UK Labour Party Proposes New Legal Landscape: Implications for Employment Law

The 2024 UK general election resulted in a victory for the Labour Party, marking the party’s return to government after 14 years. Prior to this election, the Labour Party set out various proposals that could impact UK employment law significantly. This LawFlash outlines several potential reforms and discusses the implications for employers.

In its plan A New Deal for Working People, released on 24 May 2024, the Labour Party outlined various reform proposals and pledged to introduce legislation within 100 days. The Labour Party’s manifesto promised to introduce this new “deal” in full and reiterated its intention to pass legislation within the same timeframe, subject to prior consultation with businesses, workers, and the wider public.

Key Potential Reforms

Employment rights and obligations may be impacted by the Labour Party’s pledge to take the following actions:

• Granting protection of unfair dismissal, sick pay, and parental leave as day-one rights
• Requiring that flexible working be the day-one default for all workers (except where not reasonably feasible)
• Banning zero-hour contracts
• Introducing a right for employees to have a contract that reflects the number of hours actually worked, based on a 12-week reference period
• Prohibiting “fire and rehire” practices
• Amending collective redundancy consultation thresholds such that they are triggered based on the number of people impacted across the employer’s business, rather than within each specific establishment or worksite
• Merging employee and worker status
• Strengthening the rights and protections for whistleblowers and workers transferred under the Transfer of Undertakings (Protection of Employment) regulations
• Introducing legislation to protect interns and volunteers from sexual harassment
• Introducing the right to switch off and work autonomously
• Strengthening the rights and protections for workers and the self-employed
• Protecting workers from remote surveillance
• Requiring Section 1 statements issued to new starters to inform them of their right to join a trade union
• Extending statutory maternity and paternity leave, introducing a right-to-bereavement leave and strengthened protections for pregnant women
• Introducing “Fair Pay Agreements” that will be negotiated through sectoral collective bargaining
• Requiring mandatory ethnicity and disability pay reporting for larger employers (i.e., those with more than 250 staff)
• Introducing an obligation for some larger employers to have a menopause action plan
• Overhauling health and safety law and enforcement
• Banning unpaid internships (except where they are part of an education or training course)
• Increasing the timeframe for filing claims with Employment Tribunals from three months to six months

Impacts for Employers

While, as a whole, the proposed changes are significant, even just some of these proposals could have a substantial impact on employers if implemented. For example, employees currently need to have two years of continuous service to bring ordinary unfair dismissal claims. As a result, employers have a degree of flexibility to effect terminations within an employee’s first two years of employment. Should unfair dismissal become a day-one right, employers will need to carefully consider their obligation to dismiss for a fair reason and carry out a fair procedure in all dismissal cases, regardless of the employee’s length of service. While service requirements for unfair dismissal protection eligibility have historically been less than two years (i.e., one year and six months), the right to claim unfair dismissal has never been a day-one right.

This proposal’s impact could be enhanced if some of Labour’s other plans are enacted. For example, if the “employee” and “worker” statuses are merged as envisaged, this may extend unfair dismissal protection to a previously unprotected portion of the population—currently only employees (not workers) benefit from this right. Further, extending the timeframe within which employees can bring tribunal claims could lead to a greater number of claims being made.

Overall, a surge in unfair dismissal claims is expected, and in turn, a corresponding increase in costs and time for employers in responding to them. That said, it is expected that this day-one right would be subject to a probationary period. Indeed, this is expressly mentioned in Labour’s proposals. Accordingly, employers could consider strengthening their probationary period practices. For instance, the length of probationary periods might increase going forward. Further, employers might also review and amend the manner in which such periods are monitored and extended under particular circumstances, although they will still be subject to fair and transparent processes. We expect hiring practices to also change to reflect the reduced flexibility an employer would have in circumstances where a working arrangement was not working as expected.

Labour’s proposal to transition to a two-part employment status framework would also be significant. Currently, there are three categories of employment status: employee, worker, and self-employed independent contractor. The distinction between the three is important for various reasons, but particularly because the way UK statutory employment protections and obligations on employers apply often depend on what category an individual falls under. In addition to the right to unfair dismissal protection mentioned above, only employees benefit from statutory minimum notice periods and redundancy payments, and many statutory family-related and time off entitlements only apply to employees. Should the categories of employee and worker be merged, many workplace rights could apply to a larger number of an employer’s workforce.

The Labour Party’s intention to ensure that the right to redundancy consultation is determined by the number of people impacted across the business rather than in one workplace could also be a significant change. The threshold to implement collective redundancy consultation is currently triggered when an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. Case law has clarified that the term establishment in this context means the local unit or entity to which workers are assigned. If the threshold is broadened from the local unit or entity to the entire business as planned, employers may need to engage in burdensome collective consultation exercises more frequently.

Looking Ahead

As mentioned, the Labour Party has promised an Employment Rights Bill to introduce wide-ranging employment law reforms within the first 100 days. It is understood that the King’s speech, during which the King reads out the government’s legislative agenda, will take place on 17 July 2024. It is expected that the agenda will include this legislation. Notably, the Labour Party indicated that certain plans, including changes to parental leave and the merging of employee and worker status, would take longer than others and might require detailed prior consultation prior to coming into effect.

Accordingly, while some of Labour’s simpler proposals could be acted on quickly and potentially within 100 days, it is unlikely that all or most of the proposals referred to above will take effect in the immediate short-term.

How We Can Help

Morgan Lewis lawyers stand ready to assist employers in keeping abreast of the anticipated changes and the applicable implementation timelines to appropriately plan for the impacts the changes could have on their workforce.