Labour’s Employment Rights Bill: A new approach to the regulation of work?

Collective rights

A striking feature of the first House of Commons debate on the Employment Bill was the number of MPs who welcomed it as a ‘proud member’ of their trade union. Nadia Whittome, Labour MP for Nottingham East, claimed of GMB members that ‘there are now more of us here [in the House] than there are Conservative MPs’. The Tory opposition − and right-wing press − are likely to step up their taunts of dependence on Labour’s ‘union paymasters’ and link them to more unpopular aspects of policy. For now, a majority of British people support the approach set out in the employment Bill, as workers’ rights have been so severely eroded, but strong collective rights still represent a potentially sensitive area for public opinion.

The New Deal proposes a fresh partnership approach, based on repeal of the post-2010 union laws, simplification of the union recognition process, and new rules governing workplace representation. Going beyond a simple repeal of Conservative legislation, it committed Labour to honouring long-standing union demands for statutory rights for union equality representatives, and adequate paid time for all union representatives. Unions will also have the right to request access to workplaces to speak to workers about becoming a member, and can appeal to the Central Arbitrating Committee if access is refused. Like the new obligation on employers to provide workers with information about the right to join a union, this range of measures appears designed to counter the type of aggressive anti-union action allegedly pursued by companies such as Amazon in advance of a recent recognition ballot. The thrust of the Employment Bill, putting the onus on employers to inform workers about their right to join a union, would make it harder for them to conduct anti-union campaigns.

Labour’s 2021 ‘Green Paper’ (on which the New Deal document was based) promised a reversal of ‘decades-long decline in collective bargaining coverage’ through the negotiation of fair pay agreements, covering a wide range of issues including pay and pensions, working time and holidays, health and safety, remote working, and the use of new technologies. Modelled on the experience of Australia, New Zealand and other countries, fair pay agreements set a floor for collective bargaining and can be enforced through sectoral or national agencies or commissions, whilst also allowing a high degree of flexibility in pay and conditions.

…Deputy Prime Minister Angela Rayner, who led on the 2024 Labour manifesto pledges on employment, referred to herself as a former care worker and a champion of carers, stating that ‘there will be a historic fair pay agreement process in the adult social care sector.’

However, by 2024, Labour’s commitment to fair pay agreements had been reduced to one sector, the social care workforce. Although the party pledged to review the operation of the social care fair pay agreement and consider its extension to other sectors, it argued that such arrangements ‘will not be the best solution for many parts of our economy’. This change of policy reflected the abrupt cancellation of fair pay agreements in New Zealand after just one year, following the election of a right-wing government, which observers saw as the result of fierce opposition by employer groups. The Employment Bill, as published in October, empowers the Secretary of State to establish a negotiating body for adult social care, without specifying its composition or remit, or a timetable for doing so.

OPEN IN VIEWER

Over the last two years, Labour has faced pressure to reform redundancy law, considering the furore created by ‘fire and rehire’ cases, where workers are dismissed and offered re-employment on less favourable terms: in particular, the case P&O Ferries in 2022, when 786 seafarers were dismissed with no notice, due to the employer exploiting a loophole in the law.

In presenting the Bill for its second reading on 21 October, Deputy Prime Minister Angela Rayner, who led on the 2024 Labour manifesto pledges on employment, referred to herself as a former care worker and a champion of carers, stating that ‘there will be a historic fair pay agreement process in the adult social care sector.’ The parliamentary debate indicates a general consensus in favour of a new negotiating body in social care, and backbenchers will press for action to address pay and conditions in the sector, but given the sector’s fragmentation and very low unionisation rates, it is far from clear how negotiations will operate. Moreover, employers’ response to higher employer National Insurance contributions in low-paid sectors may counteract the effect of higher wage awards, either through minimum wage rises or bargaining.

Individual rights: increasing security in the labour market

Another marked change from the Conservative years is the emphasis on greater security for employees, although still within the context of labour market flexibility. A study for the Trades Union Congress in August 2024 found that the level of employment regulation in the UK, already lower than many countries in the Organisation for Economic Cooperation and Development (OECD), diverged further from the OECD average after 2010, and is especially low for protection against dismissal. In a flexible labour market, where job tenure has decreased, the qualifying period for protection against dismissal excludes many workers. The Employment Bill includes protection against unfair dismissal from the first day of employment (whereas since 2012 workers are only covered after two years’ employment), but it will include provision for employers to apply a probationary period, which government has suggested should be nine months, during later negotiations on the content of secondary legislation.

