5 July 2024

On 4 July 2024, the Labour Party swept to power with a huge majority which will give them substantial legislative autonomy in the House of Commons. What is this likely to mean for employment law, and how soon might changes take effect?

Generally, Labour’s proposals as published in their election manifesto (which incorporated a more detailed policy document entitled Labour’s Plan to Make Work Pay: Delivering a New Deal for Working People) would extend workers’ rights more significantly than under any Government since Tony Blair’s first Labour administration of 1997. Recent commentary indicates that Sir Keir Starmer will move swiftly to table legislation between the King’s Speech on 17 July and the Parliamentary recess a few weeks later. Looking slightly further ahead, Labour have consistently stated that they would introduce substantial reforms within 100 days of taking office.

Some of Labour’s legislative proposals are likely to be technically complicated – and therefore also time-consuming to draft and see through Parliament. Labour have also undertaken to “consult fully with businesses, workers, and civil society on how to put our plans into practice before legislation is passed” – though this will probably apply only to the most complex and far-reaching proposals. Both factors could slow down some reforms. Nevertheless, employers can probably expect to see some significant changes imminently.

Below, we outline some of the more significant proposals and discuss how easy – or otherwise – they might be to implement.

Day-one unfair dismissal rights

Currently, employees cannot generally make a claim for unfair dismissal against their employer until they have accrued two years’ service. (The main exceptions to this are discrimination and whistleblowing claims, which are ‘day-one’ grounds for a claim against an employer.) Labour now proposes to remove the service requirement altogether, so that employees will be able to bring unfair dismissal claims from day one. However, they will also “ensure employers can operate probationary periods to assess new hires”.

Removing the qualifying period for unfair dismissal could be brought about by secondary legislation and is achievable quickly. On the other hand, the reference to making allowance for probationary periods suggests that the current unfair dismissal regime would not apply, or would be amended, while employees are on probation. It is unclear exactly what is intended here, but if it requires new primary legislation, this may hold up the removal of the qualifying period.

The consequences of this proposal are likely to be complex. It is arguable that two years is too long to wait for unfair dismissal rights: Labour’s rationale is that the employer’s discretion to dismiss without cause in the first two years is inequitable for employees, for whom the risk associated with giving up accrued job security outweighs the opportunity of seeking a better job, sapping dynamism from the job market, encouraging wage stagnation, and ultimately holding back the UK economy.

However, the removal of the qualifying period will drastically increase the number of potential claimants and may lead to an unwelcome increase in litigation. In any case, since the ability to bring an unfair dismissal claim can be an important bargaining chip in negotiating a settlement, the change may lead to significant additional expense for employers in settling potential claims with outgoing employees. On the employer’s side, then, it can be argued that the time and expense which is often necessary to fairly dismiss an employee is an inequitable burden for the employer to shoulder after, say, only three months of employment. Depending on how the new regime works with regard to probationary periods, the removal of the qualifying period may encourage many employers to lengthen or formalize their probationary procedures.

Banning (some) zero-hours contracts

Labour had previously suggested that all zero-hours contracts would be banned, but this has been abandoned. Instead, they will outlaw “exploitative” and “one-sided” arrangements by giving workers the right to a contract reflecting any hours regularly worked over a 12-week reference period. (However, workers will be free to stay on a zero-hours contract if they wish, and employers will continue to be able to offer fixed-term contracts and seasonal work.)

The intended outcome seems to be that if someone worked, for example, two days per week for 12 weeks, they would become permanently entitled to those working hours at their discretion. There will also be a requirement for “reasonable” notice of a change in shifts or working time, with a system of compensation for shifts cancelled or curtailed at short notice.

Generally, given the various ways in which zero-hours contracts can work in practice, this proposal seems complex, and will require detailed drafting and consultation to achieve a workable outcome. The main questions are:

• How will a worker’s “regular hours” be defined?

• To what extent will lawful exceptions be identified, to allow for situations in which an employer cannot continue to offer the same hours?

