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Proposals for Employment Law Reform

Adrian Fryer

Adrian Fryer

Many of you will have heard Angela Rayner’s recent remarks in which she explained the changes that the Labour Party propose to make to employment law in the event that they win the general election next year.

The proposals are radical to say the least, and, if enacted, would completely change the employment law landscape for years to come.

Readers will recall that when the Labour Party last came into power under Tony Blair in 1997, there soon followed lots of new employment legislation which was primarily aimed at improving the rights and protections offered to employees in the workplace.  This included national minimum wage legislation; guaranteed statutory holidays under the Working Time Regulations; protection for part-time workers and fixed term employees; protection against discrimination on grounds of religion and sexual orientation; and new TUPE protections.

Perhaps unsurprisingly, there hasn’t been a great deal of new employee friendly legislation since the Conservatives came into power in 2010. The Equality Act was brought in later that year but was largely a codification of existing discrimination legislation, rather than the creation of new rights for employees.

Against this background, Angela Rayner promised that, if elected, the Labour Party will introduce an Employment Rights Bill within 100 days of coming into power.  Some of the more significant elements of these proposals are set out below: –

Day 1 Unfair Dismissal Rights

At the moment, an employee needs to have two years’ service in order to bring a claim for unfair dismissal.  This qualifying period had been set at one year by Tony Blair’s government and was then increased to two years under David Cameron.

The right to claim unfair dismissal in an employment tribunal has never, however, been a Day 1 right and has only ever applied to employees with a certain level of service.  If unfair dismissal became a Day 1 right, then this would, inevitably, have a massive impact on businesses who could, potentially, face employment tribunal claims from employees who had only been working for them for a matter of weeks.  It may very well be the case that Labour provide some exceptions that would permit employees to be dismissed within their probation period without the employer facing the risk of an unfair dismissal claim, however that would still be likely to be subject to limits on the duration of probation periods (e.g. six months) to prevent employers from using long probation periods as a de facto qualifying period for unfair dismissal.

Banning Zero Hours Contracts

Zero hours contracts have long been a bete noire of the Labour Party.  Their proposal is to outlaw any employment contracts that do not have a minimum number of guaranteed hours for the employee in question.  A Labour government would require that an individual working regular hours for over 12 weeks or more would be entitled to an employment contract that reflected those normal working hours.

Many companies, particularly those within the leisure and hospitality sectors, remain somewhat bemused by Labour’s demonization of zero hours contracts, given how widespread they are within the gig economy.  Young people working in these sectors are often students who welcome the flexibility offered by zero contracts so that they can carry out, for example, work in a bar or as a delivery driver as and when they want to.  Whilst there may be a minority of employers who exploit workers through the use of zero hours contracts, if steps are taken to remove them completely, then care must be taken to ensure that this does not result in employers simply refusing to take on workers on a casual basis and, instead, choosing to restrict their workforce to permanent employees only.

Employment Status

There are essentially three types of status that exist within employment law: –

  1. ‘Employees’, who can be eligible for all of the employment rights.
  2. ‘Workers’, who qualify for some of the employment rights.
  3. ‘Self-employed contractors’, who, generally speaking, do not qualify for any employment rights at all.

Labour proposes to abolish the ‘employee’ status and simply categorise individuals in the workplace as either ‘workers’ (who will get all of the rights previously limited to employees) or ‘self-employed’.  If this were to take place, it would result in thousands of individuals who were previously regarded as workers gaining significant employment rights, such as the right to statutory redundancy pay and minimum notice periods.

Outlawing ‘fire and rehire’. 

The practice of dismissal and re-engagement, or ‘fire and rehire’ as it is known in the popular press, has been in place for decades and is used by employers who want to affect widespread changes to the terms and conditions of its employees, but in circumstances where the employees in question are not prepared to consent to the changes.  In these situations, many employers simply terminate the existing employment contracts with notice and then offer new employment contracts on the revised terms to start at the end of the notice periods.  The employees are then left with the stark choice of either signing up to the new employment contracts (which they can’t then challenge legally by way of breach of contract because they have agreed to the terms), or losing their job and, potentially, bringing a claim for unfair dismissal.

This practice came under close scrutiny in 2022 after the P&O Ferries scandal and the Conservative Party have pledged to create a Code of Practice which would regulate how ‘dismiss and re-engage’ can be used in practice going forward. The Labour Party, however, proposes to go a step further than that and ban the practice completely.

As employment lawyers, we have all seen plenty of examples of situations where companies have needed to make changes to terms and conditions of employment to ensure the long-term success of the business. It will be interesting to see how the proposed ban on ‘dismiss and re-engage’ is legislated for in due course and if there will be any exceptions put in place as to when the practice might be permissible.

Other Changes

In addition to the headline proposals above, the Labour Party have pledged to extend maternity and paternity rights, as well as increasing protection for pregnant employees.  They also intend to reduce the current balloting thresholds that are required for industrial action and simplify the process for trade union recognition.

Needless to say, the changes set out above are simply proposals at this stage and it may very well be the case that they do not ever become legislation or, if they do come into force, they may be enacted in a more watered-down form. However, if the key elements of these proposals do become reality, it is not exaggerating to say that they would represent the greatest change to employment law for a generation.

Contact our Employment team.