- With the UK general election approaching, this Insight discusses the potential implications of a Labour government on employment law in Great Britain.
- Key policy proposals include simplifying employment status; instituting “day one” rights; strengthening collective bargaining rights and reforming trade union laws; addressing disability, gender and ethnicity pay gaps; and introducing the “right to switch off,” among others.
As the UK general election, which must happen before the end of January 2025, approaches, we delve into the potential implications of a Labour government on employment law in Great Britain (Note, employment law is devolved to Northern Ireland and so we look at these proposals in respect of England, Wales and Scotland only). Though the election date hasn’t been set and party manifestos are awaited, we outline some of the key employment law reforms expected to feature on Labour's agenda.
Overview
At the start of this year, the Labour Party announced that, if elected, it will secure a “New Deal for Working People,” linking back to the Labour Party’s earlier Employment Rights Green Paper, “A new deal for working people” and indicating that employment law reform is still high on Labour’s agenda. Labour deputy leader Angela Rayner also pledged at the TUC Congress last year that the Labour Party would bring forward an Employment Rights Bill within the first 100 days of coming to office.
Although precise details are not yet known, and any proposals would be subject to further policy development and a full legislative process before becoming law, it is clear that Labour are considering some fairly expansive reforms to current employment laws. These range from strengthening “the protections afforded to all workers by banning zero-hours contracts, ending fire and rehire, and scrapping qualifying periods for basic rights” to promising to “deliver stronger family-friendly rights” and promising to update trade union legislation “so it is fit for a modern economy.”
We examine some of the current key proposals in more detail below.
Key Proposals
1. Simplifying employment status
In Great Britain, there are three main categories of worker in employment law: employees (who have the most statutory protections), the self-employed (who have limited statutory protections) and, a middle ground of “non-employed” workers who are self-employed, but also covered by some important statutory protections, albeit not to the same extent as employees (for example they do not have protections against unfair dismissal or the right to receive statutory sick pay).
A key tenet of Labour’s proposals includes creating a single status of “worker” for all but the “genuinely self-employed,” removing the current distinction in employment law between employees and the intermediate category of workers. But what does this mean in practice?
- The law on worker status is currently complex, so having one category of workers with corresponding day-one rights could simplify matters. However, this would not necessarily mean that worker status disputes would be eliminated altogether, as disputes would undoubtedly continue to arise in respect of whether an individual is a worker or genuinely self-employed.
- It could also be argued that continuing to have an intermediate category of worker provides flexibility for both employers and workers.
- The numbers of individuals benefitting from statutory employment protections would increase, which seems to be Labour’s aim, noting in the Green Paper, “with a new single status of worker, millions more working people will benefit from existing rights and protections.” This could leave employers who rely on “workers” and not just employees with increased workforce costs.
And what about the genuinely self-employed? Labour also proposes to strengthen protections for the self-employed, but no real further details are given at this stage.
2. 'Day one' rights
One of the big headlines is Labour’s plan to give all workers protections from day one on the job. This could include the right not to be unfairly dismissed (currently available to employees after two years’ service for most dismissals), the right to receive parental leave and pay, and to receive sick pay, to name just a few.
Unfair dismissal rights from day one (currently only the case for certain automatically unfair dismissals) would be a fundamental shift in employment law, as there has always been a qualifying period of some length in Great Britain. It would also place Great Britain at the more pro-employee end of the spectrum in comparison to other jurisdictions across Europe. For example, of Littler’s 14 European locations, only Belgium does not allow probationary periods at all (save for exceptional cases) and the average length of service before equivalent unfair dismissal rights kick in is just over six months. It is unclear if Labour’s proposals would include provision that dismissal during probationary periods of a certain length would not constitute unfair dismissal. On the face of it at least, this appears not to be the case.
In addition, Labour has said it would:
- Remove the caps on compensation that workers can receive on the basis that they “are unfair and discourage companies from following the law” and instead plans to ensure that workers will “receive full compensation, without statutory limits, if they suffer loss because of employers’ breaches of the law.” The current cap on unfair dismissal compensation is £21,000 (basic award) and the lower of 12 months’ gross pay or £115,115 (compensatory award).
- Extend the time limits for employees to bring claims to employment tribunals.
And don’t forget, these day-one rights would apply to the larger category of “workers” as set out above, rather than just employees as is currently the case.
Taken as a whole, this package of reforms is likely to require UK employers to fundamentally rethink their approach to dismissals. In particular, employers who find themselves with workers who were not up to the job in the initial months after hiring would need to go through a full and fair process for individual dismissals, or risk claims for unfair dismissal with uncapped compensation. As a result, employers are likely to be more cautious during the hiring process and put in place more rigorous recruitment processes. This may also mean that there is also greater movement of workers between employers as there would be no reason for them to build up time with an employer for their own security. The benefits could be, however, that this drives positive cultural change in some employers, who will need to act on performance issues or conduct issues, such as bullying and harassment, more quickly and thoroughly.
