The new Labour government has delivered on its promise to introduce a draft Employment Rights Bill within 100 days of gaining power to deliver on the proposals set out in their election manifesto and “Plan to Make Work Pay”.

In this article, we summarise the key changes contained in the Employment Rights Bill (the Bill) and what to expect from the Government’s longer term plans for employment law reform.

What is in the Bill?

New rights for zero/low hours workers

The original proposal was an outright ban on zero hour contracts, which then became a suggestion that only ‘exploitative’ zero hour contracts should be banned.

However, what the Bill actually contains is a new right for workers on zero or low hours contracts to be offered a guaranteed hours contract at the end of each reference period. The guaranteed hours contract should reflect the hours worked during that reference period. The definitions of “zero hours contract” and “zero hours arrangement” in the new Section 27BU of the Employment Rights Act 1996 are drawn very wide, which means they will apply to most, if not all, casual work arrangements (including bank work).

In addition, these workers will have the right to receive ‘reasonable notice’ for any changes in shifts or working time with proportionate compensation where shifts are cancelled.

It is not yet clear how this will work in practice and the government has indicated that it intends to consult further on the detail to ensure that the requirements are reasonable and proportionate for both employers and workers. 

These changes will impact on the use of casual workers and place additional pressures on managers creating rotas.

Restricting ‘fire and rehire’ practices

The Bill includes provision that it will be automatically unfair to dismiss an employee for refusing to accept a contract variation, unless the reason for the variation was to save the business and the employer could not have reasonably avoided it. This is a much higher burden than the current test of an employer needing to have ‘a sound business reason’ to make a change to terms and conditions and is likely to create a significant challenge for those working in public sector services.

Unfair dismissal and day one employment rights

The Bill significantly increases the employment rights an individual has from the first day of employment. Employees will have the right to sick pay, parental leave and bereavement leave from day one of their employment. Perhaps most significantly for employers, all employees will have the right to bring unfair dismissal claims from day one, removing the current two year qualifying period. However, the Bill makes clear that employers will still be able to dismiss employees during the ‘initial period of employment’ (which is to be consulted on – the preference is a nine month period) if they have carried out a ‘proportionate assessment of an employee’s suitability to a role’. This will, as anticipated, make robust management of probationary periods key for all employers.

Harassment

The Bill extends the new duty on employers to take reasonable steps to prevent sexual harassment (that comes into force on 26 October 2024) to ‘all’ reasonable steps. Regulations will set out what this means.

Those reporting sexual harassment will be whistle-blowers, protected from detriment and dismissal. Confidentiality clauses (or non-disclosure agreements (NDAs) in respect of such disclosures will also be invalid.

Employer liability for third party harassment of their employees (in respect of any protected characteristic) is to be re-instated.

Equality action plans

The Bill provides that Regulations may be made to require employers with over 250 employees to develop and publish gender pay gap and menopause support action plans. The existing gender pay gap reporting duty is also to be extended to include outsourced workers.

Flexible working and family friendly rights

The Bill strengthens protections for pregnant women by making it unlawful to dismiss an employee who is pregnant, on maternity leave and within six months after her return to work, except in specific circumstances.

The Bill’s changes to the flexible working regime have been described as being ‘a right to work flexibly ‘by default’’. However, the right is still only a right to request flexible working. That said, employers will only be able to refuse a request if it was reasonable for them to do so for one of the eight valid reasons (which remain unchanged).

Trade Unions, Collective Bargaining and Industrial Action

The Bill makes a large number of changes to strengthen trade union rights and protections as a means to tackle insecure work, inequality, poor enforcement of employment rights and low pay. Key points to note:-

• The Minimum Service Levels (Strikes) legislation and the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022 will be repealed.
• Workers will be protected for the first time from detrimental treatment on the grounds of industrial action (to rectify the gap in current protections highlighted by the recent Supreme Court decision in Mercer).
• Electronic balloting will be permitted for the first time.
• Trade unions and members will have a new right to access workplaces and union representatives undertaking duties will have new rights and protections to time off and facilities.
• Employers will be under a duty to inform new employees of their right to join a union.
• Collective redundancy consultation will be required if more than 20 employees are affected across the whole business and not just at one establishment.
• Negotiating bodies are to be established in the adult social care sector and for school support staff.

Enforcement of rights

The Bill gives the Secretary of State the power to create an agency to enforce workers’ rights, allowing it to inspect workplaces and bring civil proceedings. The full scope of the body and its enforcement powers is yet to be determined, and it is unlikely that it will be ‘up and running’ for some years yet.

What is not in the Bill?

The government remains committed to continued employment law reform and there are further provisions it intends to consider but which are not in the Bill. Those longer term plans are set out in a Next Steps document. The key commitments, which will be the subject of consultation, include:

• A new two-tier framework for employment status where individuals are either self-employed or a ‘worker’
• Employers with 250 or more staff will be required to publish ethnicity and disability pay gap reports, to mirror existing gender pay gap reporting
• Right to ‘switch off’
• Review of parental leave and carers leave
• New Deal for social care workers
• Changes to the National Minimum/Living Wage

Finally, the Next Steps document states that measures to increase the time limits for bringing the majority of employment tribunal claims from three months to six months  ‘will also be added via amendment’.

What’s next

The Bill is not expected to be passed before April 2025, and even then, only the repeal of the minimum service levels legislation will come into force on that date.

The government has stated that it expects to ”begin consulting on these reforms in 2025, seeking significant input from all stakeholders, and anticipate this meaning that the majority of reforms will take effect no earlier than 2026. Reforms of unfair dismissal will take effect no sooner than Autumn 2026. We will continue working with partners right up to implementation. Advice and support will be available to businesses to support this.”

What to take away

The Bill will transform the employment law landscape if passed in its current form. However, the content of the Bill may change as it goes through the parliamentary process and much of the detail will not become clear until after consultations have taken place and further legislation is laid.

We shall continue to keep you updated as the Bill progresses and as and when further information becomes available on any of the other proposed reforms.

In the meantime, employers should ensure that they are planning and prepared to review existing policies, procedures and contracts so that they are fully compliant with any future employment law changes, and to train workforces in advance of any implementation date.

How Capsticks can help

Capsticks has significant experience of supporting employers to navigate changes in employment law and policy, from reviewing of current policies, contracts, practice and implementing change, to delivering training to employees at all levels. We also deal with any complaints or specific issues that may arise in individual cases, by conducting investigations, supporting decision makers and HR, and defending any employment tribunal claims.

For further information on how we might assist your organisation, please contact Alessandra Gettins, Nicola Butterworth and Paul McFarlane.