Day 1 protection from unfair dismissal

Under current UK employment law, employees do not receive protection from unfair dismissal until they have accrued two-years continuous employment with the same employer. Once an employee has accrued this right their employer is only permitted to dismiss them for one of the following reasons: (i) conduct; (ii) capability; (iii) redundancy; (iv) illegality; or (v) some other substantial reason. Additionally, an employer needs to also be able to show that they followed a fair process. Failure to follow either of these two limbs exposes an employer to a claim for unfair dismissal.

The Bill proposes to remove the two-year qualifying period and grant employees this protection from the first day of their employment. The Bill has left space for an initial period of employment (which at this time, is looking like it will be nine months in length) during which an employee can be dismissed by using a slimmed down process. That being said, some sort of process will need to be followed, and the employee will need to be dismissed for one of the following reasons: (i) conduct; (ii) capability; (iii) illegality; or (iv) some other substantial reason (redundancy dismissals are excluded from this list). Further, the Bill also extends the time limit for bringing such a claim to six months (up from three). These changes, in addition to the fact that there are no fees for bringing a claim in the Employment Tribunal, will mean those that are considering acquiring a business will be increasingly concerned about the level of employee litigation a business is, and could potentially be, facing. To this end, there will likely be an increased focus on the hiring processes that a business has in place, to ensure that there is a system in place for ensuring that the correct individuals are being hired, and the procedures a business has in place during the initial period of employment to regularly assess the competency of a new employee with regular communication to this employee regarding their progress. Such a process, if well documented, should be helpful in meeting the slimmed down test for unfair dismissal during this period.

Fair Work Agency

The Bill will introduce a new enforcement body with the primary purpose of policing compliance with National Minimum Wage, modern slavery and holiday pay. This agency will be able to issue notices of underpayment where an employer has failed to make a statutory payment, such as holiday pay and National Minimum Wage, that can date back to six years (unless shortened in future regulations). Notices of underpayment can be combined with a penalty payable with a £20,000 cap for each individual and a minimum of £100 (these figures may be subject to future change). Future regulations may also permit the agency to recover its enforcement costs. The Working Time Regulations will also be amended to force employers to maintain records documenting holiday pay compliance for a period of six years.

Whilst the introduction of a central agency does not appear to change much from a legal perspective as compliance can currently be enforced by a number of different bodies, what it does show is that there will be an increased emphasis on compliance with such laws. As such, we are likely to see an increased emphasis from buyers in accurate record keeping in relation to holiday pay, National Minimum Wage and working hours and further focus on ensuring that holiday pay is calculated correctly.

Guaranteed hours offers

The Bill contains provisions for making ‘guaranteed hours’ offers to zero-hours workers, workers contracted to a certain minimum number of hours (the number of which has not yet been confirmed) and agency workers. Such an offer of ‘guaranteed hours’, which must reflect the hours an individual has been working, will have to made where they have worked a minimum number of hours over a specific, but not yet confirmed, reference period. Space has also been left, through future regulations, for such offers to reflect the patterns (such as days and times) an individual has been working. Importantly, a ‘guaranteed hours’ offer only needs to be implemented if an individual actually wants it, however, there is an obligation for a business to continue to make such offers at the end of each reference period. There are also further provisions for the right to reasonable notice of a shift change, and a shift cancellation, as well as a mandatory payment for a cancelled, moved or curtailed shift at ‘short notice’. Regulations will provide further details on what reasonable notice must be as a minimum and what ‘short notice’ is.

In terms of agency workers, the responsibility for making a ‘guaranteed hours’ offer will fall onto the end hirer, as opposed to the employment business (the agency). The responsibility for providing agency workers with reasonable notice of shifts will be joint between the employment business and the end hirer. The responsibility for providing adequate notice of shift cancellations, curtailments or movements (and the responsibility of making such payments due to non-compliance) will be with the employment business. However, this is something that employment businesses will undoubtedly look to push onto the end hirer and any agency agreement entered into within two months of the Bill coming into force will have an automatic mechanism built into it whereby the employment business can recover an amount which reflects the end hirers responsibility for non-compliance.

