Employment Law Changes Under Labour
Author: Sam Evans
Key Contact: Chris Aldridge
The Labour Party made its ‘New Deal for Working People’ a core part of its election manifesto. Now that Labour is in power, we expect significant employment law reforms. Many of the proposals set out in Labour’s ‘Plan to Make Work Pay’ are fairly generic at this stage and lack substantive detail. We will therefore need to wait and see how they develop, both during and after consultation with businesses and in the draft legislation. The King’s Speech on 17 July 2024 confirmed that the government would “introduce” a new Employment Rights Bill (“ERB”) by 12 October 2024 during the 2024/2025 parliamentary session (July 2024-July 2025). This is an ambiguous term and could mean that the bill will undergo prior consultation or may be subject to forensic scrutiny in parliament (meaning that the measures are unlikely to come into effect imminently).
In addition, there is also a draft Equality (Race and Disability) Bill. This is subject to a less ambitious timetable so looks to be less of a priority. We will set out below all the measures set to be addressed in the new bills plus which other changes we are expecting and when they may be implemented.
National Minimum Wage
Labour has said it will look to secure further improvements to the minimum wage rates by linking it explicitly to the cost of living. They will do this by ensuring that the Low Pay Commission’s remit is changed so that they must take account of the cost of living when recommending the new rates. This is a change that could be implemented relatively quickly because it would not require primary legislation.
Labour also plans to remove the current age bands for the NMW so that “all adults are entitled to the minimum wage”. The band currently allows employers to pay a lower hourly rate to under 21s. This will likely result in the age 18 to 20 band being removed altogether. Its removal would especially impact the retail, leisure and hospitality sector, where under 21s are often employed. It is unclear if the lower under 18 band will be deleted.
The earliest either of the above changes could likely come into effect would be April 2025 following the Low Pay Commission’s annual recommendations in November. The recent King’s Speech set out that both proposals would be included alongside the ERB.
Zero Hours contracts
Labour aims to crack down on what they term ‘exploitative’ zero-hours contracts. Workers would gain the right to a contract that reflects the number of hours they regularly work based on a 12-week reference period. Note that this does not appear to envisage a complete ban and will likely mean that zero hours contracts will be available if workers freely choose them. A ban on ‘exploitative zero-hours contracts’ will appear in the new ERB. It is unclear if this will also include the right to a contract that reflects the number of hours worked.
The impact on employers could be significant; migrating employees to average-hours contracts could reduce flexibility (for both parties), increase baseline costs, create resourcing challenges in sectors where demand fluctuates and potentially encourage greater use of self-employment models.
Labour says the plans won’t prevent employees earning overtime or employers from hiring on fixed-term contracts including seasonal work. It seems that seasonal surges could likely be managed either through hiring temporary workers or offering overtime to regular employees.
There is no detail on the minimum number of hours that must be guaranteed or the grounds (if any) on which employers would be able to resist an average-hours contract. Again, we would assume there would be a period of consultation before this proposal is implemented but it is currently set to appear in the ERB.
Right to reasonable notice of work schedules and wages for shifts cancelled at short notice
Labour plans to introduce new laws about shift scheduling to ensure that workers get proper notice of the times they are required to work and don’t lose pay if shifts are cancelled at the last minute by offering some level of compensation to the worker. Their plans are aimed at rebalancing what has become known as “one-sided flexibility” which disproportionately affects workers on zero hours contracts.
It is unclear what exceptions will be introduced to address unexpected work shortages and when these changes will be introduced.
Trade union rights
Unsurprisingly, trade unions are set to gain various extra rights under a Labour government; the effects may, however, be less pronounced in already heavily unionised sectors.
One of the most important changes to highlight is Labour’s plans to simplify the process of trade union recognition and statutory recognition thresholds. This would lower the threshold for a union to be recognised from 40% of those entitled to vote to a simple majority of those voting. Postal ballots will be replaced with a system of electronic and workplace ballots which would make it far easier to organise industrial action.