Over the last two years, Labour has faced pressure to reform redundancy law, considering the furore created by ‘fire and rehire’ cases, where workers are dismissed and offered re-employment on less favourable terms: in particular, the case P&O Ferries in 2022, when 786 seafarers were dismissed with no notice, due to the employer exploiting a loophole in the law. The Employment Bill gives additional protections against dismissal to employees who refuse to accept a variation to their contract, unless the employer can demonstrate unavoidable business reasons for doing so, and essentially defines ‘fire and rehire’ (or the hiring of someone else to do the same job, on a varied contract) as unfair dismissal. It also extends the duty to notify government and workers of planned redundancies. Employment lawyers have argued that the ability to enforce the principle of fair redundancy procedures will be an important test of the new approach to regulation.

The Bill proposes new rights for those employed on zero-hours or low-hours contracts: a right to guaranteed hours, based on a reference period, which is still to be determined (12 weeks in the Green Paper); and a right to be given ‘reasonable’ notice of changes in shifts and compensatory payments for cancelled shifts. Whether this will make much difference in sectors employing large numbers of zero-hours and low-hours contracts is likely to depend on how far workers are willing to test the law. There are very few legal limits on the use of temporary agency work, and campaigners fear that employers may circumvent new legislation preventing ‘exploitative’ zero-hours contracts by shifting workers into temporary agency work. Preventing such loopholes in the new laws will therefore form an important part of later discussions, including extending the same rights as for zero-hours or low-hours contracts to agency workers, as promised earlier, and in line with bringing the enforcement of agency workers’ rights under the single umbrella body.

Individual rights: flexible and family-friendly working

The Employment Bill extends current law designed to support working parents or promote gender equality at work, building on consultations and the enactment of private members’ bills during the Conservative years. It includes a duty on larger employers (with 250 or more staff) to produce action plans alongside gender pay gap reports, and stronger duties on employers to prevent sexual harassment at work (which had been watered down in the passage of the 2023 Protection of Workers Act). Promised reviews of parental and carers’ leave fall outside the scope of the Bill, however, and the form of those reviews has not been announced; the establishment of a regulatory agency on equal pay is also left to future action.

On flexible working and parental leave, much work remains to be done to flesh out the proposals in the earlier Labour policy documents. The right to request flexible working, introduced in 2002 and extended in 2009 and 2014, was amended in 2023 to make it easier for all employees to access, without a qualifying period of service, and to oblige employers to explain reasons for refusal. The Employment Bill further tightens the grounds on which employers can legitimately refuse a request to work flexibly, so that they must show objectively (‘reasonably’) why a request cannot be granted. However, the list of grounds for refusal currently remains unchanged, which means that the proposals fall short of a genuinely ‘default’ position of flexible working, as Labour earlier promised.

Together with the right to parental leave from day one of employment (rather than after six months), the Bill also allows secondary regulation to protect employees against redundancy and dismissal from the time the parents-to-be inform their employer, as well as (as currently) during and on return from leave. Campaigners have welcomed this proposed change, in response to evidence of discrimination against women announcing plans to take maternity leave, although they argued that the Bill should have included the provision rather than delegating it.

Overall, much was promised in Labour’s pre-election proposals to build a stronger framework for parenting-related rights and actions to close the gender pay gap (and the October 2024 budget included a section on getting women in/into employment). The Employment Bill holds open the possibility of stronger rights, but a more comprehensive approach − such as an overarching care policy −will doubtless take longer than one term to be introduced.

More than the sum of its parts (with more to come?)

Labour lawyers have argued that the Employment Bill is just a start, describing it as ‘quasi-emergency legislation to tackle a number of longstanding regulatory failures’, with further action needed to bolster collective and individual rights. The Employment Bill falls short of the major review of employment law that campaigners had hoped for. But as a set of first steps, it marks a distinctive approach allying greater contractual security, positive duties to promote flexible and family-friendly working, and a stronger union voice.

The preparatory work to secure buy-in from employers and trade unions before the General Election will ensure that the core of the bill is adopted. However, large set-piece bills usually undergo trade-offs in their passage through Parliament, and in this case there is considerable scope for further compromises at secondary legislation stage. Unions and other campaigners will be keen to see a strong enforcement agency, without which measures to increase labour market security may have little impact. Employers may however step up resistance on grounds of the cost of regulatory burdens, as other wage-bill costs rise. Whilst campaigners hope to build on the first steps set out in the bill, they are likely to face difficult times ahead.