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On 4 October 2024, a landmark piece of draft legislation was introduced to Parliament. The Employment Rights Bill, which is expected to receive Royal Assent later this year, will introduce substantial new obligations for employers and strengthen protections for workers across a number of areas.
Over the past year, the Bill has snowballed, accumulating various amendments and additions. While some have brought welcome clarity for businesses on issues like fire and rehire, significant uncertainty remains. Key details on flagship policies, including making unfair dismissal a day one right, remain to be settled through future consultations and regulations. So where are we now?
Fire and rehire
The government’s view on fire and rehire is well known. It was therefore unsurprising that, on its initial drafting, the Bill made it automatically unfair to dismiss an employee to replace or re-engage them on varied terms.
However, it also went much further than that. Routine, day-to-day changes to an employee’s terms and conditions were also captured within the restrictions, even where an employer had sound business reasons for doing so (e.g. the relocation of a workplace following the expiry of a lease). Employers would have been exposed to liability for automatic unfair dismissal unless every affected employee expressly agreed to any contractual change. As a result, there was a real risk that employers would turn to redundancy instead, viewing it as a more practical and attractive option.
One of the biggest ‘wins’ for businesses has therefore been the narrowing of this wide-ranging ban. There will now be a difference between restricted and non-restricted variations making the proposals more workable for employers. Only dismissals following an employee’s refusal to accept changes classed as ‘restricted’ - for example, reduced pay, time off or hours - will result in automatic unfair dismissal liability.
Collective redundancy consultation
As the law currently stands, the collective redundancy regime is triggered if an employer is proposing to dismiss as redundant 20 or more employees at one “establishment” (which usually means one workplace or site) within a period of 90 days or less.
The Bill originally proposed to abolish the well understood test of “establishment”. This would have required employers to aggregate numbers of affected employees across an entire organisation, rather than at a single workplace, even in circumstances where there was no commonality of issues on which to be consulted.
For multi-site employers, significant complexities could have flowed from this, including practical and logistical difficulties in convening collective consultation across various sites, as well as the risk of inadvertent breaches due to a lack of knowledge of redundancy proposals at other sites.
In a positive development for employers, the Bill was amended earlier this year to retain the “establishment” test. However, this was somewhat tempered by a further amendment doubling the maximum protective award to 180 days’ pay per employee. As a result, non-compliance will now carry even more severe financial penalties.
NDAs
A late-stage amendment to the Bill in July introduced new proposals on the use of non-disclosure agreements for discrimination and harassment.
Although not banning NDAs completely, the government is seeking to place tighter controls on their use in this context. The aim is to shift the balance of power by putting workers in control of requesting confidentiality, rather than feeling like they are having confidentiality imposed upon them. These changes form part of the government’s broader package of measures aimed at tackling workplace harassment.
Unfair dismissal
The proposal to make unfair dismissal a “day one” right (subject to a statutory ‘initial period of employment’ (“IPE”) where employers will be able to follow a modified, lighter-touch process to fairly dismiss employees in certain circumstances) is one of the government’s flagship policies.
However, we still don’t know how long the IPE will be and what procedures employers will be required to follow to fairly dismiss within that IPE. The government has suggested that the IPE could be nine months, and the process would require employers to meet with employees to discuss performance, with employees having the right to be accompanied by a colleague or trade union representative. However, all of this is subject to further consultation. The government’s roadmap, published in July, indicated this would be launched in summer / autumn 2025, but given the recent ministerial reshuffle, it is possible that the timing may be now affected.
Changes to how the compensatory award will operate in this situation are also anticipated, with the government having a power to reduce the maximum cap if someone is unfairly dismissed within the IPE. However, the government would need to choose to implement this change following consultation.
Collective redundancy consultation
Further reforms in the pipeline include a new trigger for redundancy which is set to be introduced in 2027. This would apply where an employer is proposing to dismiss a minimum number of employees (above 20) as redundant or a specific percentage of the workforce. The government will consult on the threshold to which the trigger should apply before it is confirmed.
Discrimination and harassment
The Bill will also strengthen employer obligations around workplace discrimination and harassment. From October 2026, the existing duty on employers to take 'reasonable steps' to prevent sexual harassment of their staff will be ramped up to a duty to take ‘all reasonable steps’.
So, what will this require from employers? While there is a power for the government to make regulations specifying exactly what steps count as reasonable, the government has said these regulations won’t come into effect until 2027 (i.e. after the duty comes into effect). In the meantime, employers should consider conducting a gap analysis to identify what other reasonable steps they may need to implement to be able to demonstrate that they are complying with the more onerous obligation.
Another area of uncertainty for employers relates to the use of NDAs for discrimination and harassment.
The proposals to restrict the use of NDAs will be subject to the concept of an ‘excepted agreement’. Where certain conditions are met, the NDA will be valid – but it is not clear at this stage exactly what conditions will need to be met for an agreement to fall within this exception.
Confidentiality that is requested by a worker appears to be one of the possible exceptions being considered, but this will be another area subject to consultation after the Bill gets Royal Assent before being outlined in regulations.
In addition, as the proposed changes to NDAs were introduced after the government published its roadmap of estimated timings for implementation of the Bill’s provisions, it is not clear what date they are targeting for the provisions to come into force.
Worker status
Another of the government’s flagship policies is to create a single status of worker, applying to all save the genuinely self-employed. While this measure is not included in the Bill, ministers have indicated it remains on the agenda, with plans for a separate consultation later this year.
The government has circled this issue for years. In 2018, the former government consulted on how to make the employment status rules for employment rights and tax clearer, but its 2022 response made clear that no consensus had been reached about how best to proceed. That uncertainty remains for the current government. With so much already to contend with, it remains entirely possible that substantive reform will be deferred for another parliamentary term.
Right to switch off
The government previously committed to introducing a right to switch off, preventing employees from being contacted out of hours except in exceptional circumstances.
In the Next Steps in the Plan to Make Work Pay paper, they indicated this would be taken forward through a Statutory Code of Practice. Subsequent commentary suggested this had then been quietly dropped, although without official confirmation from the government, it is unclear what the status of this proposal now is.
Equality reforms
The Employment Rights Bill makes some changes to existing equality legislation, including introducing powers to require companies to publish equality action plans. However, broader equality reforms, including mandatory ethnicity and disability pay gap reporting and the extension of equal pay laws to disabled and ethnic minority workers, are on the horizon. These are expected to follow in a draft Equality (Race and Disability) Bill, the timing of which is unknown. For more information, see this blog.
The Employment Rights Bill returns to the House of Lords on 28 October. We could therefore see Royal Assent granted at the beginning of November.
However, for the majority of the reforms, this is merely the end of the beginning. An ambitious programme of consultations is expected to follow, meaning the full, practical impact of the reforms remains largely unknown.
The direction of travel is set, but the final destination is not yet in sight.