5 July 2024

The new Labour Government: 5 key employment law changes

The election is now finally over and the UK has woken up to a new Labour Government. In its campaign, the new Government made it clear that its “New Deal for Working People” would be an integral part of its future plans, suggesting new employment legislation would be introduced within 100 days.

Given the impact of these changes, we provide a summary of the 5 key employment law changes which we believe employers should be aware of. As always, the devil will be in the detail, and some of these proposals may change over time, but one thing is certain: we will all be kept very busy focussing on how best to address and implement these proposals between now and the Autumn!

1. Basic Individual Rights from Day 1

This is the new Government’s most significant change. Briefly:

  • The Government have committed to granting all workers with important rights from the first day of their employment in relation to unfair dismissal, parental leave and sick pay. Currently, these rights are typically subject to minimum service requirements.
  • By far the most significant of these proposals is in respect of unfair dismissal, where the Government has committed to removing the 2-year minimum service requirement for bringing a claim (where compensation is capped at the lower of £115,115 or 1 year’s pay).
  • A requirement of qualifying service has been part of the law of unfair dismissal since it was introduced with the Industrial Relations Act 1971. At the time, the requirement was also two years and, although the threshold has since varied, it has never been less than six months.
  • We foresee that, in the next few weeks and months, employers might consider quick dismissals before the new rules comes into effect – e.g., removing employees where there is any doubt over their long-term future. Currently, it is easier and less expensive to remove employees who have less than 2 years’ service.

2. Probationary Periods and Hiring Going Forwards

  • The Government has also referred to the need for “probationary periods with fair and transparent rules and processes”. We envisage a maximum length for these being set (to avoid employers extending probationary periods beyond unreasonable limits) and rules requiring employers to follow dismissal procedures when letting staff go and prohibiting them from dismissing employees without justifiable reasons or cause.
  • In practice, employers will likely need to upgrade and fine-tune their recruitment policies and processes to ensure that:
    • they are compliant and reduce the risk of unfair dismissal claims by their new recruits; and
    • any risks are mitigated by hiring the right people in the first place. We expect to see more careful screening by employers, more investment in psychometric or other testing to ensure a potential candidate is a good fit for the role, and far more rigour and time spent in continuous assessment of new hires during the first few months of their employment.
  • Going forwards, there will 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.

3. The Right to Disconnect

  • The New Deal states that a new "right to switch off" would provide workers with the right to disconnect from work outside of working hours and not be contacted by their employer.
  • Whilst similar concepts already exist in some other European countries (like Belgium and Ireland), it will be new to the UK so it will be interesting to see how it is adopted, given the UK’s more 24/7 culture.
  • The Government has said that employers and workers will have the opportunity to agree bespoke workplace policies or contractual terms, suggesting that the right would not be absolute. We suspect that future guidance or a Code of Practice may emerge in the coming months; in any event, employers will likely need be creative in this regard and consider practical measures such as training to respect out of hours emails, calls and cover arrangements.
  • It is likely that any ‘disconnect’ proposals which employers consider will need to be considered against other well-being initiative and existing policies, such as those relating to flexible working and leave.

4. Zero hours contracts

  • The Government has suggested it will introduce new rules designed to prevent the abuse of zero hours contracts. Initially this was thought to be an outright ban on zero hours contracts, but the Labour Party’s position has subsequently softened.
  • Instead, we understand that employers will be allowed to continue to use zero hours contracts provided they are not "abused" or exploitative (for example, where an employer does not guarantee any work, but the worker is obliged to be available for any work that is offered).
  • A new law is planned to set out the minimum standards expected, and there would be a new right to a contract that reflects hours that are regularly worked (as judged against a 12-week reference period).
  • Employers will need to review their use of zero-hour contracts to ensure that they comply with the new rules.

5. Fire and Re-hire

  • The current Government has introduced a new statutory ACAS Code of Practice on Dismissal and Re-Engagement, which is due to go into effect imminently, on 18 July 2024. Unreasonable failure to comply with this risks a Tribunal award against an employer being increased by 25%. Where this relates to a failure to meet collective consultation obligations, the potential liability could be considerable.
  • The new Labour Government appears poised to go a step further and has suggested that it will end the practice of "fire and rehire" as a lawful way to change an employee’s contractual terms and introduce a new “strengthened” code of practice.
  • Potential areas for change on fire and rehire include:
    • improving information and consultation procedures; and
    • adapting unfair dismissal and redundancy legislation to prevent workers being dismissed for failing to agree to a worse contract.
  • Whilst “fire and rehire” practices have been under scrutiny in recent times, they can, where used reasonably and with proper consultation, be a helpful tool for employers to implement necessary changes. It will be vital to ensure any future exercises comply with the new rules and anticipated code of practice.

Please do get in touch with our Employment Team if you’d like to discuss how any of these Labour proposals will impact your organisation and how best to plan for these changes.

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