods will work. The Government has confirmed that “where work is genuinely temporary, there will be no expectation on employers to offer permanent contracts.”

The Bill also proposes a right for eligible workers to receive reasonable notice of changes to working hours and compensation if their shift is cancelled or ended early.

Our thoughts – We need to see the detail, but these proposals may have unintended consequences. Employers may be less likely to offer zero/low hours contracts or may offer fewer shifts to those on zero or low hours, relying instead on overtime or temporary/fixed term staff. The impact in practice is likely to depend on key details to be consulted on, such as the definition of ‘low’ hours, the regularity of hours required, and the level of compensation for breach of the duty.

Fire and re-hire

The Bill proposes that dismissals will be “automatically unfair” in two situations: (i) where the employer “sought to vary” the contract and the employee did not agree; (ii) where the employer was seeking to employ another person or re-engage the employee under a varied contract of employment to carry out “substantially the same duties as the employee carried out before being dismissed.”

However, an exception will be made where the employer can show evidence of ‘financial difficulties’ affecting (or likely to affect) its ability to carry on the business as a going concern or carry on the activities of the business, and that, in all the circumstances, it could not reasonably have avoided the need to make the variation. If the employer can overcome this hurdle, a tribunal will then consider if the dismissal was fair in the circumstances.

The Government has also said it will consult on lifting the cap of the protective award for failure to follow the collective redundancy process as well as considering interim relief.

Our thoughts – Whilst this is not an outright ban on fire and rehire, the Bill seeks to dramatically narrow the circumstances under which fire and rehire will be allowed. The defence of ‘financial difficulties’ seems hard to run given that an employer would need to be in serious financial difficulty to satisfy the relevant test e.g. in liquidation or insolvency. If the Bill is passed as it is, it’s possible that it will be harder to “fire and rehire” than just to dismiss for redundancy or reorganisation. The devil will be in the detail and these provisions are likely to be contested by employers in consultation.

Flexible working

The Government is proposing to tighten up the ‘right to request’ mechanism.  Employers would be able to refuse a flexible working request on specified grounds (as currently), but they will only be able to rely on one of those grounds if it is ‘reasonable’ to do so.  An employer would need to explain in writing to the employee why their refusal is reasonable.

Our thoughts – Whilst the Government has said that it will consult on the detail of the approach, the Bill itself doesn’t really change much. It adds the requirement for the reason (as well as the manner of considering the request) to be reasonable, but that’s it. There’s certainly no right to a 4-day working week, as some news reports were suggesting.

What other key reforms does the Bill set out?

 In summary, other key proposals in the Bill include:

• extending the duty to take reasonable steps to prevent sexual harassment to one to take all reasonable steps;
• providing that disclosures relating to sexual harassment will be protected as qualifying whistleblowing disclosures;
• reintroducing a duty to prevent third party harassment;
• extending the application of collective redundancy consultation provisions by removing the requirement for the redundancies to be at one establishment;
• removing the qualifying periods for unpaid parental leave and statutory paternity leave, enabling paternity leave to be taken after shared parental leave and providing a new day one right to bereavement leave;
• introducing stronger protection against dismissal for pregnant employees and certain family leave returners;
• removing the three-day waiting period and lower earnings threshold for statutory sick pay;
• allowing for regulations to be passed that may require large private employers to develop and publish equality action plans addressing the gender pay gap and supporting menopausal employees;
• repealing the Workers (Predictable Terms and Conditions) Act 2023;
• changing the law on developing and reviewing written tipping policies;
• allowing for the establishment of a new Fair Work Agency and the creation of a Fair Pay Agreement in the adult social care sector;
• reinstating the School Support Staff Negotiating Body and the two-tier code for public sector contracts;
• making numerous updates to the legislative landscape on trade union and industrial action, including requiring employers to notify employees of their right to join a union and making the process of trade union recognition easier.

What’s not included in the Bill?

Alongside the Bill, a ‘Next Steps’ document has been published outlining, amongst other things, how the government is going to deal with promises made in  its manifesto that have not been covered off in the Bill.

These include introducing a right to switch off (preventing employees from being contacted out of hours) by way of a statutory code of practice, publishing the Equality (Race and Disability) Bill to make it mandatory for large employers to report their ethnicity and disability pay gaps, starting consultation on a possible move towards a single status of ‘worker’, and reviewing the existing laws on parental leave, carers leave and TUPE.

If you would like any further advice on the proposed reforms, please do not hesitate to contact a member of the TLT Employment Team.

Co-author: Catherine Roylance

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at 15 October 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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