What does a Labour win in the General Election mean for employers?

The “New Deal” documents contain some quite significant changes to employment law and workers’ rights that employers do need to be aware of. Those that are of note are as follows:

Day one rights for all workers.

Labour have confirmed that if elected they would give, “day one rights for all workers, ending the current arbitrary system that leaves workers waiting up to two years to access basic rights of protection against unfair dismissal, parental leave and sick pay.” The reference here to “worker” is confusing as it is not clear if Labour are planning on giving workers in their current form a whole suite of employment rights or if they are referencing the new status of worker for all but the genuinely self-employed which they have committed to consult on implementing. We shall certainly need clarification on this point.

Whilst unfair dismissal will be a day one right, which will be a huge change for businesses, a “fair dismissal” would include dismissal in a probation period. This means that businesses would need to ensure that they have their policies and procedures in place to ensure that probation periods are contained in the relevant contractual documentation, and proper procedures are followed if an individual isn’t right for the business and will not be passing their probation.

It is clear that there is a proposal for Statutory Sick Pay (SSP) to become a day one right and will be available to all workers and the self-employed, along with all of those who are currently not eligible for SSP due to them not meeting the Lower Earnings Limit. There is also a commitment to raise the amount of SSP payable.

Alongside this, there is a proposal that the time limit for bringing a claim at the employment tribunal would increase to 6 months for all claims. It should be noted that the pledge to remove the statutory caps on compensation and for directors to be personally liable for a failure to comply with the employment tribunal orders which were contained in the Green Paper, are no longer contained in the Make Work Pay document and aren’t referenced in the recently published manifesto either.

Zero hours contracts.

“Exploitative zero hours contracts” will be banned, although there isn’t a definition of what would constitute “exploitative”. There is a proposal to give rights to employees to have a contract which reflects the hours they regularly work based on a 12 week reference period.

Previously there was a commitment in the Green Paper to give full pay to zero hours workers for any shifts which were cancelled without appropriate notice, but this has now changed to “compensation that is proportionate to the notice given.” The Make Work Pay document also makes it clear that employers will not be prevented from offering fixed term contracts, including seasonal work.

Single employment status of “worker”.

There is a pledge to move towards a single status of worker and transition towards what Labour describe as a “simpler two-part framework for employment status”. There is a commitment to consult in detail on this simpler framework that differentiates between a worker and the genuinely self employed. The Make Work Pay document correctly references the confusion that exists around employment status, but this is something that has been in the pipeline since the Taylor Review in 2017, so it is unlikely this will be straightforward and there certainly won’t be a quick fix.

Fire and re-hire.

It is worth mentioning that this is something that is already the subject of a draft Code of Practice that the Government plan to bring into force on the 18th July 2024. Within this Code it suggests what businesses “should” do if they are contemplating dismissing and re-engaging on new terms and conditions. Labour did seem to be looking at implementing an outright ban if they were elected, however within the Make Work Pay document there is an acknowledgement that “it is important that businesses can restructure to remain viable and preserve their workforce and the company, when there is genuinely no alternative…”. This seems to water down the outright ban on fire and rehire that had previously been planned by a Labour Government. There is also a new reference to ending “fire and replace”- where a workforce is dismissed and replaced by a whole new workforce on lesser terms and conditions.

Family friendly rights.

There had been a plan to overhaul shared parental leave and pay, extend maternity pay etc, but this isn’t included in Make Work Pay document. Instead, there is a commitment to review the parental leave system within Labour’s first year of Government. We assume that Labour mean family friendly rights generally rather than statutory parental leave, but this is not clear.  There is a proposal to introduce a right to “bereavement leave” for the loss of a loved one and the benefits of paid carer’s leave would be “examined”.

There is also a commitment for the right to work flexibly to be the default for all workers “except where this not reasonably feasible”. It is not clear if this means the 8 statutory reasons for turning down a flexible working request will no longer be available, however, this may very well be the case. Of course, the right to request to work flexibly is already a day one right from the 6th April this year.

There will also be a right to switch off brought in where workers will have the right to disconnect from work outside of working hours and not be contacted by their employer during these times. This reflects the concept which is already in place in countries such as France and Belgium, but again, we shall need to wait and see how this would work in practice.

Changes to the National Minimum Wage.

Labour plan to remove the current age bands in place which determines the level of National Minimum Wage (NMW) payable, so all adults receive the same rate, which will be significant for businesses that would normally pay on or around the NMW. This could also result in younger workers competing with older, and arguably more experienced, workers for the same roles which could make it difficult for the younger generation to enter the workplace.

There is also a commitment to ensure that the NMW is a “real living wage” and unpaid internships will be banned except where they are part of an education or training course.

Redundancy consultation and TUPE.

