On 4th July 2024 we will vote for our next government. The most recent polls indicate a Labour landslide, which would precipitate what is potentially the ‘biggest upgrade to rights at work for a generation.’
The Labour Party’s employment law proposals were set out in Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People, published on 24th May 2024. Its manifesto says it will aim to implement its New Deal. The manifesto declares ‘Britain’s outdated employment laws are not fit for the modern economy’, so there is no doubt that many of Labour’s ambitious proposals will entail a significant departure from current employment law and practice.
Employers are likely to face more tribunal claims, recruiting and dismissing will become more difficult and complex, and the role of trade unions in industrial relations will be significantly enhanced, particularly for private sector employers. However, Labour promises a time for change and hope for people. It envisages that its long-term plan, of working with employers and workers, will ‘get Britain moving forward’. Labour says its proposals seek to modernise the world of work by raising standards and tackling undercutting, empowering companies to compete, thereby increasing productivity and creating the right conditions for sustained economic growth.
Implementing the proposals will naturally take time. Despite Labour’s promise to introduce employment legislation within its first 100 days, its commitment to ‘consult fully before it is passed and engage widely with employers and trade unions’ should give employers adequate time to plan for change.
So what is Labour proposing to do for working people?
Day one rights
Employee rights (such as, the right not to be unfairly dismissed, sick-pay and parental leave) will accrue on the first day of employment. This will increase costs and risks for employers, who will need to tread very carefully when dismissing employees. However, the New Deal document indicates that probationary periods will have a special status. It refers to probationary periods ‘with fair and transparent rules and processes’.
What to do
It would be timely to review your employment contracts to ensure you have robust and lengthy contractual probationary clauses in place for new employees. A six-month probationary clause with an option to extend to twelve months would give you protection, whilst enabling you to dismiss fairly if a new employee fails to meet the required standard. You should also ensure you have rigorous recruitment processes in place and that your performance management processes and disciplinary policies allow you to deal effectively and fairly with unsuitable recruits.
Ending fire and rehire
Labour, with its close connection to trade unions, has been vocal in its dislike of ‘fire and rehire’ as a lawful means of changing terms and conditions, so this is no surprise. The Manifesto does, however, dilute the original New Deal proposal to introduce an outright ban.
In July 2024, for England, Wales and Scotland, the UK’s first Statutory Code of Practice on ‘Dismissal and Re-engagement’ will come into effect, introducing compensatory uplifts of up to 25% for breaches of the Code. It is likely that Labour will strengthen the Code of Practice with the ability to fire and rehire only permitted when a business has to restructure to remain viable and there is no alternative.
What to do
Consider making any changes to terms and conditions now, as there is a risk that this practice will be restricted significantly under a Labour Government.
Banning ‘exploitative’ zero hours contracts and one-sided flexibility
Labour says it will end ‘one sided’ flexibility and ensure all jobs provide a level of security and predictability, ban ‘exploitative’ zero hours contracts and ensure everyone has the right to a contract that reflects the number of hours they regularly work, based on a twelve-week reference period. It asserts it will introduce new laws to ensure workers get reasonable notice of changes in shifts or working times and that full wages will be paid for shifts cancelled without appropriate notice.
What to do
Identify your workers on zero hours contracts. Consider how many effectively work regular hours as these individuals could become entitled to a contract reflecting those hours. You should also review your casual working arrangements and the processes for managing requests for work and cancelling shifts, and consider how these may need to be changed.
Trade union reform
Labour promises to strengthen the collective voice of workers, including through their trade unions, and to create a Single Enforcement Body to ensure employment rights are upheld.
It intends to introduce Fair Pay Agreements, which are agreements reached through sectoral collective bargaining. This is common in parts of the European Union such as France, where 98% of the workforce is covered by sectoral collective bargaining. This would represent a radical change for the UK. Sectoral collective bargaining involves employer and worker representatives from a given sector agreeing a package of minimum terms and conditions for a range of issues such as pay and pensions, working time and holidays, training, diversity and inclusion, and health and safety. The agreed terms would then be binding on all workers and employers in that sector. Labour proposes to introduce this first in the Adult Social Care Sector but, in the future, it may extend to other sectors.
Labour also promises to overhaul trade union legislation to make it fit for a modern economy by:
- repealing the Trade Union Act 2016, which introduced thresholds for ballots and restrictions on pickets
- introducing a new right for trade union representatives to access workplaces to meet, represent, recruit and organise members, including potential members
- simplifying the statutory recognition process including lowering the thresholds and introducing automatic recognition if 50% of workers in a bargaining unit are members
- using secure and private electronic balloting when communicating with members
- ensuring union representatives are given adequate time off and strengthened protection from detriment
- introducing a new duty on all employers to inform new employees of their right to join a union
- reviewing how notice requirements for industrial action should be simplified.
