Groundbreaking legal reforms under the Employment Rights Bill: what are the implications for UK employers? | Morgan Lewis

The Employment Rights Bill was introduced into Parliament on October 10, 2024 and represents the biggest change to UK employment law since the 1990s. The new Labor government’s bill delivers on its promise to introduce legislation within 100 days of coming to power, proposes new and improved workers’ rights, includes provisions relating to wages and working conditions in certain sectors, and reforms aspects of trade union behavior and industrial action. However, the bill also reneges on several campaign promises and delays implementation of some of the more complex proposals, such as ethnicity and disability pay disparity reporting and the shift to a two-tier employment status framework.

The provisions of the bill are not expected to come into effect before 2026. Many of the requirements are also dependent on secondary legislation, the outcome of consultations and codes of practice. The government has also explicitly said that unfair dismissal reforms will come into effect.no earlier than autumn 2026.” Nevertheless, it is critical that employers understand how these changes could impact their business.

We summarize the key points of the bill below and provide more detailed commentary on some of its more notable provisions. We also highlight which of Labour’s original proposals are likely to be the subject of separate consultation processes that fall outside the scope of the Bill.

KEY POINTS

IN MORE DETAILS

Unfair dismissal – a ‘day 1’ right?

Employees currently need two years of continuous employment to bring an ordinary claim for unfair dismissal. Employers therefore have some flexibility when it comes to terminating an employee’s employment within the first two years. The bill abolishes this waiting period and thus ensures that the right not to be unreasonably dismissed commences on an employee’s first working day.

While in theory employers will therefore have to carefully consider their obligation to dismiss for just cause and follow a fair procedure in all dismissal cases, the government intends to consult on a statutory probationary period of nine months, in the bill referred to as the “initial employment period.” Within this initial period, a “lighter feeling“And”less stressfulThere will be a redundancy process in place that employers will have to follow to dismiss an employee who is deemed unsuitable.

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 dismissal falls within categories that will be known to UK employers (i.e. ability, conduct, legal restrictions and limitations). another substantial reason, but not redundancy). Subsequent regulations will clarify what these changes entail and the meaning of the “initial employment period.” The government has already suggested that this “lighter feeling” process would require a meeting with the employee to explain the performance issues.

We expect that many employers will reflect on and strengthen their probation practices in the future, given the enhanced protection against unfair dismissal provided in the Bill. However, employers must now take into account that their ability to lawfully dismiss during a probationary period is likely to be limited compared to current circumstances once the proposed legal framework for the probationary period is in place. As explained above, the government has clarified that the unfair dismissal reforms will not come into effect until autumn 2026 and that the current two-year qualification period will continue to apply until then.

Flexible working

The bill delivers on Labour’s pledge to improve employees’ ability to work remotely by making flexible working arrangements the standard where possible. The bill changes the current legal framework for flexible working with the aim of ensuring that more requests are met. Under the bill, an employer’s reliance on any of the existing legal grounds to refuse a flexible working request must now be reasonable. The employer must also indicate on what ground(s) the application is rejected and why he considers it reasonable to refuse the application on that ground(s).

Although the changes require employers to consider flexible working requests more carefully, the legal grounds on which a request can be refused remain the same and vary widely. The bill also provides that subsequent regulations may provide for other legal grounds on which a request can be validly rejected. The bill also does not change the penalty for violating an employee’s right to flexible working. So it remains to be seen whether these changes will ultimately lead to flexible working becoming the standard.

Liability for Harassment by Third Parties

A new obligation on employers to prevent harassment of their employees by third parties has been included in the bill in the Equality Act 2010. An employer is deemed to have allowed a third party to harass its employees where an employee is subjected to harassment by a third party during the performance of his employment and the employer is deemed to be at fault all take reasonable steps to prevent the third party from harassing the employee.

This provision will be particularly important for employers whose employees have regular contact with third parties due to the nature of their business. Such high-risk sectors include those in which it is common for employees to perform public functions, such as retail, leisure and hospitality, transport and industries that regularly employ external contractors, such as construction. These types of employers will likely need to conduct a harassment risk assessment (among other things) if they want to establish that they have taken action all reasonable steps to prevent harassment by third parties.

In our experience, this is a gap in compliance with many organisations’ harassment-related procedures, which is likely to need to be reviewed with this new obligation in mind, as well as the new duty to prevent sexual harassment coming into force later this month.

The Fair Work Agency

The bill establishes the Fair Work Agency, which will bring together the Gangmasters and Labor Abuse Authority, the Employment Agency Standards Inspectorate and the HM Revenue & Customs team that oversees the minimum wage. The bill provides powers to obtain documents or information, enter business premises to obtain documents and retain documents. Criminal offenses for individuals and organizations are identified, as well as prison sentences and/or fines as possible liability for violations.

If properly resourced, the Agency could lead to a much more aggressive and interventionist approach to labor law enforcement than is currently the case, which would be disruptive to employers across a wide range of sectors. While the Government has verbally committed to providing such 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 workers’ rights against employers.

LOOKING AHEAD – PLANNED CONSULTATIONS AND TIMETABLE

Following the introduction of the bill, the government also set out its vision for the implementation of its wider Make Work Pay plan. Potential further reforms that could be implemented through means outside the bill include:

• Consultation is expected in due course on the Equality (Race and Disability) Bill, which would extend pay gap reporting to include ethnicity and disability for employers with more than 250 employees and introduce other measures relating to equal pay.
• A complete overview of the UK parental leave system and care leave.
• There will be consultations on an employment status framework that distinguishes only between employees and truly self-employed people.
• The government plans to launch a Call for Evidence to investigate reported issues relating to the transfer of business (employment protection) regulations.
• A Call for Evidence on tightening the ban on unpaid internships is expected by the end of the year.
• An overview of health and safety guidelines and regulations.
• Consultations will also take place with Acas about making collective complaints possible.

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