Rishi Sunak has announced that the next general election will take place on 4 July 2024. The opinion polls currently suggest that Mr Sunak will not be returning to No. 10 and businesses should have one eye on Labour’s proposed policies.
The Labour Party’s Green Paper “A New Deal for Working People,” outlined a series of significant changes to UK employment law, and a promise to introduce a draft bill within 100 days of gaining power. More recently, a revised document “Labour’s Plan to Make Work Pay” shows that some of their headline-grabbing ideas have been watered down. In this article we explore the key changes initially proposed and how those proposals have evolved in the wake of the upcoming general election date.
Simplification of Worker Status and Day One Rights
One of the central proposals is the simplification of worker status. The current system in the UK differentiates between (1) employees, (2) workers, and (3) the self-employed. These definitions are underpinned by a lengthy and complex body of case law, which can understandably, lead to confusion. Labour aims to move towards a straightforward classification of worker and self-employed, which aligns more closely to other European models.
This change would grant all workers, regardless of sector or contract type, the same rights as employees and protections such as sick pay, holiday pay, parental leave, and protection against unfair dismissal. Labour also wish to extend many of these rights, namely unfair dismissal, parental leave and sick pay, to apply from day one of employment. This would mark a significant shift from the current framework, where many rights are only acquired after a qualifying period, often creating a precarious start for new hires. As one might expect from Labour, this is very much a pro-workforce change and an important one at that as employers will need to be acutely aware of the potential increase in claims and associated risks.
However, the newly updated paper suggests that instead of introducing the change to worker status, they will simply “consult in detail” on the idea. This indicates not only a potential delay in implementation but suggests that Labour is encountering resistance on the proposed change. Consultation processes can be lengthy, and the outcome may result in compromises to the original proposal. Many businesses enjoy the genuine flexibility that the current system provides. It is particularly valuable for industries with fluctuating workloads and for those that rely on freelance or gig economy workers. Whilst this may strike Labour’s core support as a compromise, a consultation may in reality, be a sensible means of ensuring that switching to a two-status model does not lead to unintended consequences.
Likewise the updated paper shows that dismissals will still be considered fair if they are carried out during a probation period, this means protection from unfair dismissal would not genuinely be a day one right. Labour’s approach suggests that, as the prospect of governing looms closer, they are balancing the bold pro-worker initiatives set out in the “New Deal” paper with the interests of businesses who value the flexibility to make staffing changes early in the employment relationship in the “Make Work Pay” paper.
Only time will tell where Labour truly stand.
Abolishing Caps on Compensation
In their original “New Deal” paper, Labour committed to removing statutory caps on compensation in employment claims, although it was not clear whether all or just some caps would be removed. Many claims, such as unfair dismissal cases would present a greater financial risk to employers if the cap was removed as the compensatory award for such claims is currently limited to £115,115. However, this commitment has disappeared from the revised “Make Work Pay” policy document.
Family-Friendly Rights Expansion
The Labour Party’s original proposals include extending maternity and paternity leave, reviewing shared parental leave, and introducing a new right to bereavement leave for all workers. But, the promise to extend maternity and paternity leave has seemingly been abandoned.
In light of these rollbacks, the remaining proposals seem more like ‘colouring in the lines’ – enhancing and fine-tuning existing provisions – rather than introducing groundbreaking changes. Shared parental leave has been available in the UK since 2015, and its uptake has been relatively low. Labour’s review might simplify and encourage greater use of this provision, but it doesn’t introduce an entirely new concept. Similarly bereavement leave has been available for employees since 2020. While expanding this right would ensure uniformity and access for all workers, which is certainly a positive, it doesn’t represent a radical departure from current practices.
Nonetheless, employers will need to review and manage their workforce planning to ensure that essential tasks and responsibilities are adequately covered during employee absences and the associated costs are accounted for. Notably, these changes could impact smaller businesses with limited resources more significantly, as the financial burden of hiring temporary staff or redistributing tasks among existing employees can be more pronounced in these businesses.
Right to Disconnect
Labour’s original “New Deal” Paper shows that they intended to give workers a legal right to disconnect from work outside their normal working hours. This move aims to improve work-life balance and protect workers from constantly being on call, in a world where many spend a significant portion of their working life at home. Details on this were relatively limited but there are several nations, such as France and Portugal, that Labour could draw inspiration from as they have already implemented similar legislation or guidance on these rights.