National Minimum Wage
Labour promises to make sure the minimum wage is a genuine living wage. It intends to change the remit of the independent Low Pay Commission so it will account for the cost of living. It promises also to remove the discriminatory age bands, so all adults will be entitled to the same minimum wage, thereby awarding a pay rise to many workers across the UK.
Equality
Labour places equality at the heart of some of its key proposals. It promises to transform the lives of working women by strengthening their rights to equal pay, and protections from maternity and menopause discrimination and from sexual harassment. To achieve the latter, it is likely that Labour will seek to amend the Worker Protection (Amendment to Equality Act 2010) Act 2023 that is due to come into force in October 2024.
Labour seems keen to widen the scope of protection from sexual harassment for employees to third parties. This provision, which is not currently in the Act, would impose a heavier burden on employers to take active steps to prevent third parties, such as customers, visitors or suppliers, from harassing employees on the grounds of any protected characteristic.
Labour’s manifesto mentioned for the first time an intention to introduce a landmark new Race Equality Act, to enshrine in law the right to equal pay for Black, Asian, and other ethnic minority people, to strengthen protections against dual discrimination (discrimination because of a combination of two protected characteristics), and to root out other racial inequalities.
It also intends to introduce the right to equal pay for disabled people, thereby allowing people who are members of a minority ethnic group and/or disabled, to bring specific claims where there is a pay disparity for equal work or work of equal value. This is a welcome proposal, but consultation will be required to overcome certain challenges. Equal pay legislation is complicated. For example, a worker needs to find an actual comparator who is doing like work or work of equal value. The issue of a comparator for disability and ethnicity purposes is particularly complex. The definition of a disability is not straightforward, and many employees are reluctant to class themselves as disabled in the workplace. Similarly with ethnicity, the issue of comparators is likely to raise sensitive issues about how race is defined and there is the added danger of making assumptions about people’s backgrounds.
Finally, building on gender pay gap reporting, Labour proposes to introduce disability and ethnicity pay gap reporting for employers with more than 250 employees. In preparation, companies should start gathering preliminary data about the pay and rewards offered to these employees, and think about their current remuneration structures.
Employment status
Labour’s proposal would see our three current legal categories of employment status (employee, worker and self-employed), reduced to two: worker and self-employed. Labour has said ‘All workers, regardless of sector, wage or contract type will be afforded the same basic rights and protections’ and this would see all new ‘workers’ having full employment rights, including sick pay, holiday pay, parental leave, protection against unfair dismissal and many others. Again, Labour has said it will consult fully on its proposal but there is no doubt that such changes would have a particular impact on businesses in the gig economy and similar models, such as Uber.
The right to disconnect
The right to disconnect from work after hours (not being disturbed with work when you are not working) already exists in countries such as, Belgium, France, and Ireland. Labour may well seek to follow the Irish model and introduce a Code of Practice that sets the defaults but allows staff members to be contacted outside their normal working hours for legitimate reasons.
What to do
You may want to look at how your company currently operates and whether you could take any positive measures to protect staff and focus on their mental health by ensuring they are resting and taking time away from work at the end of each day.
Tribunal caps and compensation
Labour proposes to extend the time limits for bringing employment tribunal claims. It may extend the current time period from three months to six months (as is already the case for redundancy payments). It also says it will remove statutory caps on compensation. This raises the prospect of uncapped compensation in cases of unfair dismissal where the compensation is currently capped at the lower of one year’s gross salary or £115,115.
This proposal would create greater risk for employers when dismissing employees, because unfairness (even without any discriminatory element) could result in a significant and uncapped compensatory sum, particularly in a case where an employee struggles to obtain alternative employment.
When faced with an unfair dismissal claim, it will be important to take early steps to help the individual to mitigate their loss by sending them copies of suitable job vacancies and encouraging them to apply for the roles. Taking a proactive approach that helps the individual to find another job quickly will not only reduce the potential compensation payable if the company was found to have dismissed unfairly, but it will enable the company to argue that the individual has failed to mitigate their losses if they ignore the vacancies, which could reduce any compensation awarded by a tribunal.
Conclusion
Labour’s proposed changes are plentiful and wide ranging; indeed some are quite radical. However, there is no doubt that many would be welcomed by employers and employees alike in a bid to ensure the future economic wealth and stability of our country. In the meantime, employment lawyers and human resources practitioners need to prepare for exceptionally busier days ahead in the event of Labour success at the polls.
