The new Employment Rights Bill introduced by the Labour Party, as part of the recent King’s Speech, proclaims a significant shift in employment law.
Here is a summary of some of the key changes to be aware of:
Dismissals and outsourcing
- Day one right not to be unfairly dismissed.
The Employment Rights Bill will give individuals the right not to be unfairly dismissed from their first day of employment. This marks a departure from the previous requirement, which requires two years of service for employees to qualify for protection against unfair dismissal meaning that the regular under two-year short service dismissals normally performed in these circumstances, would be no more.
Employees will benefit from immediate protection against unfair dismissal. This likely means that, employers, must have a fair and transparent reason for terminating employment, even within the probationary period. The legislation should ensure that employees are not dismissed without good cause, which aims to promote job security and fairness. It has been indicated that there will be exceptions for agency and seasonal workers.
It’s anticipated that the new law will still allow for probationary periods; however, the policy details suggest these periods will be governed by fair and transparent rules. If this proves to be the case you will need to follow a fair process, including providing reasons for dismissal and giving employees the opportunity to improve or respond to any concerns.
Whilst this change is seemingly good for employees, details remain unclear, but it appears this change is likely to increase the process around probationary periods and dismissal of new hires. It may make employers become more cautious about recruitment plans, and for them to place more rigour and time completing continuous assessment of new hires during the first few months of their employment.
Going forward, there will likely need to be more formal monitoring and feedback sessions during an employee’s probationary period, and these should be properly documented. Management will need to be focussed on areas of underperformance and conduct issues and not shy away from these matters, to ensure that any later decision to dismiss can be properly justified.
In the longer term, terminations are likely to be more expensive, and so we would expect that the number of tribunal claims will likely increase in this area.
- Restrictions on ‘fire and rehire’.
The practice of ‘fire and rehire’ is when you terminate an employee’s contract of employment before re-engaging them on different, often worse, terms and conditions. It is anticipated that the new legislation will seek to impose stringent controls on dismissal and re-engagement practices. Dismissing and offering to re-engage workers on new terms or replacing existing workers with new workers engaged on new terms, will only be allowed as part of a restructuring for a business to remain viable and preserve its workforce when there’s genuinely no alternative.
Labour has pledged to provide effective legal remedies for workers affected by fire and rehire practices. While the specifics are yet to be detailed, the emphasis will be on ensuring that workers have access to justice and that employers who engage in such practices face significant penalties. This move is expected to deter employers from using fire and rehire as a tool for restructuring.
Labour has said the new code of practice on ‘fire and rehire’ (which came into force on 18 July 2024) is ‘inadequate’ and will be replaced with a strengthened version. Further details are unknown, but the proposals would require employers to have more than a ‘substantial reason’ for changing terms (as is currently required). This new code will apparently set higher standards for employer conduct and again ensure greater employee protection.
The ultimate goal is to foster a collaborative approach in this area and ensure employees are treated fairly throughout the process. The measure aims to ensure that such extreme steps of fire and rehire are only taken when absolutely necessary and not used as a cost-cutting exercise at the expense of employee rights.
- Thresholds for redundancy consultation.
Under the current law, the requirement for collective redundancy consultation is triggered when a certain number of employees are affected within a single establishment. An ‘establishment’ is usually a place of work or location.
Labour has said it will change the law so that collective consultation requirements will be triggered if redundancies reach a defined threshold across the business as a whole rather than just, looking at numbers within each site/workplace. This was not, however, mentioned in the King’s Speech. This change would bring the UK more in line with many EU countries. Labour has not said whether it will also amend the number of redundancies that would trigger collective consultation requirements (currently 20 within a period of 90 days).
Again, this legislative change will provide greater employee protection by ensuring that more redundancy scenarios trigger a collective consultation process and there will also be improved communication and transparency regarding redundancy plans as collective consultation processes require you to inform and consult with employees’ representatives about the reasons for redundancies, the number and types of employees affected, and the proposed method of selecting employees for redundancy.
- Outsourcing/TUPE.
Labour says it will strengthen the rights and protections for workers transferred under TUPE but hasn’t offered any more detail, yet. In July, the TUPE rules changed to allow employers to consult directly with employees if the business had fewer than 50 employees (previously it was fewer than 10 employees) or if fewer than 10 employees would be transferred. This has removed collective consultation from a lot of TUPE processes and made the processes simpler and cheaper.
Labour could revert back, which would mean employers would have to go back to consulting collectively with employee reps for most TUPE situations making the process more time consuming and expensive, but as it would be returning to the previous rules it’s unlikely to have a substantial impact upon employers.
They may also look at making it harder to make transferring employees redundant or make changes to their terms and conditions of employment. It’s not clear how this could be achieved, however, employees already have several rights in a TUPE situation, including the right to compensation if they aren’t consulted with and unfair dismissal rights. They could also extend the group of people covered by TUPE, which would fit alongside their discussions about ending the three statuses in employment law (worker, employee and self-employed). Traditionally, TUPE has only applied to employees, but recent case law suggested workers were also covered. Labour have referred to ‘workers’ in their manifesto and this change would widen the pool affected in a TUPE situation.
Written by Lucy Williams FCILEx
Head of Employment Law and HR at Key Group Services Limited