Labour's plans for employment law reform (Updated July 2024)

In the King’s Speech, Labour reiterated its plans to introduce an Employment Rights Bill within 100 days of taking office, as set out in its Plan to Make Work Pay: Delivering a New Deal for Working People.

We can expect to see this in draft form before any legislation is passed, as Labour has pledged to consult fully with stakeholders.

In this article, David Browne and Lubna Laheria look at some of Labour’s main proposals and what they mean for employers.

Unfair dismissal rights from day one

One of Labour’s key proposals is that certain employment rights will become “day one rights”, most notably the right to protection from unfair dismissal. This means that employers would need follow the rules on carrying out a fair dismissal for all staff, as they do now for staff with two years’ service.

Key to managing this change and minimising the increased risk of tribunal claims will be for employers to ensure that they have the right staff from the start. This should be done through rigorous recruitment processes, as well as the effective use of probationary periods, ensuring staff performance is monitored on an ongoing basis and that the employee is given regular feedback and made aware of any issues as they arise.

Importantly, Labour has stated that it will ensure employers can operate probationary periods to assess new staff, although it is unclear precisely how probationary periods will sit alongside the revised rules on unfair dismissal.

Creating other day one rights

• Statutory sick pay – the Labour government plans to remove the current three-day waiting period and the lower earnings limit, making it available to all workers.
• Parental leave – parents have the right to take up to 18 weeks of unpaid leave for each child during the course of their chil Labour has committed to reviewing the parental leave framework within the first year of government and to making parental leave a day one right.
• The right to request flexible working – this became a day one right on 6 April 2024. The government will go further, making it a day one right to flexible working (rather than a right to request flexible working), as far as is reasonable. It is unclear how Labour plans to implement this yet, so we will need to await further detail

When these changes are implemented, they will need to be clearly reflected in internal HR policies and procedures.

Increasing tribunal time limits

Currently, employees have three months to bring most claims before an employment tribunal. Labour plans to increase the time limit to six months, bringing it in line with the time limit for statutory redundancy and equal pay claims. This will undoubtedly cause an increase in the number of tribunal claims, which could affect the length of time that complaints take to be dealt with in the tribunal system.

Given the potential impact of this change, we expect that consultation will take place before any changes are implemented.

Widening employment status

As it stands, the law recognises three types of employment status: employee, worker and self-employment. While employees have extensive statutory rights and protections, workers benefit only from a limited number of rights, for example the right to holiday pay and a minimum wage. The self-employed do not benefit from any of the statutory protections provided to employees or workers.

Labour has indicated that it would create a single status of “worker” for all but the genuinely self-employed, to replace the current three-tier structure. Under the proposals, anyone who falls within the enlarged employee category would have access to the full suite of rights, thus increasing worker protections. One of the most significant changes is that workers would gain unfair dismissal rights and this would apply from the first day of employment.

The implications of this change would be significant and so it is reassuring that Labour has stated its intention to consult before any changes are implemented, giving affected parties the chance to have their say. In the meantime, it would be sensible for organisations to carry out an internal audit to determine the number of staff in each of the current three categories and the potential impact of the proposed change on their workforce.

The end of one-sided flexibility

Zero-hours contracts are a type of casual contract where the employer does not guarantee a particular, or minimum, number of hours of work.

Initially, Labour had proposed an outright ban on zero-hours contracts but this was subsequently watered down so that employers will be allowed to use zero-hours contracts provided they are not “exploitative”. If someone wants to stay on a zero-hours contract, we understand that they will have the freedom to do so.

We will have to wait for further details of what will be classed as “exploitative” and to see whether Labour implements the provisions of the Workers (Predictable Terms and Conditions) Act 2023, which had been expected to come into force around September 2024. Labour may choose to drop this in favour of its own, more wide-ranging proposals.

Reforming fire and rehire practices

Fire and rehire is the practice of dismissing an employee and offering them a new contract on different, usually less favourable, terms. It is not unlawful, but has been the subject of political debate in recent years. The Conservative government stopped short of outlawing fire and rehire but introduced a statutory code of practice with expected standards of behaviour and best practice, which will come into force on 18 July 2024.

Labour has been very critical of fire and rehire but the latest version of its New Deal suggests that, where there is genuinely no alternative, businesses must be able to restructure to remain viable. However, this must follow a proper process based on dialogue and common understanding between employers and workers. The law will be reformed to provide effective remedies against abuse as well as a strengthened statutory code of practice. However, it is likely that the code of practice coming into force on 18 July will remain in force until the Labour government has an alternative.

Strengthening diversity, equity and inclusion

Diversity, equity and inclusion is clearly high on the Labour Party agenda, with a number of commitments made in its New Deal. These include further strengthening of harassment laws; revising the gender pay gap reporting and pay ratio reporting rules to include outsourced workers; and requiring large employers with more than 250 employees to produce Menopause Action Plans.

These changes will create additional burdens, especially for employers with 250 or more employees.

More power to trade unions

The Labour Party proposes to strengthen the power of trade unions and the rights and protections of trade union officials and members. It intends to repeal recent legislation that introduced thresholds for ballots and restrictions on picketing, minimum staffing levels in certain sectors and removed the right to replace striking workers with agency staff.

Labour also plans to reform the balloting system, allowing this to be done electronically rather than by post; simplifying the union recognition process; and creating greater rights for union access to the workplace.

Employers will also be under a new duty to inform new starters of their right to join a trade union and to inform existing staff of this regularly.

Increasing wages

The remit of the Low Pay Commission, which reviews and makes recommendations on the national minimum wage (NMW), would be expanded to ensure that the NMW takes into account increases in the cost of living and inflation. Labour would remove the age bands to ensure every adult worker benefits.

Labour would work with the single enforcement body and HMRC and ensure they have the powers necessary to make sure the genuine living wage is properly enforced, including penalties for non-compliance.

Introducing a right to ‘switch off’

Workers will have the right to disconnect from work, giving workers and employers the opportunity to have constructive conversations about bespoke workplace policies or contractual terms that benefit both parties.

Workers would also benefit from new rights to be protected against remote surveillance. Any proposals by an employer to introduce surveillance technologies would be subject to consultation and agreement by trade unions or elected staff representatives.

Equality (Race and Disability) Bill

We will also see the introduction of an Equality (Race and Disability) Bill, enshrining in law the full right to equal pay for ethnic minorities and disabled people and introducing mandatory ethnicity and disability pay reporting.

We recommend that large employers start thinking now about their ethnicity and disability pay gaps, gathering and analysing data and considering how any gaps could be mitigated. Employers should also ensure they have sufficient staff and adequate processes in place to comply with the enhanced reporting requirements.

Our thoughts

There is still a degree of uncertainty as to when these changes will be implemented and to what extent they might be watered down during a consultation process. However, it is clear that the changes will be significant and employee focused. It is therefore important that employers prepare themselves by considering what internal procedures will need to be updated, and keeping abreast of developments, so that they are ready for what is likely to be significant change in employment law over the next couple of years.