The government will also repeal the Trade Union Act 2016. This legislation introduced turnout requirements for industrial action ballots and increased the notice that trade unions had to give of any industrial action from one week to two. This could lead to increased industrial action but will be dependent on the parliamentary agenda and so could take longer to execute. The government will also repeal the Strikes (Minimum Service Levels) Act 2023 which set minimum levels of staffing required during strikes.
Labour says it will give union reps stronger protection from dismissal and create new rights for members in relation to intimidation, harassment, threats and blacklisting. As trade union reps and members already enjoy extensive protections, these changes are unlikely to be of major significance. Further details are awaited.
The written statement of employment particulars (which must be given to all workers when they start a new job) will need to say that workers have the right to join a trade union, and all staff must be informed of this on a “regular” basis. This will require the updating of standard templates but seems unlikely to have a big impact.
At the time of writing it would appear that the ERB will repeal the Strikes (Minimum Service Levels) Act 2023 and the Trade Union Act 2016. Beyond this, it is not entirely clear aside what could be included but it is likely that simplifying statutory recognition will be on the list.
Fire and Rehire
Labour have committed to clamp down on the practice of fire and rehire (the practice of dismissing and offering to re-engage workers on new terms – or replacing existing workers with new workers engaged on new terms). Employers will only have the right to resort to it if there is no other alternative to preserve the viability of the business, or its workforce, subject to dialogue with their workers.
Labour has also stated that it will replace the new code of practice on ‘fire and rehire’- due to come into effect on 18 July 2024 with a stronger version. It remains to be seen how these changes will be translated into specific policies given that the new code already stresses that fire and rehire should be a last resort. The intention is clearly that employers will be expected to have more than a ‘substantial reason’ for changing terms and conditions. The King’s Speech confirmed that the ERB would ‘end fire and rehire’. This is quite definite language and goes beyond making fire and rehire a last resort.
Unfair dismissal
Labour has pledged to remove the existing two-year qualifying period for protection from unfair dismissal and to make this a ‘day 1 right’. The current proposals allow employers to dismiss workers during their probationary period, subject to ‘fair and transparent rules and processes’. It remains to be seen what this means exactly but this would inevitably increase the process around probationary periods and the dismissal of new hires. It will almost certainly increase the likelihood of Tribunal claims and make employers more cautious about recruiting. Given the increased risks of unfair dismissal claims, it may make some employers more inclined to use alternative resourcing models such as agency workers or to avoid recruiting unless necessary.
At the time of writing, it is unclear whether the new government will amend existing legislation to introduce a new fair reason of failing probation or will simply remove the qualifying period via statutory instrument. The latter could be implemented quickly but it is important to note that, even though this is set to appear in the ERB, the government has proposed to consult widely before implementing these changes, so they may not come into effect immediately.
Right to ‘Switch Off’
Labour has previously promised to implement a right to ‘switch off’ for employees outside of work. This initially meant a new right for workers to disconnect from work outside of working hours and the right not to be contacted by their employer. The latest proposals appear to be far less ambitious and point towards employers having to consult workers about workplace policies and practices, based on laws in force in Ireland and Belgium. In Ireland, commentators have remarked that the regulations have been largely ineffective and only resulted in changes to workplace policies and workers’ email signatures. There is also likely to be a non-binding Code of Practice adopted in the future to set out best practices (without any binding sanctions).
Given the lack of detail at the time of writing, this is likely to be a longer-term ambition for the new government.
Skilled Worker visas
Labour will require sponsors in sectors such as construction, IT and engineering to adhere to a government-determined workforce plan. Individual companies could be banned from sponsoring visas for overseas employees if they are considered to be making insufficient progress on workforce training.
Labour have proposed to increase the minimum salary requirement for some skilled work visas by nearly 50%, as well as increasing the salary requirements for skilled workers, British citizens and those with settled status to bring family dependents into the UK.
There is no current plan from the new government to set an overall cap or target on immigration, but it will aim to reduce net migration and may consider implementing a points-based system.
Whilst the King’s Speech did commit to a new Border Security, Asylum and Immigration Bill, this will not implement any of the above measures, suggesting these will be longer term priorities.