However the updated “Make Work Pay” paper states that Labour will follow similar models to those in Ireland or Belgium and workers and employers will have “the opportunity to have constructive conversations and work together on bespoke workplace policies”. In Ireland, the right to disconnect is encapsulated in a code of practice that, while providing guidelines, does not have the binding force of primary legislation. Similarly the Belgian framework allows employers a great deal of leeway in adopting the right to disconnect, nor does not it outline specific penalties for employers who do not comply. By adopting these models, Labour appears more cautious, focusing on incremental changes rather than sweeping reforms.
This seems to be a notable step back from a legislative right to disconnect which seemed to be a popular idea amongst the electorate.
Ban on Zero-Hour Contracts and End to “Fire and Rehire”
Labour originally set out plans to ban zero-hour contracts and end the practice of “fire and rehire”, which allows employers to impose less generous terms on employees by dismissing them and then rehiring them on new, often less favourable, terms. It seemed that Labour intended to amend unfair dismissal and redundancy laws to prevent workers from being dismissed solely for refusing to accept less favourable contract terms, as well as improving information and consultation procedures.
In the revised “Make Work Pay” paper, Labour state that they will ensure that everyone has the right to have a contract that reflects the number of hours they regularly work, based on a 12 week reference period. It is not clear how this will work in practice with new hires. Will this mean that for the first 12 weeks a worker may have no guaranteed hours, but from week 12 their contract will need to be updated on a weekly basis to take into account the hours “regularly worked” in the last 12 weeks?
Further, rather than a ban on “fire and rehire”, Labour will draft a strengthened code of practice to provide remedies for abuse of fire and rehire whilst recognising “it is important that businesses can restructure to remain viable and preserve their workforce and the company when there is genuinely no alternative”. This softer approach suggests that Labour is prioritising economic and operational feasibility over the transformative change initially promised. It remains to be seen how far the new code will go and whilst many will feel it falls short of the robust legislative action that was anticipated, it seems certain that there will be more onus on employers to consult and negotiate with employees and to be able to demonstrate that there was “genuinely no alternative” but to dismiss and re-engage on new terms. This strategy will help Labour navigate potential resistance from the business community, but it also underscores some of the limitations of their purported commitment to radical transformative change in UK employment law.
Strengthened Sick Pay and Tipping Laws
Labour wish to strengthen sick pay by making it a day one right, lowering the earnings limits, and making it available to all workers. Likewise Labour have stated they will strengthen the law “to ensure hospitality workers receive their tips in full and workers decide how tips are allocated”. This commitment is peculiar given that the UK government has recently passed legislation to ensure that all tips left for service staff are actually given to them, in full. Labour have not clarified how exactly their proposals extend beyond the soon-to-be implemented legislation. Regardless, it is clear these measures would be extensions of existing frameworks rather than radical reforms.
Tackling Sexual Harassment
Labour’s proposals would require employers to create and maintain harassment-free workplaces and working conditions, including protection from harassment by third parties.
Readers may remember that the provision for third party harassment in the Equality Act 2010 was never enacted and eventually repealed in 2013. Likewise, the provisions of the Worker Protection (Amendment of Equality Act 2010) Bill to prevent harassment from third parties also did not survive the parliamentary process.
How Labour’s proposal differs from what has already been debated and rejected by parliament in previous years remains to be seen.
New Enforcement Body and Extended Time Limits
The Labour Party intends to establish a single enforcement body (SEB) to enforce workers’ rights rigorously. This SEB would have the authority to inspect workplaces and bring civil proceedings and the hope is that this may take some pressure off the Employment Tribunals.
However, time limits for various Employment Tribunal claims will be extended from 3 months to 6 months, offering workers more time to pursue their claims and this is likely to lead to more claims being brought. It is not yet clear how Labour proposes to support Employment Tribunals who are already struggling with too many cases and too few judges, leading to claimants having to wait (in some cases) over 12 months to get their day in court.
Conclusion
The Labour Party’s Green Paper, “A New Deal for Working People,” outlines a comprehensive set of proposals to reshape UK employment law. If realised, in their original form, these changes would provide workers with substantially enhanced rights and protections in the workplace. However, the devil is in the detail and in the run up to the general election all political parties will be aiming to score points with voters by making headline grabbing promises. In light of the revised paper, the specifics of each of Labour’s policies is now somewhat unclear. Nonetheless, the proposed policies, though revised, still outline significant changes to employment law and signal a shift towards more employee friendly labour laws – as one would expect of a Labour Government.