• How will employers be prevented (as Labour have stated they will be) from avoiding their obligations by deliberately varying the hours they offer?

Single status of worker

Currently, there are three types of employment status in the UK: employee, worker, and self-employed. Workers enjoy some basic employment rights, such as the minimum wage and statutory holiday; other rights, such as unfair dismissal, statutory redundancy, and maternity pay/leave are restricted to employees only. Those who are self-employed have no employment rights. The increasing profusion of flexible and zero-hours working arrangements in many sectors, and the development of the ‘gig economy’, mean that the tests for employment status continue to develop in a complex body of case law. Given the highly fact-sensitive nature of many judgments, there is often considerable legal uncertainty around employment status which can only be resolved by litigation. It is not possible to definitively resolve the issue with contractual wording, and some large organisations have lost high-profile cases despite sophisticated contractual arrangements under which their workers were putatively self-employed.

Labour proposes to introduce a new legal framework which distinguishes only between workers and the “genuinely self-employed”. The intention seems to be that everyone, or most people, whose current legal status is that of ‘worker’ would have full employment rights. This would expand employment rights significantly – for example, to many ‘gig economy’ workers, many casual workers in the hospitality and care sectors, and many agency workers, among others. However, there is an implicit acknowledgement that this would be complicated to implement: the New Deal states that Labour will “consult in detail on how a simpler framework that differentiates between workers and the genuinely self-employed could properly capture the breadth of employment relationships in the UK [and] adapt to changing forms of employment […] while ensuring that workers can benefit from flexible working where they choose to do so”. In other words, this is unlikely to be a swift change.

Trade union reforms

Labour is proposing an ambitious programme of reforms to trade union law. These are likely to be received by many as pro-union, although the Labour manifesto emphasizes that strengthening the economy requires a “new era” of partnership and co-operation between employers, unions and Government. This is perhaps an implicit rebuke to the previous Government’s approach to industrial relations.

Reforms proposed by Labour include simplifying and lowering recognition thresholds, including removing the requirement to show that recognition would be supported by more than half of workers in the bargaining unit, and allowing the final ballot on recognition to be made by a simple majority of those voting. Electronic (as opposed to postal) balloting will also be allowed for the first time. Labour also proposes to increase union rights of access to workplaces and to require employers to inform workers of the right to join a union. The Trade Union Act 2016 and the Strikes (Minimum Service Levels) Act 2023, which heavily restricted lawful industrial action, will, perhaps unsurprisingly, be repealed.

In our view, these proposals do not seem to entail a great deal of complexity, and might take effect fairly swiftly.

Others

The points above cover only a fraction of what Labour is proposing. There are many other significant proposals (some of which we have touched on previously here), including:

• Ending equal pay avoidance via contracting out – this might mean that an end-client would be liable to equal pay claims from a contractor’s employees; this could have wide implications, particularly for contracted-out services in the public sector (e.g., social care, cleaning, catering)

• Abolishing the lower minimum wage rate for 18-20s, so that everyone would be entitled to the standard rate from the age of 18

• Tracking the minimum wage to the cost of living

• Introducing a Single Enforcement Body to enforce workers’ rights

• Introducing a right to work flexibly unless an employer has “good reasons” not to allow it

• Outlawing dismissing a woman within 6 months after returning from maternity leave, other than in “specific circumstances”

• Introducing ethnicity and disability pay gap reporting for large employers (250+ employees)

• Introducing a requirement to produce a menopause report for large employers

• Increasing the time limit for bringing an Employment Tribunal claim from three months to six months

• Providing new remedies against the abuse of ‘fire and rehire’, and strengthen the forthcoming statutory Code of Practice on Dismissal and Re-engagement, which comes into force on 18 July 2024; however, business restructuring “when there is genuinely no alternative” will not be prohibited

• Introducing a system of collective bargaining with a nationwide Fair Pay Agreement in the adult social care sector

• Introducing bereavement leave for all workers

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.