Fire and Rehire – Unintended Consequences of the Employment Rights Bill

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.  

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The Employment Rights Bill – Closing the ‘Woolworths’ Loophole

In my last post I was trying to make sense of 11 pages of densely-worded text in the Employment Rights Bill. For this post I have set myself the easier task of explaining the implications of removing just three words from the law on collective redundancy consultation. 

Clause 23 of the Bill removes the words ‘at one establishment’ from S.188 of the Trade Union Reform and Employment Rights (Consolidation) Act 1992. To understand why this is important we need to look at what S.188 does. 

Section 188 of the 1992 Act provides that when an employer is engaging in a large-scale redundancy exercise, it must first consult with a trade union or other employee representatives with a view to reaching an agreement about ways to avoid, reduce or mitigate the effect of the redundancies that are being proposed. The consultation must start at least 30 days before the first dismissal takes effect – or 45 days where 100 or more dismissals are proposed. A failure to consult in accordance with the statutory requirements may result in those employees who are dismissed being given a ‘protective award’ of up to 90 days’ pay. That award is quite separate from any compensation for unfair dismissal and is intended to be punitive. Employees who have lost nothing at all as a result of being dismissed – who have walked straight into a better paying job and pocketed a redundancy payment – will still be entitled to a protective award if the employer has failed to consult. 

The duty to consult is (currently) triggered by the employer proposing to dismiss as redundant 20 or more employees at one establishment over a period of 90 days or less. Over the years, the courts have had some trouble with the concept of an ‘establishment’. The word is taken from the EU Collective Redundancy Directive which we obviously no longer need to worry about, but it has always been a niggling problem that there isn’t a clear definition of what an establishment is. 

The amendment made by the Employment Rights Bill is prompted by the closure of Woolworths in 2011. The collective consultation procedures were held not to have been followed but not all of the employees were given a protective award. About 4,500 of them missed out because they worked in branches of Woolworths that had fewer than 20 employees. It was held that each branch was an establishment in its own right and so the duty to consult only applied where 20 or more employees were being dismissed from a particular branch. You can see why many people would regard that as an unsatisfactory result. 

The effect of the Employment Rights Bill in removing the words ‘at one establishment’ will be that future closures of multi-site businesses will require consultation whenever the total number of redundancies across the whole business reaches 20 or more over a 90-day period. That would mean that in a future ‘Woolworths’ case all of the affected employees would be included in the consultation, not just those employed at sites of 20 or more.  To that extent we might regard the change as merely closing a loophole. But there are also unintended consequences that large-scale employers are going to struggle with. 

Imagine a nationwide company with sites across the UK. It proposes to restructure the sales team in its Southampton branch with the result that there will be 12 redundancies. The employer will have to behave reasonably in selecting the employees to be dismissed and will have to engage in a consultation process to avoid any findings of unfair dismissal – but the specific duties under S.188 will not apply because the total number of redundancies is less than 20. If at around the same time the company is merging two offices in Wales with the loss of a further 7 jobs then the nothing changes as the threshold will still not have been reached. But if the Aberdeen office then decides to reduce the number of its admin staff then the employer will find that it is proposing to dismiss 20 or more employees. If the dismissals are spread over a period of no more than 90 days then the duty to consult will apply. 

The problem for the employer is that each location is engaged in a completely separate redundancy exercise that may not be coordinated in any way. Does it have to carry out one single consultation exercise or can it carry out three separate ones? What if the 20 employee threshold is only triggered by the last proposal and some dismissals have already taken effect? Does that mean that all the dismissed employees will be entitled to a protective award? Section188(3) says that where consultation has already started in respect of some employees then their numbers are not treated as part of the total. But if the initial proposal was for just 12 redundancies then collective consultation would not have started.  So as a result of an office reorganisation in Aberdeen the employer may find that it has already acted unlawfully. Is that fair? 

These issues could in theory arise under the current law but only if the employer is conducting a series of uncoordinated redundancy exercises at the same establishment. But once redundancies can be aggregated across different establishments in different parts of a business and spread over the whole country, then these are certainly questions that many large employers will need to consider. Some of the case law that follows might lead to some surprising results. 

My suggestion would be an amendment providing that genuinely separate redundancy exercises – not driven by a common underlying business reason – should not be aggregated in this way. The Woolworths loophole would still be closed, but employers would not be caught by surprise when a series of separate redundancy exercises happened to occur within the same 90-day period. 

On the other hand, the Government might well believe that nudging employers towards consultation is a good thing. One consequence of the removal of the ‘at one establishment’ requirement is that large employers may feel obliged to engage in formal collective consultation when they are proposing fewer than 20 redundancies – just in case further redundancies occur elsewhere in the business. I don’t think this Government would see that as a bad outcome.

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The Employment Rights Bill – The Right to Guaranteed Hours

The right to guaranteed hours is the mechanism the Government has chosen to ‘ban’ zero hours contracts. It takes up 11 densely worded pages in the Employment Rights Bill inserting a new Chapter into Part 2A of the Employment Rights Act 1996. It is not an easy read. One reason for this is that after you have slogged through it you emerge little the wiser. All of the crucial details are left to be ‘specified’ by future Regulations. As a result it is impossible to tell how significant this new right will be and how far it goes towards ‘banning’ zero hours contracts. 

All we can see in these eleven pages of text is the overall structure and framework of the new right. What follows is an explanation of how I understand that structure. I think I have understood it, but it is quite possible that I have missed something important or got confused somewhere along the way. I’m happy to be corrected, but slightly sorry for anyone with enough time on their hands to correct me. 

So here goes. 

