UK: Labour Manifesto confirms key employment law reform proposals

Employers hoping that today's Labour Party Manifesto would bring a little more clarity on the details or timing of Labour's plans to radically reshape employment law will be disappointed. 

The employment law content (once you've managed to find it amongst the 136 pages and sea of photos of Sir Keir – see pages 44-45 and 88-9) largely comes down to a commitment to do what they said they would do in the New Deal ("Labour's Plan to Make Work Pay") published on 24 May 2024. 

The Manifesto restates Labour's pledge to introduce legislation within its first 100 days in power, but also to consult fully before legislation is passed.  This suggests that an Employment Rights Bill could be introduced in the 17 July King's Speech, but might be amended as the Bill progresses through Parliament.  The New Deal also noted that much of the detail could be included in secondary legislation drafted later and which would also be subject to consultation (if substantial).  Implementation for many of the more significant changes could well be a couple of years away, if not longer.  And for many of the plans, there is as yet insufficient detail to allow much in the way of preparation.

However, if and when fully implemented, Labour's ambitious proposals would indeed live up to their billing as "the biggest upgrade to rights at work for a generation".  Employers will likely face more tribunal claims, recruiting and dismissing will become more difficult and complex, and the role of trade unions in industrial relations will be significantly enhanced, particularly for private sector employers.  Changes could have a significant impact on both HR practice and business strategy, for example in relation to restructuring and outsourcing.  Participation in the promised consultations will help ensure the business voice is heard.

So what can be learnt from the Manifesto?  It's possible that the proposals name-checked in the Manifesto indicate Labour's main priorities in the short-term.  The Manifesto mentions banning exploitative zero hours contracts; ending fire and re-hire; and introducing day one rights including unfair dismissal protection.  Strengthening trade unions, creating a Single Enforcement Body, and changes to the national minimum wage (to remove the age bands and take account of cost of living) also feature.  The New Deal plan to move towards a single status of 'worker' (excluding only the genuinely self-employed) is not mentioned – this may reflect the fact that the complexity of drafting and need for full consultation (including on tax implications) may render it unachievable within one parliamentary term.

Equality and discrimination initiatives are also highlighted in the Manifesto, including strengthening rights to equal pay and enhancing protections from maternity and menopause discrimination and sexual harassment.  (It is unclear whether this is intended to be wider than the New Deal proposals, which only mentioned enhancing protection for pregnant workers and requiring larger employers to publish menopause action plans.)  Notably the Manifesto also includes two proposals recently announced in the media but not included in the New Deal: extending the equal pay regime to cover the protected characteristics of race and disability, and bringing the dual discrimination provision of the Equality Act 2010 into force.  There are doubts over how useful these changes would be for claimants and it had been thought (hoped?) that these ideas had been dropped.  Their inclusion does indicate that the omission of an earlier proposal from the New Deal does not necessarily mean it has been abandoned.  Ideas such as removing caps on tribunal compensation (including the unfair dismissal compensatory award) which were in the 2021 Green Paper could therefore resurface during consultation, despite being left out of the New Deal and Manifesto. 

