Major Employment Law Changes in the Employment Rights Bill 2024

The Employment Rights Bill 2024 promises to bring substantial change to employment law across Great Britain, designed to enhance worker protections and promote fair employment practices. We consider the key changes and their implications for employers.

Key changes

Day-one rights for unfair dismissal

One of the most significant changes is the introduction of day-one rights for unfair dismissal. Currently, employees need to have worked for a company for at least two years to qualify for unfair dismissal protection. This proposed change would mean that employees will be protected from unfair dismissal from their first day of employment. As a result, employers will not be able to circumvent a fair reason or fair process to dismiss staff with short service once this provision is in force.

That said, the Bill does allow for Regulations to be made relaxing the requirements for a fair dismissal during an initial period of employment in order to allow employers to carry out a proper assessment of an employee’s suitability to a role. How long such a ‘statutory probation period’ for new hires will be, and to what degree a ‘lighter touch’ process will be allowed is likely to be the subject of consultation.

Employers should look to introduce probationary periods into contracts of employment for new starters or where these are already in place review and amend existing clauses to ensure they provide maximum flexibility under the new laws.

However, a consequence of the removal of the two-year qualifying period could be that employers are more hesitant to take on new recruits, adopting more rigorous recruitment processes in order to ensure selection of the right candidate, stagnating rather than boosting the labour market. It could also lead to employers being tempted to recruit only from pools it regards as lower risk, such as people already known by existing management from past employment or with whom there are personal connections. This could have a negative impact on diversity initiatives.

Fire and re-hire

The current government has promised to replace the recently updated statutory Code of Practice on Dismissal and Re-engagement which took effect on 18 July 2024 with a strengthened code of practice and to provide effective remedies for employees subjected to such measures. Indeed, the Bill provides that a dismissal as a result of an employer seeking to varying the terms of a contract will be unfair unless the variations is due to financial difficulties or where the variation cannot reasonably be avoided. Clarification of when these exemptions will apply will be critical.

Any business planning reorganisations and/or contractual variation projects will need to pay close attention to reforms in this area.

Flexible working

The recent change by the previous government to make flexible working the default from day one will be retained but the permitted reasons for employers to refuse requests may be changed by further regulations made under the Bill. Again, the devil will be in the detail in this regard.

Zero-hours contracts

The government committed to banning exploitative zero-hours contracts. These contracts, which do not guarantee any hours of work, have been criticised for creating job insecurity and financial instability for workers. As drafted, the Bill will ensure that all workers have a guaranteed minimum number of hours, have a right to a contract that reflects the number of hours regularly worked and provides workers with reasonable notice of change in shifts with proportionate compensation available for cancelled or shortened shifts providing them with more predictable income and better working conditions. The proposals were initially thought to be aimed only at outlawing some zero hours contracts, being those of a type regarded as “exploitative”. However, the proposals appear to spell the end of zero-hours contracts altogether unless the employee indicates that they want to keep theirs.

These provisions replace the Workers (Predictable Terms and Conditions) Act 2023 which the government has chosen not to bring into force.

For those employers used to using zero hour contracts, such as in the tech and automative sectors, a review and update of these contracts will be needed along with potentially considering a new employment model for the business. A change in approach could impact service delivery and cost for such organisations and leave workers without the flexibility they desire.

Collective redundancy

In an important, but little publicised, provision, the Bill will remove “one establishment” from the trigger for collective consultation meaning that proposed dismissals across an employer’s workforce must be aggregated to see whether the 20 plus figure is reached, rather than looking at proposals within a specific workplace. This is likely to significantly increase the number of redundancy situations which fall within the scope of collective consultation obligations and may lead to employers revisiting their group structure, perhaps trying to avoid consultation obligations by having a different legal entity as the employer in each separate establishment.

Sick pay and parental leave

The government promises to scrap the lower earnings threshold for statutory sick pay and make employees eligible to claim sick pay from day one of falling ill. This will bring many more employees in the scope of statutory sick pay, opening up access to an estimated 1.5 million people.

In addition, the right to parental leave and paternity leave will become a day one right and the ability to take paternity leave following a period of shared parental leave will be introduced along with a statutory right to a week’s bereavement leave.

Employers will need to ensure that payroll is implementing the changes once in force to avoid employment tribunal claims.

Maternity dismissal and harassment

The Bill also allows for regulations to make it unlawful to dismiss a woman during or after a protected period (likely to be 6 months) of pregnancy, maternity, adoption or shared parental leave other than for reasons of redundancy.

Large employers will also be required to create action plans on addressing gender pay gaps and supporting employees through the menopause and regulations may be made to include outsourced workers in ender pay gap reports.

The Bill also seeks to strengthen the duty on employers to prevent sexual harassment by requiring employers to take “all reasonable steps”, rather than just “reasonable steps”, with regulations expected setting out what those steps should be. In addition, the Bill will introduce liability on employers for third party harassment of their staff.

Establishment of the Fair Work Agency

To enforce these new rights and ensure compliance, the Bill proposes the creation of a new single enforcement body called the Fair Work Agency. This agency will have the authority to investigate breaches of employment law, impose penalties, and support workers in disputes with their employers.

Trade unions

Of importance to those operating Care Homes in the Living sector, the Bill proposes the establishment of sector-based collective bargaining, starting in the care sector. It seeks to establish a Fair Pay Agreement in adult social care and, following review, will then assess how and to what extent such agreements could benefit other sectors.

Alongside this, the Bill will update trade union legislation by removing what the government sees as unnecessary restrictions on trade union activity and ensuring industrial relations are based around good faith negotiation and bargaining. It also seeks to simplify the process of statutory recognition and introduce a regulated route to ensure workers and union members have a reasonable right to access a union within workplaces.

The government has announced that it will repeal the (Minimum Service Levels) Act 2023, stating that minimum service levels (MSLs) 'restrict the right to strike and undermine good industrial relations'. Amendments made by the Strikes (Minimum Service Levels Act) 2023 to the Trade Union and Labour Relations (Consolidation) Act 1992 will be reversed. It also states that the High Court ruling in August 2023, which upheld the judicial review challenge on the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022, means that 'employment businesses are prohibited from providing agency workers to cover the duties normally performed by a worker of an organisation who is taking part in a strike or other industrial action'.

Conclusion

The Employment Rights Bill 2024 represents the most significant shift in employment law for employers across Great Britain for over 20 years, with the potential to greatly enhance worker protections. However, whether they will bring about the desired economic boost remains to be seen. Employers must stay informed and proactive in adapting to these changes to ensure compliance and support their workforce effectively. The Bill gives broad ranging powers to the government to pass Regulations which will significantly affect the scope of the new laws. The extent to which probation periods could water down unfair dismissal rights is a prime example of this.

The government has also published a Next Steps document which outlines those reforms it will look to implement in the future, including a right to switch off, making it mandatory for large employers to report their ethnicity and disability pay gap, extending Equal Pay cases to include race and disability, moving towards a single status of worker and reviewing the parental leave and carers leave systems.

The Bill is just the start and meets the Labour Party’s pre-election promise to put a Bill before Parliament in the first 100 days. There is much more to follow.