Qualifying workers

In essence, these new provisions will oblige employers to offer contracts with guaranteed hours to ‘qualifying workers’ whose working pattern over an as yet to be specified reference period reaches an as yet to be specified threshold. Qualifying workers include zero hours workers – hourly paid workers for whom there are no guaranteed hours –  or workers whose guaranteed hours fall below a level set by the Secretary of State in Regulations. 

The number of hours at which that threshold is set will obviously be crucial. The Next Steps document says the right will apply to workers with a ‘low’ number of guaranteed hours but does not give any indication of what ‘low’ means. Does it mean just two or three hours? If so, then this new right will not be very significant. Does it mean sixteen hours or even more? If so, then employers will have to constantly review the hours that they are offering workers to see if they need to translate that working pattern into a contractual offer. 

The new right is based on a reference period that will be set out in Regulations. The Next Steps document talks about a 12-week reference period and this has been an established part of Labour’s policy since the beginning. However, the Bill itself does not set the reference period. I don’t think this reflects second thoughts on the part of the Government so much as a desire to reserve the option of adjusting the reference period over time depending on how the new right operates in practice. For now, I think it is safe to work on the basis that the reference period will be set at 12 weeks. 

An Offer of Guaranteed Hours

A worker will qualify for an offer of guaranteed hours if over the course of the reference period they work a number of hours which is in excess of the minimum number of hours under their contract and do so with a level of regularity that will be set out in Regulations. 

So, for example, the Regulations could apply to workers whose contract guarantees no more than 8 hours a week and an offer of guaranteed hours could be required if over the 12 week period the worker works in excess of 8 hours in at least 6 of those 12 weeks. Or, of course the Regulations might say something completely different.

Where the duty is triggered the employer must make an offer to the worker either of a new contract or of a variation to their existing contract. The offer must ‘reflect’ the total number of hours worked in the reference period.  So if the worker worked 240 hours over the 12 week reference period then the offer would have to ‘reflect that’. Exactly what that means, you will be astonished to learn, is something that will be set out in Regulations. 

Once the offer has been made and assuming it is accepted then the cycle begins again. If the worker still qualifies because of the ‘low’ number of hours that are guaranteed then there will be another reference period and another potential obligation to offer a contract to reflect hours worked in excess of the new guaranteed minimum. This continues – essentially a ratcheting effect – until the worker no longer qualifies because their guaranteed hours are no longer ‘low’. 

We then get some quite complicated (!) provisions preventing the employer from offering the varied or new contract for a limited term unless it is reasonable to make the offer on that basis. There is also the power to make Regulations specifying when the offer needs to be made, what form it should take and what other information the employer needs to give to the worker.

The offer that is made should not be less favourable to the worker in relation to terms other than hours and time of work. For example, the employer couldn’t make an offer that guaranteed the worker a certain number of hours but reduced the hourly rate of pay.  The exception is that if it is a ‘proportionate means of achieving a legitimate aim’, the offer may include less favourable individual terms provided that it is ‘overall’ no less favourable than the terms on which the worker worked during the reference period. 

The employer’s duty to make an offer ends if the worker resigns (or terminates the working arrangement if they are not an employee) or if the employer reasonably terminates the contract / arrangement for a  qualifying reason. That is then defined in the same terms as the ‘potentially fair’ reasons for dismissal that we are used to in unfair dismissal cases (conduct, capability, redundancy etc). If the termination happens after the offer but before the offer is accepted (the ‘response period’) then it is treated as having been withdrawn.

Accepting the Offer

A feature of the right to guaranteed hours is that it operates as an obligation on the employer to make an offer which then has to be accepted by the employee. This contrasts with the rather more straightforward approach in the Fixed Term Employees Regulations under which the contract simply becomes permanent once the relevant conditions are met. 

Because of this approach we have to have a provision (about a page and a half) dealing with the worker accepting or rejecting the offer during the ‘response period’. In a startling move, the duration of the response period is left to Regulations to determine. The Bill then goes into detail about what happens if the contract or arrangement ends before the end of the response period – it seems that the offer still stands unless the employer has fairly terminated the contract / arrangement.

The last part of these provisions are pretty standard – giving the worker the right to bring a Tribunal claim if the employer is in breach of its obligations with the Tribunal being able to make a declaration and order compensation if the claim succeeds. 

And that’s all there is to it.

Will this Work?

The overall shape of the new right seems to make sense. But it is hugely complex and it will be quite a challenge to translate the legislation into guidance that employers – particularly small businesses – will be able to follow. 

There are also some gaps. How, for example, does the Government set the various thresholds that will need to be specified without giving employers a target to aim at? If the Regulations say an offer must be made if the worker works more than 8 hours in at least six weeks of the reference period (for example) then what is to stop the employer from ensuring that the hours offered are never quite as regular as that? Will the new right create an incentive for employers to restrict working hours or ensure that workers never develop a regular pattern of work? 

I also don’t see how the new right will cope with seasonal work or other surges in activity. If someone is recruited in October and the next 12 weeks are really busy with lots of work offered, will the employer really have to offer a contract guaranteeing consistent hours after the Christmas rush is over? Perhaps the limited permitted use of fixed-term contracts could help here, but I don’t quite see how that could work in practice. 

These issues might be addressed as the Bill progresses, but there is a danger that the Government will wave away concerns by promising that they will be dealt with in the subsequent Regulations.

And that of course is my central objection. I don’t criticise the Government for not yet knowing how this new right can be made to work. That’s OK. The idea of banning zero hours contracts may have been Labour Party policy for almost a decade, but they have never before had to translate that political goal into a workable legislative framework. It is early days. If they hadn’t made the absurd commitment to introduce legislation inside the first 100 days then they could simply have announced that they would begin a formal consultation in the autumn on how to achieve their aim with a view to legislating sometime in 2025. That would be the sensible way to implement a policy that is complex and difficult and needs to be thought through carefully.