Thresholds for redundancy consultation
Currently, an employer must hold a collective consultation when they are proposing 20 or more redundancies in one establishment (not necessarily in the organisation as a whole) within a 90-day period. 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 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).
This plan will require multi-site employers to keep close track of redundancy numbers and will result in more collective consultation exercises.
Outsourcing / TUPE.
Labour says it will strengthen the rights and protections for workers transferred under TUPE. As of yet, it has not said how, but we anticipate it will consider: –
- Ensuring that the protection extends to a wider range of workers (rather than just employees).
- Improving collective consultation requirements ensuring that consultations are more inclusive and comprehensive.
- Preventing dismissals post transfer by strengthening unfair dismissal protection and ensuring that new employers cannot easily terminate transferring employees without following rigorous procedures.
- Enhancing the role of trade unions by making it easier for unions to represent workers and engaging in negotiations during business transfers.
Labour says it will bring about the “biggest wave of insourcing of public services in a generation”, to ensure that outsourcing can’t be used to avoid paying equal pay, and embed social value into the rules around public sector contracting.
Flexible working by default.
Labour says it will strengthen the right to request flexible working to ensure flexibility is genuinely the default from day one, except where it is not reasonably feasible.
Details are unclear, but this could involve limiting the discretion for refusing flexibility and/or increasing tribunal powers to review employer decisions. Labour says it would mean that workers could benefit from flexi-time and term-time options, suggesting a focus on helping parents.
For anyone delivering services on the front line this is unlikely to have a material impact, but for those in management and administrative roles this is likely to lead to an increase in requests to work flexibly. The ERB is set to include this proposal.
Ethnicity pay gap reporting (for employers with 250+ employees).
Labour plans to make ethnicity pay gap reporting compulsory for employers with at least 250 employees. The threshold is surprisingly low considering current guidance that employers need at least 50 employees in at least two out of five ethnic groups before they can report any meaningful data externally. It is possible that a more nuanced approach will emerge after consultation, but employers in sectors with large concentrations of employees from BAME backgrounds should be ramping up efforts to address incomplete data. This is even more important given the fact this is set to be included in the draft Equality (Race and Disability) Bill. However, as it is a draft bill this should enable detailed consultation between the government and employers.
Disability pay gap reporting (for employers with 250+ employees).
Labour plans to introduce compulsory disability pay gap reporting which supports meaningful action to address inequalities. Given the current lack of consensus around what metrics to look at, how to ask about/define disability and the broad spectrum of disabilities, detailed consultation seems likely even though it is set to appear in the draft Equality (Race and Disability) bill. This will likely mean a significant lead time before this is introduced.
Race Equality Act
Labour plans to extend the right to make equal pay claims to black, Asian and minority ethnic and disabled workers. It also plans to enact the right to claim ‘dual discrimination’, (namely where someone claims they have been discriminated against because they have two protected characteristics, such as because they are a disabled woman).
Extending the already flawed equal pay regime to cover additional characteristics will make it even more complicated for people to complain about discrimination. We’d expect Labour to consult on these ideas in depth before publishing the draft Equality (Race and Disability) bill. However, it is worth noting that the briefing notes for the King’s Speech state that the legislation will seek to make it easier for ethnic minorities and disabled people to bring equal pay claims.
Increased protection for sexual harassment
Changes have already been enacted to ensure that employers have a proactive duty to take ‘reasonable steps’ to protect employees from sexual harassment from October 2024. However, Labour plan to go a step further and require employers to take ‘all reasonable steps’ to stop sexual harassment, including harassment by customers/third parties. This will be more challenging for employers due to the higher threshold of compliance. It remains to be seen what ‘all reasonable steps’ means in practice however as a minimum it will likely include: –
- Implementing specific policies on the prevention of sexual harassment.
- Providing regular training and education about expected behaviours in the workplace.
- Establishing clear and confidential reporting channels.
- Ensuring there is a framework which requires complaints to be handled promptly and effectively.
- Promoting a culture of zero tolerance.