It appears that there will be a change to redundancy consultation provisions, meaning that the current case law will effectively be reversed and the duty to collectively consult will occur when looking at the number of redundancies over the whole business, rather than at each workplace, which is the law at present. In addition, “Labour will also strengthen the existing set of rights and protections for workers subject to TUPE processes.” It is not clear if the Labour Government mean workers as they are at present? Of course, there is currently a Government consultation regarding if “worker” should be included in the wider definition of “employee” for the purposes of TUPE.

Strengthening of Trade Union and collective bargaining rights.

Unsurprisingly, there are plans to strengthen Trade Union powers and to make it easier for Trade Unions to enter workplaces to organise, meet and represent their members, along with simplifying the Union recognition process. It is worth noting that there is a proposal to place a proactive duty on employers to inform all new employees of their right to join a Union and to inform staff of this on a regular basis and for this to be included in the section one statement issued to all staff. It would also be fair to say that the Strikes (Minimum Service Levels) Act 2023 probably won’t survive under a Labour Government. There will only be Fair Pay Agreement in adult social care, and not for the wider economy as was originally pledged and there is a proposal to make it easier for workers to raise collective grievances via ACAS.

Fair distribution of tips.

For many in the hospitality industry they will be aware that there is currently a draft statutory code of practice on the fair and transparent distribution of tips which was approved by the House of Lords in May of this year, but Regulations are awaited to bring this and the remaining provisions of the Employment (Allocation of Tips) Act 2023 into force.

The Make Work Pay document states that Labour will strengthen the law to “ensure hospitality workers receive their tips in full and workers decide how tips are allocated” which is slightly different wording to the current legislation. We shall need to see what a Labour Government does about this going forward.

Equality provisions.

Large firms will be required to develop, publish and implement action plans to close the gender pay gap and pay ratio reporting. The publication of any ethnicity and disability pay gap will also be made mandatory for employers with over 250 staff. There will be a requirement for large employers with more than 250 staff to produce Menopause Action Plans, setting out how they will support employees through the menopause. There also will be guidance published for smaller employees on measures relating to uniform and temperatures, flexible working and recording menopause related absence.

Labour also propose to strengthen the legal duty on employers to take all reasonable steps to stop sexual harassment and strengthen protection for whistleblowers, including updating protection for women who report sexual harassment at work, including by third parties. It will be interesting to see how this fits in with the changes to the duties on employers to prevent sexual harassment in the workplace, which are due to come into effect in October 2024. The Workers Protection (Amendment of Equality Act 2010) Act 2023 had a torrid time during its passage through Parliament, with many of the original provisions being removed or watered down. We will need to see how Labour propose to now strengthen those rights.

Labour also commit to permitting equal pay comparisons across employers where men and women carry out comparable work and enforce the duty to report and eliminate pay gaps. Labour will also enact the socio-economic duty on certain public bodies in the Equality Act 2010.

Should businesses expect these proposed changes to employment law and workers rights to take place imminently?  

In Labour’s Plan to Make Work Pay document, it suggests that there will be a full and comprehensive consultation on the implementation of the New Deal. It does confirm that legislation will be put before Parliament within 100 days of the Labour Party entering Government, with an implementation period as is standard following Royal Assent. This doesn’t mean that it would become law straight away and it is likely that it will be draft legislation considering the pledges to consult on many of the changes, such as the move towards the single status of worker and a review of parental leave.

It is noted that many of the proposed reforms have been debated for years, (as far back as the Taylor Review in 2017) so some of these proposals could be included in an Employment Bill and acted on quickly. One example of this would be creating the single enforcement body to ensure the National Minimum Wage is protected.

Where substantial secondary legislation is required, Labour say that they will engage with experts and stakeholders, including employers and trade unions.

There is a Parliamentary summer recess which is normally late July to early September, so that may factor into the timescales for any planned changes too.

It is worth noting, that there are some other proposals contained in the Plan to Make Work Pay that don’t require legislation, for example Labour commit to writing to the Low Pay Commission to change it’s remit requiring it to take account of the cost of living.

Would the change to the qualifying period to claim unfair dismissal to make this a day one right be something that could be changed quickly?

There have historically been many changes to the qualifying period needed to bring an unfair dismissal claim, changing from 6 months service to two years. The most recent change was in 2012 where the qualifying period of continuous employment for unfair dismissal rights was increased from one year to two years. Looking at the process that was followed in this instance, the change was made pretty quickly. However,  it is worth remembering that there were transitional provisions which provided that the change in qualifying period did not have effect in any case where the period of continuous employment began before the 6th April 2012.

In addition and process wise, an Order cannot be made under the provisions contained in the Employment Rights Act unless a draft of the Order has been laid before Parliament and approved by a resolution of each House of Parliament. Labour have also referenced “consultation” throughout all of the proposals made in the various publications, so we would expect that there will be consultation on this point and the intended changes to the rules on probation periods. We would also expect there to be transitional provisions as there have been previously.