As it is, in order to meet a meaningless 100-day target they will force Parliament to spend months slogging through empty provisions before eventually launching a consultation on the parts of the policy that really matter. The results will then be presented to Parliament in the form of Regulations that will receive next to no legislative scrutiny and which cannot be amended. This is not a recipe for good lawmaking. It would be better if the Government just scrapped the measures currently in the Bill and undertook to legislate separately once they have consulted fully and have a clearer idea of what their actual policy will be. 

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The Employment Rights Bill – Unfair Dismissal as a Day-One Right.

One of the features of the Employment Rights Bill that has attracted particular attention is the abolition of the qualifying period for unfair dismissal making it a day-one right (see Schedule 2 of the Bill). This is something that a Government already has the power to do by statutory instrument, so in theory there is no need to include the measure in the Bill at all. If they wanted to, the Government could abolish the qualifying period by Christmas.

But they don’t want to. Recognising the impact that the change will have and the concerns that the business lobby have expressed the Government has actually committed (in a Next Steps document published alongside the Bill) not to introduce the change before the autumn of 2026 – more than two years after the election. Essentially this amounts to a long transition period with the effective qualifying period reducing over time. Employees recruited today will qualify for unfair dismissal about two years from now. Employees recruited in a year’s time will qualify after about one year’s service – and so on. 

Once the change is made, it is clearly intended to be permanent. Section 108 of the Employment Rights Act 1996, which sets out the current qualifying period, is repealed. A future Government will not be able to issue regulations increasing it because there will be nothing to increase. They would need to introduce primary legislation which – as we are seeing – takes a great deal of time and effort. 

I have suggested a few times that it is wrong to refer to the abolition of the qualifying period as making unfair dismissal a ‘day-one’ right. If there is no qualifying period then employees who have been recruited and have a contract of employment but who have not yet started work could also qualify. Well, the Bill takes care of that. A new S.108A provides that an employee cannot claim unfair dismissal unless they have started work. So if you manage to dismiss an employee before they cross the office threshold on the morning of their first day then you are safe. There are the expected exceptions here for ‘automatic’ unfair dismissal where the reason for dismissal is things like union membership, whistleblowing or asserting a statutory right etc. 

More contentious is the provision for a probationary period. The Bill doesn’t actually use the word probation – but it does refer to an ‘initial period of employment’. It creates a Regulation making power that allows the Secretary of State to provide for a different standard of reasonableness to apply to dismissals that take place during that initial period. This includes situations where the employer gives notice during that period which expires up to three months after the initial period has ended. 

The duration of the initial period of employment (shall we call it the IPE?) is not set out in the Bill – that is something for the Secretary of State to specify in the Regulations themselves. The Government has indicated in its Next Steps document that it currently favours a 9 month period. In the real world six months is much more common – but many employers do allow for three month extensions to probation so I suppose 9 months is not a figure simply plucked from the air. 

Even if the dismissal does take place during the IPE it will still be possible for the employee to claim unfair dismissal. The employer will have to show that the reason for dismissal is either related to the employee’s conduct or capability, is because the employee is subject to a statutory ban (e.g. not entitled to work in the UK, or disbarred from the profession)  or is ‘some other substantial reason related to the employee’. 

Importantly, a dismissal for redundancy is not included in this list. This means that employees who are made redundant on day one can claim unfair dismissal in the same way as any other employee and the same test of fairness will apply. 

The reference to some other substantial reason (SOSR) is a little bit different from the version we see elsewhere. In a normal unfair dismissal claim the employer has to show that the reason for dismissal is “some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held” (S.98(1)(b) ERA 96). But the special rules covering the IPE will only apply if the reason is ‘related to the employee’ which suggests the something like a dismissal connected with a business reorganisation would not be covered, though a dismissal following a breakdown in working relationships would. This is obviously a deliberate choice as Regulations can specify whether or not particular reasons should be seen as relating to an employee.  There is also no suggestion that the reason in itself needs to be one that is ‘capable of justifying dismissal’ – which is usually an important part of the SOSR test. This difference might be deliberate or it might just be something that will be amended as the Bill progresses. I’m intrigued by what the Government is thinking about here. 

So how easy will it be to dismiss employees during the IPE? The Bill doesn’t say. The Regulations introduced by the Secretary of State can ‘modify’ the test of reasonableness when assessing an unfair dismissal claim. In theory they could only give a slight tweak – merely requiring the Tribunal to take the fairness of any probation period into account for example. Or they could apply a completely different reasonableness test, perhaps requiring a specific procedure to be followed but providing that a dismissal should otherwise be presumed to be fair. 

In the Next Steps document the Government says. 

As a starting point, the Government is inclined to suggest [a fair procedure] should consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague). The Government will consult extensively, including on how it interacts with Acas’ Code of Practice on Disciplinary and Grievance procedures. 

I’m still worried that the rules on probation will turn into something reminiscent of the statutory dispute resolution procedures (if you don’t know what they were, ask someone who has been in HR or employment law for 20 years and watch the corner of their eye twitch as they remember). But this is an argument for next year.

In the meantime, yes the Government is legislating to make unfair dismissal a day one right – but not for a while yet. Employers will be able to operate a probation period but we don’t yet know how long for or what they will need to do to ensure that any dismissal during that period is fair. 

That all seems nice and straightforward. Do I have to look at zero hours contracts now or can I find something else to write about first? 

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Fire and Rehire under the Employment Rights Bill

There is a lot to say about the Employment Rights Bill which was introduced in Parliament earlier today.  In many ways it really is transformative – its also long and detailed. My plan is not to write one big summary of it (dull) but to highlight individual reforms that I think are interesting or important. 

