A New Deal for Working People – the Labour Government’s proposals for employment law reform

We recently wrote about the various changes to employment law the last Government brought into force this year.

Since that blog was published, we have had a change of ruling party and on 17 July 2024 the new Labour Government’s legislative agenda was made public as part of the King’s Speech. The Speech itself was light on detail (as is often the case), but the Government released a briefing note setting out more of the substance on their plans, which represent the biggest shake-up of employment law in at least 14 years.

The key changes are as follows:

1. “Day one rights”

At present, while some employment rights apply from the first day of an individual’s employment, others only apply after a qualifying period has elapsed.

The Government intends to grant employees the right to parental leave, protection against unfair dismissal and the right to statutory sick pay (without a waiting period) from day one of their employment.

Currently individuals must be employed for 26 weeks to accrue the right to parental leave, two years to accrue unfair dismissal protection and must have been off sick for 3 days or more before claiming statutory sick pay.

The lower earnings limit on statutory sick pay (currently £123 per week) will also be removed.

The abolishment of the qualifying period for unfair dismissal protection will in particular have a significant impact (and is likely to lead to a sharp increase in the number of such claims), although the Government has said that this will still be subject to the operation of probationary periods so that employers can assess new hires.

 2. Zero hours contracts

The Government intends to ban “exploitative zero-hours contracts” and to ensure that workers have the right to a contract which reflects the number of hours they regularly work, and that workers will get reasonable notice of any changes in shift, with proportionate compensation for shifts cancelled or curtailed.

3.  “Fire and rehire”

The Government intends to reform the law to provide “effective remedies” and replace the existing statutory code, so as to end ‘Fire and Rehire’ and ‘Fire and Replace’.

Employment lawyers call this “dismissal and re-engagement”. When an employer wishes to change an employee’s contract of employment in a material way and the employee does not consent to this change, some employers will dismiss the employee and offer to re-engage them on the proposed new terms and conditions. This comes with differing levels of risk (to the employer) and required process depending on whether the employee has the protection against unfair dismissal.

It is unclear how this proposal will work in practice and more detail will follow when the Employment Bill is published. As has been written about eloquently elsewhere, it is difficult to see how only dismissal and re-engagement can be prevented without much more fundamental and far-reaching reform to unfair dismissal law more generally; for example, by requiring Tribunals to scrutinise the fairness of the commercial basis for a redundancy or ‘fire and rehire’ dismissal, rather than simply the process which leads to that dismissal.

4. Flexible working

Flexible working will be made the default from day one for workers, with employers required to accommodate this as far as is reasonable.

It is unclear what this will mean in practice, but the reference to a requirement to accommodate flexible working “as far as is reasonable” could involve revising the 8 permitted statutory grounds for refusal.

5. Maternity protection

The last Government made substantial changes this year to the protection afforded to those on various types of family leave who are placed at risk of redundancy. In particular, it widened the pool of those to whom suitable alternative roles must be offered as a priority over other employees as an alternative to dismissal for redundancy.

The new Government intends to go further by making it unlawful to dismiss a woman who has had a baby for 6 months after her return to work, “except in specific circumstances”.

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Notable by their absence from the Government’s announcements are the following, which were proposed by Labour in the months before the election took place:

1. The extension of the time limit for issuing claims in the Tribunal from 3 months to 6 months.
2. The introduction of a single “worker status” which would cover all people who are not genuinely self-employed. Currently, there are three statuses in employment law, employee, worker and self-employed.

Much of the detail of the above proposals will not become clear until an Employment Bill is published, and of course we will need to wait and see how much of the Bill remains intact following its passage through the House of Commons and the Lords. That said, given Labour’s sizeable majority in the House of Commons and the limited ability of the House of Lords to meaningfully overturn measures approved by the Commons, it is perhaps likely that the new government is in a good position to ensure their plans become law.

Some of the proposed measures will also not require primary legislation and so could be brought forward sooner.