The Employment Rights Bill is about to enter into the part of the Parliamentary process where the Government will consider amendments. This is not something it needs to do in order to ensure the Bill is passed. With a huge majority the Government does not need to worry about political opposition. Anyone who wants to advocate for a particular amendment needs to persuade the Government that it is genuinely a good idea. And there is no point in arguing against the grain of the Bill itself. You might think that abolishing the qualifying period for unfair dismissal is the wrong thing to do or that the Trade Union Act 2016 made a number of sensible reforms that should be kept in place. But there is no point in advocating for such positions – those ships have sailed. 

But there may be areas where the Government could be persuaded that the Bill as currently drafted will not achieve its aims or will have ‘unintended consequences’. Those two words are very powerful. If you want a Government to change course you need to give it a ladder to climb down and ‘unintended consequences’ do just that. The policy is right, the Government will say, but the current draft runs the risk that there will be unintended consequences that will undermine that policy and so a change needs to be made. 

As it happens, I think I have a genuine example of unintended consequences that merit an amendment to the provisions on fire and rehire. I’ve written about those provisions already, but in brief the Bill will make it automatically unfair to dismiss someone for refusing to agree to new terms and conditions or in order to replace them with someone (or rehire the same person) doing substantially the same work but on different terms. 

In the policy paper ‘Labour’s Plan to Make Work Pay’ we read this:

It is important that businesses can restructure to remain viable, to preserve their workforce and the company when there is genuinely no alternative, but this must follow a proper process based on dialogue and common understanding between employers and workers. 

So how is that policy translated into the Bill? An exception is created (see page 33, line 11 of the Bill) if:

the reason for the variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business, and 

in all the circumstances the employer could not reasonably have avoided the need to make the variation.

I argued in my previous post that this was a very narrow exception. Having spoken to many employers since about the circumstances in which they may need to seek a variation of contract I think it is clear that the exception is simply too narrow. Consider these scenarios:

• an employer is a contractor providing after-school activities to a local authority. When the contract comes up for renewal the contractor is told that under the new contract those activities will be required at other times of the day including mornings and lunchtimes.
• an employer is providing support services running Monday-Friday and the client informs them that this needs to change so that the services are also available at weekends
• an employer undertakes a new contract handling personal data which for security reasons cannot be accessed by employees working at home so that those working remotely will have to come into the office to work
• A manufacturing firm invests in new machinery that will increase productivity but only if shift patterns are changed so that the plant runs seven days a week rather than five.  

You get the point. In all of these cases the employer would have a strong case for seeking changes to contractual terms. Not necessarily to make them worse, but changing the provisions on working time or location to meet the new requirements of the business. But none of these reasons for seeking the employee’s agreement to a variation would meet the test of ‘financial difficulties’ that would ‘in the immediate future’ affect the employer’s ability to operate as a going concern. 

You might look at those scenarios and think of alternative ways in which the employer could achieve its objectives. But suppose there was no realistic alternative? The Bill as currently drafted would make it automatically unfair to dismiss any employees who did not agree to the change. What is a law-abiding employer to do in those circumstances? Would a contractor have to just lose the contract and make employees redundant? That would not be straightforward as a new contractor would probably inherit the employees under TUPE – on their current terms and conditions – and face exactly the same problem. Would the manufacturer simply have to make do with its current machinery and not seek to improve productivity?

These are the unintended consequences of confining the exception to cases of ‘financial difficulties’. A sensible amendment would be to add ‘technical or organisational reasons’ to the exception. 

An amendment along these lines would not undermine the overall impact of the new right. Dismissal would still only be lawful when the employer ‘could not reasonably have avoided’ the need to make the variation. This test is significantly more restrictive than the current test of reasonableness in unfair dismissal cases. The Bill would still contain provisions saying that even if the exception is met the Tribunal must consider the extent to which employee representatives were consulted about the change and what the employer was offering the employee in return for agreeing to the change (page 33, lines 25-40). 

Even with the change that I am suggesting the provisions on fire and rehire will amount to a significant new right that will prevent employers from forcing through a change in terms and conditions except in cases where there there is no realistic alternative. Limiting the exception to financial difficulties will result in severe unintended consequences that I think the Government will ultimately want to avoid.