I’m starting with Clause 22 on fire and rehire  because as well as being both interesting and important – it is also simple and easy to grasp.  I have to admit that I can’t say the same for the proposals on zero hours contracts – but that is an issue for a future post. 

The provisions on fire and rehire frankly go much further than I had expected. Here is what Labour’s Plan to Make Work Pay said before the election: 

Labour will end the scourges of ‘fire and rehire’ and ‘fire and replace’ that leave working people at the mercy of bullying threats. We will reform the law to provide effective remedies against abuse and replace the inadequate statutory code brought in by the Government, with a strengthened code of practice.

That all sounded a bit soft to me. Like they weren’t really going to ban the practice, just strengthen the Code of Practice (the current one is very vanilla) and limit ‘abuse’. 

What we actually get is a provision – inserting a new S.104I into the Employment Rights Act – that says that it is unfair to dismiss an employee if the principal reason for dismissal is either that the employee refused to agree to a variation of contract sought by the employer or to enable the employer to recruit another person (or rehire the employee) under new terms but with substantially the same duties. 

That is essentially a blanket ban on the practice of fire and rehire / dismissal and reengagement. It is (will be) automatically unfair to dismiss an employee for refusing to agree to a variation in contract. Once you have agreed terms with an employee, you are stuck with them. You cannot force through a change. Nor can you skip the proposed variation and just replace one employee with another on worse terms. Both practices will be automatically unfair.

There is an exception. The Government says in a ‘Next Steps’ document that businesses will be able to ‘restructure to remain viable’ but as the Bill is drafted strikes me that this is a very narrow exception. 

Under the new provision, for a dismissal to be lawful the employer has to show that it was in ‘financial difficulties’ (no other kind will do) that would affect its ability to carry on the business. It must also show that it could not reasonably have avoided the need to make the variation. As I read it, the variation needs to be a last resort in the face of an existential threat to the employer’s business. That is a major shift from the current position where the decision need only be within the range of reasonable responses. I’m sure lots of employers will want to argue that their particular case meets the kind of ‘financial difficulties’ that are envisaged by the Bill, but I really think the exception is intended to be a very narrow one. I would not like to be the lawyer advising an employer that its situation allowed for dismissal and reengagement.

The exception is so narrow that I think many employers, in the private sector at least, will seek a way around it. One tactic might be an increasing reliance on variation clauses. These can allow an employer to vary a contract without seeking an employee’s agreement because that agreement is essentially baked into the contract itself. They would have to be careful not to operate these clauses in a way that undermined trust and confidence, as that could lead to a constructive dismissal claim. But otherwise the case law suggests that a clearly worded variation clause can be relied on even for changes that are detrimental to the employee. 

Before employment lawyers start brushing up their model variation clauses, however, I suspect that as the Bill goes through Parliament there will be some debate as to whether an amendment is needed to close this loophole. But even if that doesn’t happen, this is still a significant new right that will have a big impact on how employers approach restructuring and redundancy. 

There may be more to come. The Next Steps document says:

As key remedies to end this practice, we are committed to consult on lifting the cap of the protective award if an employer is found to not have properly followed the collective redundancy process as well as what role interim relief could play in protecting workers in these situations. 

Neither of these measures are in the bill itself as far as I can see. instead they are matters that may be consulted on separately. Interim relief – currently used mainly in whistleblowing cases – allows a hearing at very short notice at which the Tribunal can issue a ‘continuation of contract order’ to ensure that the employee continues to be paid while the matter is litigated. I can see why the Government might want to extend it to situations where employees are being threatened with dismissal unless they agree new terms.

But lifting the cap on the protective award seems an odd idea. This is the sum paid to employees who are dismissed when the employer has not complied with its collective consultation obligations under the Trade Union Reform and Employment Rights (Consolidation) Act 1992. It is currently set at a maximum of 90 days’ pay and that is taken as the starting point for any calculation – with the award being reduced to reflect the extent to which the employer has engaged in consultation. Removing the 90-day cap makes no sense to me because Tribunals would have no benchmark to use in calculating the award. It is punitive in nature and not based on any losses the employee might have suffered.  Still, if the Government wants to consult on that we can all weigh in when it does so. 

There will be a lot of debate following the Bill’s publication about how much the Government has watered down its proposals or caved in to the business lobby. But let’s be clear. On the issue of fire and rehire this is a big win for trade unions who have long opposed the practice. To all intents and purposes, the Employment Rights Bill makes fire and rehire unlawful. 

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Probation Periods and Unfair Dismissal

The Financial Times reported last night that 

Companies will be able to keep new hires on probation for up to six months under a compromise Labour plan despite an election pledge to give employees “day one rights”

It seems there has a been a ‘lot of back and forth’ between Angela Rayner and Business Secretary Johnathan Reynolds about how long probation periods should be with the latter favouring a longer period and the Deputy PM preferring an even shorter one. A Whitehall source is quoted as saying “its a decent compromise”

Personally I am surprised that ministers have spent any time at all thinking about this. Six months is – by some margin – the most common probationary period I have come across. Encouraging employers to operate a longer period would hardly seem in keeping with the principle of day-one rights and a shorter period which undercut arrangements already in place and would have struck many businesses as unfair. If a probationary period is going to be provided for in the forthcoming Employment Rights Bill, then six months is the obvious duration to go for. 

Back in September last year I predicted that Labour would probably end up introducing a qualifying period of six months. Since that could be done by Regulations (see this post) it would be a quick and easy change and would reflect most probationary periods already in place. 

But it does not look like this is what Labour is proposing. Unfair dismissal will become a day-one right – the manifesto is quite clear on that – but there will be provisions specifically dealing with dismissals during a six month probation period. 