3. Strengthening collective bargaining rights and reforming trade union laws
Labour has always been rooted in its relationship with trade unions, so it is unsurprising that it has said it will “empower working people to collectively secure fair pay, terms and conditions.” Exactly how it will do this is unclear as Labour is keeping its plans under wraps for now (although repealing some of the Conservative reforms over recent years including the Strikes (Minimum Service Levels) Act 2023 and the Trade Union Act 2016 is likely on the list).
One reform Labour has announced is the introduction of sectoral collective bargaining through Fair Pay Agreements, which would set minimum standards across entire sectors. It is unclear how extensive sectoral collective bargaining would be, but it would likely focus on sectors with historically high union activity, such as medical, social care and manufacturing. Depending on the precise details, this could lead to a reset of the culture around trade unions in Great Britain, particularly given the steady decline of trade union membership over the past 25 years.
4. Taking action to improve disability, gender and ethnicity pay gaps
Indicated measures include a requirement for employers to devise and implement plans to eradicate the gender pay gap (currently this is voluntary) and introducing mandatory ethnicity pay gap reporting for employers with more than 250 employees. Labour has also said it would extend the ability to bring equal pay claims to include claims on the grounds of ethnicity or disability, within the current law claims are just limited to sex.
Labour’s current proposals in this area emphasize mandatory requirements and enforcement, rather than just requiring employers to publish data, likely aimed at speeding up improvements of pay disparities. At current rates, the Fawcett Society estimates it will take around 28 years to correct the gender pay gap.
5. Introducing the 'right to switch off'
Labour has suggested that the UK has a long-hours culture with “some of the longest working hours in Europe.” This is perhaps partly due to the growing number of employees working from home and the advent of technology, meaning that work is no longer left at the office at the end of the day. To address concerns about workers having a better work-life balance, Labour proposes allowing workers the right to disconnect and not be contacted outside working hours. Similar rights have been introduced across Europe in the past few years, with France leading the way in 2017 and Ireland, Germany, Italy, Denmark, and Belgium following suit.
However, there are complex challenges that would need to be worked through on any firm proposal. For example: How does this work with flexible working? How do you make this work across different types of industries or even working across international borders and time zones? Will this only apply to certain industries?
6. A host of other reforms
Including:
- introducing a single enforcement body to enforce workers’ rights and investigate workplaces with “extensive powers to inspect workplaces and bring prosecutions and civil proceedings on workers’ behalf relating to minimum wage violations, worker exploitation, and discriminatory practices”;
- banning zero-hours contracts (according to recent ONS figures about 3.5% of people in employment are employed on zero-hour contracts); and
- ending the practice of fire and rehire (where employers dismiss employees and then immediately rehire them on less favourable terms and conditions).
As well as its own legislative agenda, Labour would also have to grapple with a number of legacy issues that are unlikely to get Parliamentary time before the election. The Supreme Court recently declared (in Secretary of State for Business and Trade v. Mercer) that a key part of union law was incompatible with human rights law, leaving it to Parliament to fix the issue. Recent updates to holiday rights, which are complex, would also benefit from reform.
Will these reforms remain on the agenda?
It remains to be seen how many (and how quickly) these reforms will be implemented if the Labour Party were to win the next election. In an increasingly unsettled world, employment law reform may not be the number one priority for any political party as international political matters, economic change and climate change pressures may instead take center stage.
At this stage, if the Labour Party is successful and its current proposals are implemented, the next few years are going to see more change in employment law than has been seen in the past few decades.
So, how can employers prepare now?
Given that manifesto commitments are not yet published, and the outcome of the election is not certain, it may be too early for employers to start taking immediate actions to prepare for these changes. However, there are some good general housekeeping steps that employers should consider in good stead, for example:
- Seek to understand more about their workforce and identify the genuinely self-employed, workers, and employees to understand who may be impacted by the proposed reforms to have one category of worker encompassing workers and employees. This will help employers to better understand the cost implications in advance of such reforms.
- Try to identify any existing areas or challenges within their own workforce and analyze whether there are steps that could be taken now to address these, for example in relation to:
- bullying, harassment or wider diversity and inclusion concerns;
- recruitment, hiring or termination processes or;
- cultural issues regarding long working hours.
- Check that handbooks and policies are up to date and that staff are aware and understand employer expectations. This means that employers will have a good base for overlaying any new developments.
- Refresh training on current employment processes for HR and managers, such as managing grievances, disciplinaries, poor performance issues and redundancies and ensuring any applicable documents and processes are refreshed if needed.