There are certain exceptions built into the need to make ‘guaranteed hours’ offers which I will not go into for the purposes of this article. For businesses that have a large number of zero-hours, part-time and/or agency workers, there will be an increased emphasis on the systems in place for actively tracking such individuals’ working time and tracking the offers that have been made, to ensure that the appropriate offers are being made, to the appropriate individuals at the appropriate times. In terms of agency workers, there will be an increased scrutiny on the agency agreements in place to see where, beyond the two-month initial period, liability for short notice of shift cancellations, curtailments or movements lies.

Harassment

On 26 October 2024, a new duty for employers to take ‘reasonable steps’ to prevent the sexual harassment of their employees came into force. Failure to comply with this obligation can result in a 25% increase on an award made by an Employment Tribunal. The Bill proposes to further heighten this risk to compel employers to take ‘all reasonable steps’, and it proposes to make disclosures related to sexual harassment a specific disclosure for the purposes of whistleblowing (which entitles employees to increased protections).

The Bill is also going to introduce an obligation for employers to take ‘all reasonable steps’ to prevent the harassment of their employees from third-parties. An employee can bring a standalone claim for failure to comply with this duty.

During any diligence process a potential purchaser will want reassurance that a business is currently complying with the current duty to prevent sexual harassment. Risk assessments to identify factors and circumstances in which employees are particularly exposed to a heightened risk of sexual harassment (and corrective action having been taken in response to such assessments) and robust policies and procedures (that are effectively communicated to the staff), will go a long way to showing that a business is aware and on top of this duty. As we move closer to the Bill coming into force, businesses should be able to prove that they are aware of this heightened duty and the fact that non-compliance can be due to the actions of third-parties (such as suppliers and customers). Further risk assessments and updated policies and procedures which takes these new factors into account should be a priority. As should effective communication to employees and third-parties of the business’ zero-tolerance approach towards sexual harassment.

Further changes

In addition to the above, the Bill introduces a number of other changes that businesses should be aware of and, for the purposes of diligence, be able to show compliance of:

• Fire and rehire – It will be automatically unfair to fire and rehire employees (subject to a very narrow exception).
• Flexible working – The rejection of a flexible working request must now be reasonable from the employer (in addition to their being a good business reason to do so). Businesses should be able to show that they have a clear process for dealing with requests and such processes are regularly implemented.
• Family leave – Paternity and unpaid parental leave will become a day one right and bereavement leave will no longer be limited to the parent/child relationship (future regulations will set out what the relationship needs to be).
• Statutory sick pay – The current three-day waiting period for statutory sick pay will no longer apply, nor will the lower earnings limit.
• Trade unions and industrial action – A raft of trade union friendly amends are being proposed by the Bill, such as: (1) employees being entitled to a written statement of their right to join a trade union; (2) the statutory recognition requirement for a required percentage of workers constituting a relevant bargaining unit to be union members is being reduced to 2%, down from 10%; (3) workplace access rights for officials; (4) reduced 7-day period for notice of industrial action to the employer; (5) removal of the requirement for union supervision of picketing; and (6) introduction of the right not to be subjected to a detriment on grounds of industrial action and the reduction of time limited protection in respect of dismissals on the grounds of unfair dismissal.
• Gender pay gap and menopause – Employers with at least 250 employees will be required to create and publish an annual ‘equality action plan’ showing steps they are taking to advance equality of opportunity between male and female employees.
• Pregnant and new mothers – The Bill has left space for further protections for pregnant women and new mothers from certain dismissals. This builds on the current protection for pregnant women and new mothers in relation to redundancy dismissals. The shape of this proposal will be made clear through future regulations.
• Collective redundancies – In addition to the current threshold for collective consultation (triggered if 20 or more employees are being made redundant within a 90-day period at one establishment), there is an additional threshold that applies across more than one establishment. It is not currently clear what these thresholds are, nor how they will apply (i.e. across the whole company, just to certain establishments within a set proximity to one another or across an entire group of companies). Further regulations will make this clear.

How can we support you

Our employment team are able to assist with your business’ preparation for the Bill coming into effect, with a specific focus on your business being able to show a potential buyer of compliance during any diligence process.