The big question is what the position during probation will be. I can think of a number of options. 

Option 1 – If an employee is taken on with a probationary period then any dismissal during that period will be held to be fair.

Option 2 – Provided any dismissal is shown to be for the reason of capability or conduct then a dismissal during the probationary period will be held to be fair.

Option 3 – In deciding the fairness of a dismissal the Tribunal will be required to take into account the fact that the dismissal took place during a probationary period.

Option 4 – A specific procedure will be set out for the operation of a fair probation period and the fairness of any dismissal will depend on whether or not the employer has followed that procedure. 

Personally I would go for Option 3. It would be easy to draft (Johnathan Chamberlain of Gowling WLG has helpfully shown how) and would allow for common sense. Option 1 is really no better than just having a six month qualifying period and Option 2 would deem blatantly unreasonable dismissals to be fair. 

Option 4 would be an abomination. Anything but Option 4. I shouldn’t even have suggested it in case someone reads it and thinks it’s a good idea. If Option 4 happens I will stand outside Parliament with a loudspeaker like an employment law version of Steve Bray. Those of us who remember the statutory dispute resolution procedures will shiver at the prospect of Option 4. Forget I mentioned it. 

Option 3 seems to me to be the way to go. It fulfils the manifesto commitment because it clearly makes unfair dismissal a proper day-one right while allowing employers to assess employees during probation and make a reasonable decision as to whether they should be kept on or not. The Financial Times quotes Matthew Percival of the CBI as calling for ‘only a light touch approach’, but in unfair dismissal cases a light touch is already baked into the test of reasonableness. I don’t think it is too much to ask employers to behave reasonably when operating probation periods. It is easy enough to see how that would work. Tribunals would be likely to look for

  • transparency about the process,
  • reasonable communication and an opportunity to improve
  • a decision based on an honest belief that the employee is unsuited to the work
  • reasonable grounds to back up that honest belief

Specifically directing Tribunals to take probation into account may not be strictly necessary – they would do that anyway – but there is nothing wrong with adding something to that effect in the test of unfair dismissal. It has been done before. One thing I particularly like about the wording that Johnathan Chamberlain came up with is that he added the reference to probation immediately after a requirement that Tribunals take into account the ‘size and administrative resources of the employer’s undertaking’. Those words were added by the Employment Act 1980 soon after a new Conservative Government came into power. Giving tribunals a bit of a steer by requiring them to look at particular factors, but without undermining their ability to make a judgment about fairness, has a long history. 

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Labour’s new right to a four-day week

Screenshot 2024-08-30 at 12.57.39

So a story seems to have exploded over the the course of the day that the Government is going to give workers the right to work a compressed four-day week. They aren’t. But they might be about to strengthen a right that already exists.

What these press stories are about is the ‘right to request flexible working’. This was introduced by the Employment Act 2002 and was originally aimed at employees with child-care responsibilities wanting to work part-time. Over the years it has been expanded so that it is a right that now applies to all workers who want to change their hours of work – irrespective of their reason for doing so. 

The reference to flexible working is a bit of a misnomer really. The key section of the Employment Rights Act actually refers to a right to request a contract variation. Essentially a worker can ask the employer to make a change to their contract relating to the hours they are required to work, the times they are required to work or to allow them to work from home. When a request is made under this section the employer must ‘deal with the application in a reasonable manner’. If the application is refused it must be refused for one of a number of listed business reasons and the decision must not be based on incorrect facts. 

So if an employee asks to be allowed not to work on Fridays, the employer could refuse that request on the grounds that Friday is actually their busiest day – but if it does so then it must be true that Friday is their busiest day. The worker could also ask to work a four-day week (whether under compressed hours or otherwise) or for that matter a three-day week or a two-day week. A worker could ask to work nothing but Sunday mornings if that’s what they want. Each of these would be a valid request and the employer would have to deal with that request in a reasonable manner.

Crucially, however, the employer’s refusal does not have to be a reasonable one. If the employer refuses the request because of the additional costs involved, there can be no argument that the costs are small enough that a reasonable employer should absorb them. The employer is required to be sincere in its reasons for refusal – but does not have to be reasonable. The worker can ask to work compressed hours but the employer can pretty easily say ‘no’.

In 2019 the Conservative Party manifesto promised to change the law, saying: 

We will encourage flexible working and consult on making it the default unless employers have good reasons not to. 

What that turned into was the Employment Relations (Flexible Working) Act 2023 which tweaked the procedure for making a request. Separately, the Government also made it a a ‘day one’ right. But the reforms did not do anything to change the grounds on which the employer could refuse a request or to introduce a requirement for any refusal to be reasonable. 

Labour’s proposals for employment say they will act by: “making flexible working the default from day one for all workers, except where it is not reasonably feasible.”

Love the use of the word ‘default’ there – a deliberate call-back to the 2019 Tory manifesto. The trouble is we still don’t have a clear idea of what it means. My assumption is that the law will be changed to raise the threshold of reasonableness – so that it is harder for an employer to refuse a request.  But I’m happy to wait until a Bill is published to see what is actually intended. One thing I am sure about however. Whatever the new Bill says it will not create a specific right to ask for a four-day week – whether that is a move to part-time working or compressed hours.

Workers already have that right and have had it for years.

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The New Duty to Prevent Sexual Harassment

I have a problem with the Worker Protection (Amendment of Equality Act 2010) Act 2023. It’s a rubbish name for a statute to begin with. But I also think it does something fundamentally undesirable. Bear with me, though, because it will take a while to explain. 

This Act was introduced as a private member’s bill, although it was supported by the Government of day and implemented a policy that they had committed to back in 2021 to: “introduce a duty requiring employers to prevent sexual harassment”.

