UPDATE: Breaking news, in a case of typical bad timing on the day after our original publication, it is rumoured in the UK press that the Labour party may be set to weaken their proposed package of workers’ rights over the coming weeks. We have therefore amended the article below to reflect this update and will report further as developments unfold.

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 originally 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.

It is now being reported that Labour is considering watering down the proposed New Deal, with a revised package of proposals expected to be published in due course. How much of this is rumour and political grandstanding is not yet clear.

In any event, as with any new laws, Labour’s proposals would be subject to further policy development, consultation and a full legislative process before becoming law. However, recent reports predict that any revised package could emphasise the importance of prior consultation with businesses. Although, we suspect the trade unions may have something to say about any reduction of rights against Labour’s original New Deal reform proposals.

The original package of reforms was not insubstantial,  ranging 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”. How much of this will be kept, and how much is to be watered down or dropped entirely either prior to the election, or after it during any consultation and legislative process, remains to be confirmed.

In any event, in this article we explore some of Labour’s key proposals.

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 New Deal proposals currently includes creating a single status of “worker” for all but the “genuinely self-employed,” removing the distinction in employment law between employees and the intermediate category of workers. Reports suggest that Labour would first consult with businesses and other interested parties on its plan to create this single status for workers.

But, if Labour do proceed with the full suite of planned reforms, what would 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 proposed to strengthen protections for the self-employed, but no real further details have been given.

2. 'Day one' rights

One of the big headlines that was set out in Labour’s plan is 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, but recent news suggests that this is more likely under any revised plans.

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 under Labour's original proposals would potentially apply to the larger category of “workers” as set out above, rather than just employees as is currently the case.

Taken as a whole if implemented as currently proposed (bearing in mind they are subject to change, both before and after the election) it would likely require 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 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. We shall see how this unfolds.

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. From Labour's original proposals, it was unclear how extensive sectoral collective bargaining would be, however recent reports suggest that Labour will likely focus on the social care sector.

Depending on the precise details of any of Labour's reforms in respect of trade union law, 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 in the New Deal package 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 recently 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, although we wait to see if these too will be softened, 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 initially proposed 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? It seems that Labour is  weighing up the best way to introduce this in practice as the current rumours are that this right could be introduced by way of an Acas Code of Practice and that an exemption for small companies might be included, rather than via new laws.

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”;
• originally proposing a ban on zero-hours contracts (according to recent ONS figures about 3.5% of people in employment are employed on zero-hour contracts), however this instead may take the form of the right to a contract based on a worker’s regular working pattern calculated over a 12-week reference period; 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 of (and how quickly) these reforms will be implemented if the Labour Party were to win the next election. As we get closer to an election, if recent reports are to be believed, Labour may already be reconsidering the extent and ambition of their original proposals given other political agendas. Further, in an increasingly unsettled world, employment law reform may not continue be the number one priority for any political party as international political matters, economic challenges and climate change pressures may instead take centre stage.

At this stage, if the Labour Party is successful,  and depending on the final extent of its reforms, we could see the next few years delivering 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, the outcome of the election is not certain, and that any proposals will need to go through a consultation and legislative process, it may be that there are too many unknowns 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.