Employment Rights Bill 2025: Lords challenge Day One dismissal rights

However, the day one unfair dismissal rights have come under significant scrutiny during the Bill’s passage through the House of Lords resulting in the Conservative peer, Lord Sharpe of Epsom, proposing an amendment which would mean that the right to claim unfair dismissal would not be a “day one right”, and instead the period of qualifying employment needed to bring an unfair dismissal claim would be six months. There would then be an “initial period of employment” following that six months in which a “simplified process and lower compensation cap” would apply. The vote on the amendment resulted in this being passed by the peers in the House of Lords, with a majority of 144.

It is really useful to see what Lord Sharpe identifies as his reason for introducing this amendment. It is clear that the messages from businesses and organisations surrounding the concern with day one unfair dismissal rights have been heard by at least some of the peers in the House of Lords. Lord Sharpe notes that providing day one unfair dismissal rights to employees would “create disincentives to hire, particularly at the margins of the labour market where the stakes are highest”, along with a real concern about fewer jobs being created where an employer does not have a window in which to asses a new hire, including on soft factors such as team dynamics, initiative or client manner. As Lord Sharpe says “who loses then? Again, it is the person who just needed someone to give them a chance”. Concerns were also raised about the inevitable increase in employment tribunal claims and the impact this will have on the already overstretched tribunal system, along with uncertainty for employers regarding how a new statutory probation period, or “initial period of employment” will work in practice.  As Lord Sharpe says:

We have to be clear that jobs are not abstract concepts; they are costs. In the early stages, even the most promising employee is an investment that takes time to repay. Employers need space to make those judgments. This Bill, as it stands, puts a thumb on the scale in favour of caution and against second chances. That is not fair, that is not just and that is not how we grow a dynamic, inclusive labour market.

The Employment Rights Bill is still at the Report Stage at the House of Lords, with further sittings taking place on the 21st and 23rd July, so there may very well be further amendments proposed and approved.

We shall need to wait and see what happens to the amended Employment Rights Bill when it returns to the House of Commons (where there is a huge Labour majority), but this amendment will be a big disappointment to the Labour party with day one unfair dismissal protection being a key part of their manifesto. It is likely that considering Labour’s huge majority, the amendment will not be accepted by the House of Commons, with the House of Lords then having to decide whether to acquiesce or otherwise.

Whatever happens, this provides more uncertainty for employers. The confirmation from the Government that the changes to unfair dismissal protection will not take effect until 2027 appear eminently sensible, providing a decent amount of time to finalise what the qualifying period of employment may be, along with unpicking what any dismissal during an “initial period of employment” (essentially a statutory probation period) may look like.