The idea that there should be a duty to prevent harassment – as opposed to a remedy for those who suffer it – seems reasonable enough. Bringing a claim for harassment is a gruelling experience and obviously it would be better if the harassment had simply not happened in the first place. Focussing the duty on sexual harassment – as opposed to any other kind – is a result of this proposal emerging from the 2018 report of the House of Commons Women and Equalities Committee into sexual harassment in the workplace.

And what is that duty? Here is what the Act says (creating a new S.40A of the Equality Act):

An Employer (A) must take reasonable steps to prevent sexual harassment of employees of A in the course of their employment

This duty comes into force exactly one year after the Act received Royal Assent – which gives employers until 26 October 2024 to put the appropriate measures in place. You know the sort of thing – risk assessments, policies, training. All the usual stuff. This seems straightforward. But there are some things to unpick before we get to the issue that I am concerned about.

The definition of sexual harassment

First of all, what is meant by sexual harassment? Harassment as a whole is defined in S.26(1) of the Equality Act as unwanted conduct ‘related to’ a protected characteristic which has the purpose or effect of violating a person’s dignity or creating an ‘intimidating, hostile, degrading, humiliating or offensive environment’ for them. 

This new Act does not create a duty to prevent this sort or harassment. It only applies (new S.140A(2)) to sexual harassment as defined in S.26(2) of the Equality Act. This deals with unwanted conduct ‘of a sexual nature’ which has the purpose or effect that is described in S.26(1). 

We have never before had to distinguish between harassment under S.26(1) and S.26(2). And it is quite common to describe as ‘sexual harassment’ behaviour which does not involve conduct of a sexual nature. Suppose we have a misogynistic manager who subjects a female colleague to denigrating comments and jokes. That would be unwanted conduct related to her sex and which violates her dignity. We may call that ‘sexual harassment’, but within the meaning of the statute it is just harassment. To be sexual harassment within S.26(2) it must involve conduct of a sexual nature. It is only that sort of harassment that employers will have a duty to take reasonable steps to prevent. 

The role of the Commission

So what happens if an employer acts in breach of this duty to prevent sexual harassment? Individuals will not be able to sue the employer for the breach – that power is reserved exclusively to the Equality and Human Rights Commission.  It can investigate employers who appear not to be complying with the duty and ultimately issue unlawful act notices to employers who continue to be in breach. An employer who does not comply with an unlawful act notice can ultimately be fined – though I am not sure that this has ever happened in practice. Even unlawful act notices are rare. One was issued to Pontins back in February this year, but I am not aware of any others since the Commission was founded in 2006. 

For most employers, the chances of the Equality Commission knocking on their door and demanding to see what steps they are taking to prevent sexual harassment are as close to zero as makes no difference.  On the other hand, if I were the BBC, the Ministry of Defence or the Metropolitan Police I would regard a visit from the Commission as pretty much inevitable. 

But I shouldn’t be too cynical about this. I know lots of employers who will genuinely want to do more to prevent sexual harassment and will regard this law as an opportunity to focus on the issue. Employers in Local Government and the NHS will also come under considerable political or union pressure to make sure that they are seen to be complying with the new duty. 

Enhanced compensation

Nevertheless, I think the real impact of the Act will be felt in the Employment Tribunals. Just because individuals cannot sue for breach of the duty per se, that does not mean that individual claims will be unaffected. The Act inserts a new section into the Equality Act (S.124A) allowing the Tribunal to increase compensation when someone successfully sues their employer for sexual harassment and it is then found that the employer had breached its preventative duty. In those circumstances, the Tribunal “may” increase the compensation awarded to the employee by as much as 25% in order to reflect the extent of the employer’s failure. Given that there is no cap on compensation awarded for harassment, this could potentially represent a significant sum and be well worth having. 

This brings me (at long last) to the problem. It strikes me that almost any successful sexual harassment claim will attract this uplift. 

In a harassment claim, the claimant is relying on the fact that the employer is liable for the actions of the individual who has harassed them because the harassment was something done ‘in the course of their employment’ (S.109(1)). But the employer has a defence. It can avoid liability for harassment if it shows that it has taken “all reasonable steps” to prevent the individual from “doing that thing” or “doing acts of that description” (S.109(4)). 

Here’s my point. If it is a defence for an employer to show that it has taken all reasonable steps to prevent the harassment then it must follow that in any successful claim for sexual harassment the employer has failed to establish that defence. And if it can’t show that it has taken all reasonable steps to prevent the harassment then it seems to me that it must be in breach of its duty to take reasonable steps to prevent sexual harassment. 

Now, technically, this new duty does not require the employer to take ‘all’ reasonable steps, but I don’t think that omission affects the meaning. Asking whether someone has taken reasonable steps to prevent something is equivalent to asking whether they have taken such steps as were reasonable. The employer could hardly expect to discharge the duty to prevent sexual harassment by pointing out that it took some of the reasonable steps open to it but decided not to take the others. The technical guidance being produced by the Equality Commission certainly draws no such distinction.

A hierarchy of harassment?

So the situation we have is that any claim for sexual harassment will – all other things being equal – attract a higher level of compensation than a claim for ‘normal’ harassment where there is unwanted conducted that is related to a protected characteristic. But why should we treat sexual harassment as being more serious than, say, racial harassment? In both cases the harassment might be absolutely devastating to the victim and involve serious criminal conduct. I don’t think it is desirable or in keeping with the spirit of the Equality Act to create a hierarchy of harassment based not on the harm done but the basis of the claim.

It is also inevitable that we will have litigation seeking to draw a distinction between unwanted conduct related to sex and unwanted conduct of a sexual nature – because the way in which the harassment is categorised could significantly affect the compensation awarded. That distinction will not always be easy to draw.  

