Labour’s Employment Law Proposals: "A New Deal for Working People"

Unfair Dismissal

The proposal that will likely have the biggest impact on employers is to make the right to bring an unfair dismissal claim a “day one” right, removing the current two-year qualifying period of service. This period has varied between six months and two years in the more than 50 years since unfair dismissal protection was first introduced, but the right has never applied from the first day of employment. Little further detail is given, although “probationary periods with fair and transparent rules and processes” will not be prevented. It is not clear what this will mean once consultation and legislation have taken place – it may for instance be that failure of a probation process will be added as a new “fair reason” for dismissal, although this raises obvious questions about what would constitute a fair process for such a dismissal.

Labour argues that this increased protection will encourage productivity, giving workers security to change jobs where they may otherwise have been deterred due to losing rights accrued over time with a past employer.

Whether that turns out to be the case or not, it is virtually inevitable that there will be an increase in unfair dismissal claims, since many more employees will be brought within the scope of the unfair dismissal regime.

Fire and Rehire and Zero-Hours contracts

Labour promises to “end the scourge of fire and rehire” – the practice of an employer making an employees redundant and then re-engaging them on reduced terms and conditions – although this is softened by the acknowledgment that “it is important that businesses can restructure to remain viable, preserve their workforce and the company when there is genuinely no alternative”. In our experience, on the relatively rare occasions where employers do embark on a process as controversial and detrimental to employee relations as fire and rehire, it is usually precisely because they have no real alternative to avoid failure of the business. As with many of the other proposals, the devil will be in the detail.

Another element of the broad proposal to end “one-sided flexibility” is to ban “exploitative” zero-hours contracts. Whilst there are doubtless some instances of zero-hours contracts being used in an unfair or abusive manner, it is also the case – at least anecdotally – that some workers appreciate the flexibility that zero-hours contracts can provide.

Whilst both these issues are bones of contention with the unions, we suspect that the impact on most employers will be relatively limited.

Pay gap reporting

As well as pledging to “go further and faster to close the gender pay gap”, ethnicity and disability pay gap reporting will also become mandatory for employers with more than 250 employees. This is likely to give rise some difficult issues, such as in relation to monitoring ethnicity and disability in the workforce, and will surely increase the compliance burden on employers.

Right to “switch-off”

This eye-catching proposal, reflecting concerns arising from the post- pandemic explosion in hybrid and remote working, has the potential to bring about some major changes in the working relationship. Again, details are scarce, with a proposal to follow “similar models to those that are already in place in Ireland or Belgium”. The suggestion that workers and employers will be given “the opportunity to have constructive conversations and work together on bespoke workplace policies or contractual terms that benefit both parties” indicates that the approach will be more collaborative than mandatory.

With plenty more proposals, including the creation of a single enforcement body, a two-tier employment status system and a crackdown on sexual harassment, as well as increased redundancy rights and other rights becoming day one rights, employers should get ready for a significant amount of legislative change in the near future, should Labour be voted in on 4 July.