Flagship proposals

• Zero hours contracts: the Green Paper suggested a ban, but the New Deal watered this down to a ban on "exploitative" zero hours contracts.  The purpose is to remove "one-sided flexibility", seemingly by giving those working regular hours a right (should they want it) to a contract with guaranteed minimum hours reflecting the hours they regularly work (averaged over a 12 week period).  Labour confirm that this will not prevent paid overtime or fixed-term contracts including for seasonal work.  Anti-avoidance measures are promised, presumably to try and prevent employers simply ensuring hours remain irregular.  The proposal would clearly reduce flexibility and increase costs for employers in sectors reliant on zero hours workers.  Employers may need to audit their workforce to gauge the potential impact and may wish to explore alternative flexible working arrangements.  Although this proposal might be included in the Employment Rights Bill, it is likely to require substantial consultation and secondary legislation before coming into force.
• Fire and re-hire: again the Green Paper proposed a ban on dismissing then re-engaging employees on new, less favourable contractual terms (currently permitted provided the employer has a "substantial reason"), whereas the New Deal envisages this still being an option if (but only if) the business genuinely has no alternative to remain viable, and after a fair consultation process.  Deciding issues of business viability would be uncharted territory for employment tribunals.  Again this proposal could well be included in the Employment Rights Bill, with details set out in secondary legislation after consultation.  The detail is yet to be confirmed, although the thinking may be similar to a Labour Party Private Member's Bill introduced last parliament.  That included making dismissals or variation of terms void in certain circumstances, enhanced unfair dismissal rights and remedies, and greater protection for associated industrial action.  There is also a risk of pushing employers simply to fire and not re-hire, perhaps outsourcing or replacing staff with agency workers instead.
• Day one rights including unfair dismissal protection:  the Manifesto refers to making sick pay, parental leave and unfair dismissal rights available from day one of employment.  Labour are likely to move quickly on abolishing the three day waiting period for statutory sick pay (and also the lower earnings threshold) by including it in the Employment Rights Bill, and could possibly implement this by April 2025.  It is unclear whether the reference to parental leave means all statutory family-leave rights or just unpaid "parental leave" of up to 18 weeks per child (which is rarely taken anyway);  again this could be implemented quite quickly.  The Green Paper proposal to remove the two year qualification period for unfair dismissal claims has been revised to make clear that it will not prevent use of "probationary periods with fair and transparent rules and processes".  There is no detail as to how the probationary exemption would work, but it will obviously be prudent to include appropriate probationary periods in all template contracts and ensure they are properly operated.  The exemption is also likely to require consultation and therefore to delay implementation of this change (which could otherwise be made swiftly by statutory order).  Where the probationary exemption doesn’t apply, employers will need to adopt sometimes lengthy procedures prior to a fair dismissal.  In particular, there may need to be a change in approach to ensure performance issues are addressed early rather than left alone.  Employers may also want to tighten recruitment processes.
• Strengthening trade unions: Labour plan to repeal recent Conservative trade union laws including for minimum service levels, ease balloting requirements for industrial action and statutory recognition of unions, enhance union rights of access to the workplace and impose a duty on employers to inform staff of their right to join a union.  The repeal of earlier legislation could come into effect as soon as an Employment Rights Bill is enacted, and Labour is likely to prioritise the other reforms too.  Employers face a potential increase in successful recognition claims, increased union influence and demands, and more disruption and disputes.  Employers may want to consider a proactive employee relations strategy, including reaching a view on whether to embrace union recognition or seek to establish a credible alternative for employee voice.
• Creating a Single Enforcement Body: this body would have strong powers to inspect workplaces and take action, including civil proceedings to enforce "workplace rights" (as yet undefined).  Labour has said it is keen to action this quickly and therefore to include it in an Employment Rights Bill, although it is likely to be quite some time before the body is fully resourced and operative.
• Equal pay and discrimination: Labour plans to extend pay gap reporting to ethnicity and disability (for large employers) and amend gender pay gap reporting to require the publication of action plans and that outsourced workers' data is included.  The New Deal also proposed ensuring outsourcing can't be used to avoid paying equal pay including for work of equal value – this would seem to allow employees of a contracted-out service to compare their terms with direct hires of the client business, a claim which the Court of Appeal has recently confirmed is not available under current legislation.  A new regulatory and enforcement unit for equal pay with union involvement will also be created.  As set out above, Labour also plans to extend the equal pay regime to cover the protected characteristics of race and disability, and bring into force dual discrimination provisions in the Equality Act 2010.  In relation to sexual harassment, Labour will strengthen whistleblowing rights and amend the legislation (currently due to come into force in October 2024) so that an employer has a proactive duty to take all reasonable steps to prevent sexual harassment and will be liable for harassment by third parties.  These changes are likely to take some time to implement in practice, but could be very significant for some employers and increase the risk of litigation and reputational damage.

Other notable proposals in the New Deal, but not flagged in the Manifesto, include to:

• Increase the time limit for all employment tribunal claims to 6 months (many are currently 3 months).
• Permit collective grievances to be made "to Acas" – this is odd given that the New Deal refers to this being in line with the existing Acas Code on individual grievances, whereas individual grievances are made to the employer (not Acas).  Individual grievances do come with the right to a companion (including a trade union official) and the Acas Code sets out the basics of a fair procedure, breach of which can lead to an adjustment in any tribunal award.  Presumably the suggestion is to apply a similar regime to collective grievances.
• Make it unlawful to dismiss a pregnant worker for 6 months after their return to work "except in specific circumstances" not yet defined.  It is unclear whether this is intended to prohibit redundancy during this period – there is already a right to priority over vacancies introduced in April 2024.
• Ensure flexibility is "a genuine default" from day one for all workers (beefing up the current right to request), except where it is "not reasonably feasible". 
• Introduce bereavement leave for all workers, possibly make carers' leave paid, and review the parental leave system within the first year.
• Require employers to consult with unions or employee representatives before introducing surveillance technologies, and possibly to develop workplace policies on a right to switch off.
• Amend the current threshold for collective redundancy consultation obligations (of 20 or more proposed redundancies "at one establishment" within 90 days) to apply to the aggregated total across all of an employer's sites, rather than to each separate work unit.
• Strengthen the rights and protections for workers transferred under TUPE (no details provided) and bring about the "biggest wave of insourcing of public services in a generation".  Extending the Freedom of Information Act to apply to private companies that hold contracts to provide public services, with regard to information relevant to those contracts. Reintroduce the two-tier code to end unfair two-tiered workforces and introduce a new Fair Work criterion for contracts with the public sector.
• Introduce a Fair Pay Agreement for the adult social care sector.  The Green Paper proposed rolling out such agreements across the economy through sectoral collective bargaining, but Labour appears to have rowed back on this, stating in the New Deal that it recognises this "will not be the best solution for many parts of our economy".

Of course the sheer number of proposals in the Manifesto may mean some have to be held back while others are pushed through.