The Government will have the opportunity to address this issue in its proposed reform of the Equality Act. According to ‘Labour’s Plan to Make Work Pay’: 

Labour will require employers to create and maintain workplaces and working conditions free from harassment, including by third parties. And Labour would properly tackle sexual harassment at work. One in two of all women have been sexually harassed at work; this must change. Labour will strengthen the legal duty for employers to take all reasonable steps to stop sexual harassment before it starts.

It’s not exactly a clear pledge – but it does give the Government wiggle room to extend the new provisions to all forms of harassment. Any changes would not come into force until after the sexual harassment duty takes effect in October – but the sooner they can be made the better.

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Should the BBC have sacked Huw Edwards before he resigned?

Was the BBC wrong to keep Huw Edwards employed despite knowing that he had been arrested on such serious charges? Looking at the timeline I think it’s difficult to criticise their approach. Most large public sector organisations would have done the same. 

When an employee is accused of a serious criminal offence – the sort of offence that, if they are guilty, would mean that they obviously could not continue in their role – then the employer has a choice. They can dismiss the employee at once or wait for justice to take its course and keep the employee suspended on full pay until they are either convicted or acquitted.

We often say that a person is innocent until proven guilty. But we don’t really behave as though that is true. Employers can certainly not take the risk of allowing employees to continue to work with allegations hanging over them that suggest that they pose a risk to either the business, its customers or members of the public. They often have to be kept away from the workplace – which usually means a suspension on full pay. Waiting for a verdict can therefore be a very expensive option. What is more, while a conviction would certainly give solid grounds for dismissal, an acquittal could leave the employer in a very difficult position. 

Imagine a teacher charged with offences that raise serious safeguarding issues. If a jury decides that they are not ‘sure’ that the individual is guilty, is it really an option to let the teacher return? Would parents feel comfortable with their children being cared for by a teacher on the basis that ‘nothing has been proved’? In those circumstances the employer might well dismiss. Not because the teacher is guilty but because there is a risk that they might be. This is a potentially fair reason for dismissal (employment lawyers describe it as an SOSR dismissal – a dismissal for ‘some other substantial reason) and depending on the circumstances might well be held to be fair. 

In fact, an employer might still be acting fairly if it dismisses before a trial even takes place. The argument would be that given the nature of the work it is not feasible for an employee who has been charged with such an offence to return. If there is enough evidence to sustain a charge, then an employer might reasonably conclude that there will always be a level of suspicion hanging over the employee and so it may as well proceed straight to dismissal rather than keep the employee on paid suspension for an extended period first. That is of course unfair on a wrongly accused employee – but an ‘unfair dismissal’ case is primarily concerned with the reasonableness of the employer’s decision to dismiss rather than with whether that decision causes injustice to the individual. For the purposes of an unfair dismissal claim, the needs of the employer might outweigh the unfairness to the employee. 

But there are other factors that the employer needs to consider. If its employees are vulnerable to false allegations – perhaps because of the kind of people they have to interact with or because they are in the public eye – then the employer will not want to be hasty. It sends a negative message to other employees if it appears that the employer will simply dismiss anyone against whom serious allegations are made. The employer will want to check – as best it can – the circumstances of the allegation and assure itself that there is some substance to it. 

This is often made more difficult if the employee is signed off sick and cannot be spoken to. That is likely at the very least to delay any decision about what to do. Of course the employer does not have to keep the job open indefinitely but sickness absence does make it harder to reach a decision.

There is also a wider duty of care. I have known of cases where employees facing serious charges have been identified as being at risk of suicide. In those circumstances the question of whether an Employment Tribunal would regard it as ‘fair’ to dismiss them rather fades into the background. These are sensitive matters that have to be handled carefully. 

One other factor to throw into the mix is the contract of employment. That will allow the employer to dismiss without notice if the employee is actually guilty of gross misconduct. But if the Tribunal (or court) accepts on the ‘balance of probabilities’ that they are innocent, then dismissal without notice would be a breach of contract. We would call that a ‘wrongful’ dismissal as opposed to an ‘unfair’ dismissal and I try my best not to get too irritated when journalists conflate the two. To avoid that the employer has to dismiss with notice, or at least with a suitable payment in lieu. In some cases even that is not possible. It is not unknown for very senior employees to obtain an injunction preventing dismissal before proper procedures have been followed. This all depends on the terms of the contract which for senior (or very high profile) individuals can be quite complex.

So taking all of these issues together, how well did the BBC do? 

As far as I can tell, allegations about Edwards surfaced in the summer of 2023 and he was taken off air in July. At that time the indication was that this was not being treated as a criminal matter by the police and Edwards himself started receiving medical care and may have been hospitalised. In those circumstances it is difficult to see what could be done. The allegations were being made from someone outside the organisation and related to alleged behaviour that took place outside work. The BBC would of course want to investigate matters but it would be difficult to do so quickly. Most employers would want to know more about the health of the employee before interviewing them about the allegations, even if that meant delaying matters. Realistically it is also harder to progress an investigation over the summer holiday period. 

It is not clear that those allegations would have been sufficient to lead to dismissal. The situation changes, however, when Edwards is arrested in November 2023 (but not charged) for offences which eventually led to his conviction. Assuming the BBC knew about the arrest and the broad nature of the allegations that were being made, they would want to decide what this meant for his future. With hindsight it might seem obvious that he would have to go, but it is reasonable to expect the BBC to take some time to assess what the situation was and how the case was likely to proceed. Was Edwards going to accept guilt or claim that he was completely innocent? Was he the victim of a tabloid smear campaign and did that mean that the BBC should stand by him? Was he available for interview and what was he prepared to say? Finally, what were the terms of his contract and what did it say about his notice period?

