Last month, the new Labour government published the much-anticipated Employment Rights Bill 2024. This new legislation will be welcomed by employees, but the impacts of it, alongside those arising from the budget, will undoubtedly have a mixed response from employers. Much of the bill is unlikely to enter law until the middle of next year (at the earliest). This will follow consultations and secondary legislation, with suggestions that any substantive reforms are unlikely to take effect before 2026. Despite this, employees should be aware of the significant reforms to employment laws on the horizon and start to consider and prepare their policies, practices, and management teams for these changes.
The bill is extensive, so below we provide a brief overview of some of the key changes and how this may impact employers.
Unfair Dismissal—”Day 1” Right
One of the most significant proposed changes is to protect against unfair dismissal. As most employers will be aware, employees bringing claims for ‘ordinary’ unfair dismissal currently must have at least two years of continuous employment. If implemented, this will be repelled so that unfair dismissal claims can be brought from day one of employment, provided they have started work. This will require an employer to have a fair reason and follow a fair process to dismiss employees at any stage.
It also proposes to introduce the concept of an “initial period of employment,” which will act as a statutory probationary period where fair dismissals may be less onerous with a ‘lighter-touch process’ applying. Reports suggest that this period could be between 6 and 9 months. Whether compensation is limited for successful claims during the probationary period is also going to be considered.
It will be prudent for employers to start considering their current practices and procedures and how probationary periods might be utilised in readiness for this change.
Fire and Rehire
The Bill introduces a new category of automatic unfair dismissal aimed at preventing the firing and rehiring of employees who decline or refuse to accept a change to the terms and conditions of their employment, except in extreme circumstances. The government has also committed to consulting on lifting the cap on a protective award for failing to follow the collective consultation process during fire and rehire processes.
The proposals will be a huge change to current practice as they may not only cover dismissals where the employee refuses a variation to their contract but also introduce the new concept of unfair dismissal arising if an employee is replaced with another person carrying out substantially the same duties but with varied terms. If introduced, employers will be severely curtailed from using fire and rehire in the future and likely only be able to defend a claim for unfair dismissal here in very limited circumstances where “there is a genuine need to avoid serious financial issues that may threaten the business.”.
Zero-hours
Another significant and complex change is the bill’s provisions on zero-hour contracts. The changes propose to introduce provisions requiring employers of workers on zero, or low/minimum, hour contracts to offer a contract(s) that guarantee a minimum number of hours, as calculated over a particular reference period (proposed as 12 weeks). It will be up to those workers to decide whether to accept those offers, but it seems that employers will also need to continue to make new offers at the end of each period.
The changes may also require the offer to cover the same days, times, or working patterns as in the reference period. There is also the introduction of a requirement for employers to give “reasonable notice” of any changes in shifts of working time with compensation arising if shifts are cancelled or shortened at late notice. These new changes are guaranteed to be met with concern by employers and, indeed, some employees who utilise the flexibility of zero-hour contracts. Whilst there are some carve-out provisions, the changes will be a disincentive in the use of these contracts if or when the changes are introduced. We await more details about the specific conditions and how these changes will work in practice, which are currently unclear. The government has indicated an intention to consult on the details.
Flexible working
Although the right to request flexible working has been a Day 1 right since 6 April this year, the bill substantively extends this by making flexible working the “default” position. Whilst employers can refuse such requests (for prescribed, statutory reasons), the bill adds that the refusal must be “reasonable” and that the employers must explain the reasoning in writing. This aligns with the updated ACAS Code on flexible working. In practice, if employers have already adjusted to April changes, these changes should not mean a significant change.
Redundancies
The new changes intend to invoke the obligation to collectively consult where there are 20 proposed redundancies across the whole organisation, rather than treating establishments independently, as you can do currently. This will be a major change; it will engage the onerous collective redundancy provisions more frequently and add greater costs to businesses.
Some other key changes:
There is currently no “commencement date” for when the provisions will come into force, and there is still a huge way to go until the bill is finally passed. Much of the changes will be welcomed by employees, but, in its current form, the bill will introduce onerous and complex changes to practices for employers with one of the most significant overhauls to employment law for decades.
Further details on the changes will become more apparent in the consultation papers and as they are debated in parliament, but with these significant changes in mind and with Labour’s plans to continue to transform employment law, employers should keep watch and start to consider how they will incorporate and implement them in their practices and policies. A copy of the Next Steps document can be found here. The guidance notes to the draft bill also provide a detailed overview of changes—see here.
At Warners, we can help you plan and limit the risk of exposure to Employment Tribunal proceedings for these proposed changes, as well as the legislative changes that have (or are shortly due to) come into force. We can offer fixed-fee services for employee contract reviews, staff handbooks, and in-house training for your senior management team.
Written by: Hope Flashman-Wells, Solicitor and Louise Brenlund, Head of Employment & Partner.