Labour has indicated that it would treat an allegation of sexual harassment as amounting to whistleblowing so we can expect complaints of sexual harassment to be dealt with in a similar fashion to whistleblowing. This measure did not appear in the King’s Speech so it is unclear when such changes will be introduced. It also remains unclear at the time of writing when sexual harassment protection would be extended to interns and volunteers in the workplace, as pledged by Angela Rayner, Deputy Prime Minister, prior to the election.
Maternity changes
Since 6 April 2024, women selected for redundancy have had the right to suitable alternative employment if they are pregnant (and have told their employer this) or if their expected date of childbirth was less than 18 months ago. Labour says it plans to go further in its ERB and prevent the dismissal of those returning from maternity leave except in specific circumstances (yet to be defined).
This is a difficult proposal to balance and could result in ostensibly better performing employees being made redundant instead of a poorer performing employee who is pregnant (we assume that this right would apply during maternity leave as well as afterwards – but that’s not been made clear).
Bereavement leave
Currently there is no set statutory amount of bereavement leave under UK law, although many employers generally offer compassionate leave (even if this is not covered by way of any formal policy). Labour plans to make this a statutory entitlement for all workers. It remains to be seen when this could be implemented.
Paid carer’s leave
The right to one week’s unpaid carer’s leave came into force in April 2024, however, Labour is planning to review the benefits of introducing carers’ leave as a paid entitlement. This is not a firm commitment so will be dependent on the parliamentary agenda and Labour’s political priorities.
Parental rights review
Labour plans to review the parental leave system within the first year of government and make ‘parental leave’ a day one right. It’s unclear if this means parental leave specifically or any kind of right for parents to take family leave. As things stand, paternity leave currently requires a minimum of six months’ employment – it seems likely that Labour will scrap this. This could be done under powers in existing legislation but is unlikely to change promptly.
There are no radical reform proposals currently on the table to overhaul the UK’s complex family rights framework which already offers various strands of protection.
Statutory sick pay reforms
Labour will remove the waiting period so that Statutory Sick Pay (SSP) must be paid from day one of sickness (rather than day four) and they plan to remove the lower earnings limit so that very low earners qualify for SSP.
It’s not clear if Labour will also increase the rate of SSP, which remains low compared to other European countries. The reforms will significantly increase costs for employers who rely on the waiting period or who have low earners (for example because they work very few hours) but will assist those on low incomes who fall ill.
The ERB has pledged to include payment of SSP on the first day of sickness and the abolition of the lower earnings limit as part of its ‘day one’ agenda.
New enforcement body
Labour has promised in its ERB to establish a new state enforcement agency called the “Fair Work Agency” who would have the authority to ensure that employers comply with the new regulations. The new body is likely to have powers to enforce working time, holidays, pay, sick pay, agency rules and ‘discriminatory practices against migrant workers’. It has been reported that its remit may also include parental rights. Whilst it will appear in the ERB, we do not expect the agency to be fully staffed and operational until at least the end of 2025 or the beginning of 2026.
Summary
Labour’s plan to implement legislation within 100 days of entering government is ambitious. Many of the proposals are unlikely to be implemented before next year at the earliest. Some of the proposed changes could happen quite quickly, for example, changing the remit of the Low Pay Commission in relation to the national minimum wage. However, most of the new proposals will need primary legislation, passed through and approved by both Houses of Parliament, which is typically a lengthy process. It may also be that secondary legislation is required to flesh out the detail of the relevant reforms, and this in turn will take time to go through Parliament. Labour have committed to consult with businesses before legislation is passed, so, despite the hype about reform within the first 100 days, we expect that employers will have plenty of time both to shape the proposals and to prepare for them!
Whilst the King’s Speech on 17 July has highlighted Labour’s legislative priorities for the next parliamentary session, the detailed provisions are still lacking and will likely be subject to consultation. The measures in the draft Equality (Race and Disability) bill will likely come in 2026 or later.
For more information about any of the changes set out above, please feel free to reach out to Juliette Franklin (juliette.franklin@acuitylaw.com) or Chris Aldridge (chris.aldridge@acuitylaw.com).