In the event he resigned in April – before he had been charged with any offences. We don’t know whether that was something he decided out of the blue, or whether it was the result of discussions with his employer. It was reported at the time, however, that he was not ‘paid off’. It looks as though he was paid through to April 2024 but not beyond that. If that is so then it is likely that he resigned without notice – or perhaps had given his notice to the BBC some weeks or months earlier. 

Some employers worry about accepting a resignation in these sort of circumstances. But they don’t really have the option of refusing if the employee gives notice. Employees are entitled to resign if they choose to do so. Where there is a safeguarding issue, the employer might need to carry on with an internal investigation until it reaches its conclusion and can decide whether or not it needs to make a referral to the Disclosure and Barring Service, but that is not a factor in Huw Edwards’ case. From a strictly legal point of view the employee choosing to resign is a good thing as it reduces the risk of any legal challenge and saves the employer from having to make a potentially unfair decision to dismiss.

I note that the BBC has apologised for the way in which it handled the initial allegations – which did not lead to criminal proceedings –  in May of last year. No doubt there are lessons to be learned and things they can improve. But on balance I think the BBC have reason to be pretty satisfied with how the employment question was resolved. A lot has been made of the amount that Edwards was paid while he was off air – but we have to remember that he was a highly paid individual and a few months pay will inevitably add up to a hefty sum. It is better to look at how long he was paid for and whether things could have been dealt with more quickly.  From that point of view we can see that a serious allegation made in November 2023 led to a resignation in April 2024 with no additional sum being paid in settlement. Given the high-profile nature of the case and seriousness of the allegations Edwards faced, I think that is a pretty good result for the BBC. Many employers I know will be envious of how quickly and (relatively) cheaply the issue was resolved. 

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Abolishing the qualifying period for unfair dismissal

I love a State Opening! I am an absolute sucker for a man in tights carrying a stick with a Cap of Maintenance on the end even though no-one seems very sure why he is doing that. I also like the subtle symbolism of how the Lord Chancellor kneels before the King as if being highly deferential but then hands him a speech written by the Government that he is obliged to read out word for word. 

It has been a while since the actual text of a King’s (or Queen’s) Speech has held any interest for employment lawyers. The last Government reformed employment law by supporting a number of small Private Members’ Bills. And they were all pretty modest in their scope. But in this year’s King’s Speech we get the announcement of a full-on Employment Rights Bill that looks set to be the biggest employment law bill since 1975. To go along with the Speech itself, the Government published background briefing notes which set out in a bit more detail what is to be included. Those notes reiterate the commitment to ‘Labour’s Plan to Make Work Pay’ that I’ve picked apart in several earlier posts. The Employment Rights Bill, the notes say, “will deliver on policies as set out in the Plan to Make Work Pay that require primary legislation to implement”

For me that raises a question about how one of the key policies is to be delivered. As we all know, the Government intends to make unfair dismissal a ‘day-one right’, abolishing the current requirement for employees to have two years’ continuous service before they can claim that their employer has acted unreasonably in dismissing them.

(If the qualifying period is abolished altogether, the employee may not even need to make it to day one. A dismissal is the termination of the contract of employment by the employer. There is no reason why a dismissal could not occur after the contract has been entered into but before the employee has actually started – see Sarker v South Tees Acute Hospitals NHS Trust. But perhaps we shouldn’t go down that particular rabbit hole just yet.)

The change itself is simple enough – but when will it happen? If the abolition of the qualifying period is a measure to be included in the forthcoming Employment Rights Bill then it obviously won’t come into effect until the Bill has been passed – well into next year. The Government is committed to introducing the Bill within 100 days but it will take a good few months for such a large Bill to make its way through Parliament.  

But the change could happen more quickly than that.

The qualifying period is found in S.108(1) of the Employment Rights Act 1996. Under S.209 of the Act ministers have the power to “vary or exclude” the operation of that provision by Order.  So, in 1999 the qualifying period was reduced from two years to one year and then in 2012 it was put back up to two years. Neither change required an Act of Parliament – just a Statutory Instrument approved by Parliament. If the Government wanted to, it could remove the unfair dismissal qualifying period almost immediately. Indeed there is an argument for acting quickly. It isn’t necessarily a good idea to give employers lengthy notice that they are about to lose the right to dismiss – with impunity – employees with less than two years’ service. You may cause a rush! 

But what might prevent a quick and clean removal of the qualifying period is the question of probation periods. The background notes to the Kings Speech say: “We will continue to ensure employers can operate probationary periods to assess new hires”. That was also a point emphasised in “Labour’s Plan to Make Work Pay” What exactly does it mean?

If there were no qualifying period for unfair dismissal I would expect case law to develop setting out standards of fairness in the operation of probationary periods and dealing with when an employer can reasonably decide that an employee should not be confirmed in the post. That would take some years however and the Government are clearly suggesting that they will do something more proactive than just allowing case law to develop. Perhaps there will be a code of practice? Tribunals will have to then take that into account when deciding whether an employee who has failed probation has been fairly dismissed or not. Alternatively the Government could legislate to provide for a different test of reasonableness when dismissing an employee during probation. But if that is the plan then the abolition of the qualifying period will need to wait until the Bill is passed and will only come into force sometime next year. The Government might also choose to formally abolish the qualifying period by repealing S.108 altogether. That would mean that any subsequent Government would not be able to just reintroduce it with a Statutory Instrument, but would have to take the time and trouble to amend the Employment Rights Act all over again.

We should find out soon just how fast the Government is prepared to move in making the changes it is proposing. But my guess would be that the two year qualifying period will be sticking around for a good few months yet.

Now that I’ve said that, we’ll probably see a statutory instrument within days. Just you watch!

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