Innovative legal reforms under the Employment Rights Act: what is the impact for UK employers? | Morgan Lewis

The Employment Rights Bill was introduced to Parliament on 10 October 2024, representing the biggest change to UK employment law since the 1990s. Delivering on its promise to introduce legislation within 100 days of coming to power, the Labor government’s new bill proposes new and improved employee rights, sets out pay and conditions provisions in specific sectors and reforms aspects of trade union behavior and labor action. However, the bill also goes back on several campaign promises and slows the implementation of some of the more complex proposals, such as the Ethnic and Disability Pay Gap Report and the shift to a two-party framework for to employment status.

The provisions of the Bill are not expected to come into force before 2026. Many of the requirements are also dependent on secondary legislation, the outcome of the consultation and codes of practice. The government has also explicitly said that reforms to unfair dismissal will come into effect.”not before autumn 2026.” However, it is critical that employers understand the implications these changes may have for their businesses.

Below we summarize the key points of the bill and discuss in more detail some of the most salient provisions. We also highlight which of Labour’s original proposals are likely to be subject to separate consultation processes beyond the scope of the Bill.

KEY POINTS

MORE DETAILS

Unfair dismissal – a “day 1” right?

Currently, employees need two years of continuous service to bring an ordinary unfair dismissal claim. Therefore, employers have some flexibility when it comes to terminating a worker’s employment during the first two years. The bill removes this qualifying period, thereby ensuring that the right not to be unfairly dismissed begins on the employee’s first day of work.

So, while in theory employers will have to carefully consider their duty to dismiss for just reason and carry out a fair procedure in all cases of dismissal, the government plans to look at a statutory trial period again months, known in the bill as the “initial period of employment.” Within this initial period, a “lighter touch” and “less burdensomeThe dismissal process that employers must follow to dismiss a worker who is deemed unfit will apply.

In this new initial period, the Bill provides that changes will be made to existing obligations in relation to procedural and substantive fairness, provided that the reason for the dismissal falls within categories known to UK employers ( i.e. ability, conduct, legal restriction and some other substantial reason, but not redundancy). Subsequent regulations will clarify what these modifications entail and the meaning of the word “initial period of employment.” The government has already suggested that this “lighter touch” The process would require a meeting with the employee to explain performance issues.

We hope that many employers will reflect on and strengthen their testing practices in the future in light of the enhanced protections against unfair dismissal provided for in the Bill. Employers should note now, however, that their ability to legally dismiss during a trial period is likely to be reduced compared to current circumstances once the proposed statutory trial period framework comes into force. As explained above, the government has clarified that the unfair dismissal reforms will not come into effect until autumn 2026 and the current two-year qualifying period remains in place until then.

Flexible work

Delivering on Labor’s promise to improve the ability of employees to work remotely by making flexible working arrangements the default where practical, the Bill amends the current legal framework for flexible working with the intention of ensuring that more requests are accepted. Under the Bill, an employer’s reliance on any of the existing statutory grounds for refusing a request for flexible working must now be reasonable. The employer must also state the reason or reasons for refusing the request and why it considers it reasonable to refuse the request for that reason or reasons.

Although the changes require employers to consider requests for flexible working more carefully, the legal grounds on which a request can be refused remain the same and are very diverse. The Bill also provides that further regulations may provide for other statutory grounds on which an application may lawfully be refused. The bill also does not change the penalty for breaching an employee’s right to flexible working. As such, it remains to be seen whether these changes ultimately result in flexible working being the default in reality.

Liability for harassment to third parties

A new duty for employers to prevent harassment of their employees by third parties is inserted under the Bill into the Equality Act 2010. An employer will be deemed to have allowed a third party to harass its employees when an employee has been subject to harassment by a third party during the course of their employment and it is considered that the employer has not accepted all reasonable measures to prevent the third party from harassing the employee.

This provision will be particularly important for employers whose employees regularly interact with third parties due to the nature of their business. These high-risk sectors include those where it is common for employees to have public functions, such as retail, leisure and hospitality, the transport sector and industries that regularly employ third-party contractors, such as construction. Such employers will probably need to carry out a harassment risk assessment (among other things) if they want to establish that they have taken all reasonable measures to prevent third-party harassment.

In our experience, this is a compliance gap in the harassment-related procedures of many organizations that will likely need to be reviewed in light of this new obligation, as well as the new duty to prevent sexual harassment that will come into force at the end of this month.

Fair Work Agency

The Bill establishes the Fair Work Agency, which will bring together the Gangmasters and Workplace Abuse Authority, the Employment Agency Standards Inspectorate and the HM Revenue & Customs team that monitors the minimum wage. Law providers of powers to obtain documents or information, enter business premises to obtain documents and retention of documents. Offenses are established for individuals and organizations, as well as prison sentences and/or fines as possible liabilities for violations.

If properly resourced, the Agency could lead to a much more aggressive and interventionist approach to employment law enforcement than is currently the case, which will be disruptive to employers across a wide range of industries While the government has verbally committed to providing this support, it remains to be seen how the Agency will work in practice and whether its unified enforcement powers will prove more effective in enforcing employees’ rights against employers.

PREVIOUS VIEW – INQUIRIES AND ESTIMATED TIMES

Following the introduction of the bill, the government has also set out its vision for implementing its wider Make Work Pay plan. Possible further reforms that could be implemented through means other than the bill include the following:

• A consultation is expected in due course on the Equality (Race and Disability) Bill, which would extend pay gap reporting to ethnicity and disability for employers with more than 250 employees and introduce other measures related to equal pay.
• A comprehensive review of the UK’s parental leave and carer’s leave system.
• There will be a consultation on an employment status framework that only differentiates between workers and the truly self-employed.
• The government plans to launch a call for evidence to examine reported issues relating to the Transfer of Business (Protection of Employment) Regulations.
• At the end of the year, a call for evidence is expected on the tightening of the ban on unpaid internships.
• Review of health and safety guidelines and rules.
• There will also be a consultation with Acas on the enabling of collective complaints.

(See source.)