Ben Smith, Senior Associate at GQ| Littler, the leading specialist employment law firm, says there are eight big employment law proposals businesses should prepare for ahead of a likely Labour Government:
Restricting “fire and rehire”
Currently, Labour are proposing to ban ‘fire and rehire’ except as a last resort to save a business following a process of dialogue between the employer and affected workers. The question of whether a company genuinely had no choice but to “fire and rehire” would be a complex one and likely a point that will need to be heavily litigated.
Ben Smith says the Employment Tribunals have neither the capacity nor expertise to deal with such complex cases, with Tribunals generally avoiding a review of the financial decisions made by employers. It is likely that this reform will further discourage “fire and rehire” (which is already rarely used) and employers may simply choose to make employees redundant rather than risk becoming embroiled in expensive litigation.
Greater emphasis on collective bargaining
Labour has proposed a series of reforms to trade union and collective bargaining rights. They would increase union rights to access workplaces, make strike action easier (such as by allowing electronic balloting), make the process easier for a union to be recognised, and require employers inform workers of their right to join a union. Labour would also create a new Fair Pay Agreement in the adult social care sector, setting minimum terms and conditions, before reviewing whether that approach should be rolled out in other sectors. Labour would also create an ability for employees to raise collective grievances and reform collective consolation requirements for collective redundancies (i.e. those affecting 20 or more employees).
In the immediate term an increase in union activity will be a steep learning curve for many employers who have no experience of a unionised workforce and only engage in collective consultation in limited circumstances required under TUPE or when proposing collective redundancies. Longer term, unions and collective bargaining becoming more embedded in working life in the UK may increase costs for employers, limit business flexibility and slow down decision-making.
Creating a new single status of “worker”
Labour have committed consult on reforms to the complex area of employment status with the goal to introduce a new single status of “worker” that will include all but what Labour call the “genuinely self-employed”, effectively merging the current categories of “employee” and “self-employed worker”. While Labour’s ambitions in this are clear, there is a huge amount of detail to be worked out in consultation. For instance, it’s unclear whether Labour would reclassify those who are currently self-employed workers into the new status of worker or whether there would be an entirely new test that would need to be assessed for each individual.
A single status of worker could result in increased costs and reduced flexibility for employers. Chief among those costs would be increased employer National Insurance Contributions, as it is likely that the new category of workers would be subject to tax in the same way as employees are now. A new single status would also likely give those who are currently self-employed workers employment rights they don’t currently have, such as family leave, unfair dismissal, and minimum notice.
The changes is likely to give rise to further litigation as the boundaries of this new single status are tested by the courts. Individuals seeking to assert the new worker status have a lot to gain, but conversely the tax position may encourage more litigation around the scope of “genuinely self-employed”. It will be a complex landscape for employers to navigate.
Making unfair dismissal and other key employment rights available from day one
Labour will reduce the qualifying period for unfair dismissal from 2 years to day 1 of employment. Employers will be able to implement probationary periods (though it is likely that there will be limits on how long probation can last) and dismiss if probation is failed, but only with a “fair and transparent” process. This is likely to increase the number of claims to Employment Tribunals and will require employers to invest more time and resource into monitoring and managing probationary periods and all dismissals, regardless of length of service.
As well as unfair dismissal, Labour will make statutory sick pay and parental leave “day 1” rights.
Banning exploitative zero hours contracts
Labour have committed to ending “exploitative” zero hours contracts and create a new right to a contract that reflects regularly worked hours (calculated over a 120 week period). It is unclear how this will work in practice, but risks unduly limiting freedom and flexibility for employers and employees alike, increasing employer costs – particularly in sectors with fluctuating demand or highly seasonal working patterns e.g. hospitality in holiday destinations or agriculture.
Protection for working parents
Labour have committed in their manifesto to reviewing the parental leave an pay system within the first year of being in government.
Labour will also introduce new protections for mothers returning to work from maternity leave, meaning they cannot be dismissed for 6 months expect in limited circumstances.
Enhancing pay gap reporting and equal pay rights
Labour will (i) enhance the current gender pay reporting regime by requiring employers publish and implement action plans to tackle their pay gaps and (ii) introduce disability and ethnicity pay gap reporting, similar to the gender pay gap reporting regime, for employers with 250 or more employees. Labour would expand equal pay laws (currently available only in relation to sex) to include disability and race.
The expansion of pay reporting will create an additional compliance burden for large employers. Increased scrutiny of pay could generate more discrimination claims, as well as creating a more contentious and litigious environment. The expansion of equal pay law will inevitably create more complex and long-running litigation (equal pay claims can run for several years) which seems unnecessary when the current law already protects against discriminatory pay practices based on race or disability.
Expanding discrimination protections in the workplace
Labour have committed to strengthening protections for maternity and menopause discrimination and sexual harassment. One of these reforms would seemingly be treating sexual harassment complaints as a form of whistleblowing. Labour will strengthen the current rules requiring employers to take steps to prevent harassment at work, and will introduce protections from harassment by third parties. Labour will also bring not force protections from dual discrimination, where discrimination is because of a combination of protected characteristics.
These proposals are likely to result in increased litigation as the scope of the new rights and guidance is tested and employers will need to review policies and practices to ensure they are sufficient.
What is the overall impact for employers?
Says Ben Smith: “Overall Labour are planning on addressing pretty much every area of employment law – while some of the changes are minor in isolation, the overall picture is one of significant change in the next few years. Labour’s manifesto also includes a number of proposals that will also indirectly impact on employers – such as reforming the carried interest tax rules (which will have a big impact on the privacy equity sector), immigration (Labour have said employers who breach employment laws will be banned from hiring from overseas), and regulation of AI.
“Overall, it is likely that employers will face higher costs and a greater regulatory burden. Employers are also likely to face a surge in litigation as the scope of changes to the law is tested in the courts. A more agile, diverse and secure workforce however presents opportunities for employers who are able to recruit and retain key talent.”
“Taken as a whole, Labour’s plans are perhaps the biggest change in employment law since the introduction of the Equality Act and employers will need to ensure they are keeping abreast of the law as it develops. Employers will not be able to rely on business as usual practices but will have to engage with the changing landscape – for example, if the law on unfair dismissal changes as proposed, that will require a much more careful approach to dismissals at any stage of employment. Employers that fail to prepare could face hefty bills – from increased staff and compliance costs as well as from an increased amount of litigation.”
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