Growth and the Employment Rights Bill

Reforms to unfair dismissal, statutory probation periods and day one flexible working rights are set to create the perfect storm for employers; Kerry Garcia and Sarah Taylor at Stevens & Bolton explore the likely effects on growth

The government describes the Employment Rights Bill as “the biggest upgrade to rights at work for a generation.”  The Bill is indeed expansive in scope and reach, seeking to address many of the most complex aspects of employment law. 

But will the reforms achieve the government’s objective of delivering security in work, boosting productivity and growing our economy?  Does the Bill “[raise] the floor on rights to work” or will unintended consequences leave some workers in a more precarious position? 

The headline reform is that all employees will be eligible to claim unfair dismissal from their first day of employment, instead of requiring two years’ service as they currently do in most cases. 

There is scope to follow a lighter-touch dismissal process with employees during a probationary period (likely to be nine months), provided that the reason for dismissal is performance, conduct or something else that is personal to the individual.  For any other reason, such as redundancy or restructuring, the employer will have to ensure there is a fair reason for the dismissal and follow the established, comprehensive process in order to dismiss fairly. Employees with less than two years’ service would also be eligible to claim unfair dismissal if they are dismissed in connection with a TUPE transfer. 

It is easy to see how these reforms may inhibit recruitment and undermine moves towards greater diversity.  Where previously employers may have taken a risk on new recruits, knowing that they could let them go fairly easily within the first two years of employment, they may be more hesitant to engage new staff if there is uncertainty about future workloads or about the person’s suitability for the role. 

Employers may be reluctant to take a chance on a recruit from a less conventional education or professional background, preferring to recruit known types that have previously proven themselves. 

The removal of the service requirement for unfair dismissal may significantly increase the risk profile of a business, requiring more stringent people-related due diligence by would-be purchasers of a business (or in an outsourcing or insourcing scenario).  Knowing that the purchaser will not be able to swiftly offload excess staff with limited service may thwart the deal, reduce the purchase price, or increase the cost of the service provided.

Businesses are also going to have their hands tied to a large extent when seeking to make unpopular changes to contractual employment terms.  The option to fire and re-hire will no longer be available to employers, except in exceptional circumstances.  It will be automatically unfair to dismiss because an employee refuses to agree to a requested variation of contract, unless the business is in dire financial difficulties (likely to mean on the verge of insolvency). 

Businesses will also lose discretion in relation to how they structure working arrangements.  The Bill grants zero hours and other casual workers the right to a guaranteed number of working hours based on the average number of hours they work over a reference period (likely to be 12 weeks). 

Shift workers will also be entitled to payment each time a shift is cancelled, moved or curtailed at short notice.  This may encourage some businesses to seek to manipulate working arrangements towards genuine self-employment, thereby reducing the rights of the very people the legislation seeks to protect.    

We are going to see more businesses having to undertake collective redundancy consultation, as the threshold for triggering collective consultation is effectively lowered by applying it across the employer’s workforce and not just at the factory, shop or restaurant where the employees at risk of redundancy are based. 

Trade unions are going to gain greater access rights in relation to a workforce, even in respect of non-unionised businesses; and it will become easier for a union to be recognised in any event.  We may see more strikes as a result of the legislation, which reduces the requirements for lawful action and enhances the protection of striking workers.

From an individual perspective, employees will be entitled to greater family friendly rights from their first day of employment, to statutory sick pay from their first day of absence, and to greater protection from harassment, including by members of the public.

While we await the detail of these reforms, employers can be sure of one thing: there are going to be seismic changes to how the labour market is regulated in the UK. 

Kerry Garcia is Partner and Head of Employment, Immigration and Pensions practice at Stevens & Bolton LLP and Sarah Taylor is Senior Knowledge Lawyer

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