Published on: October 12, 2022
Authors: David Hopper
Topics: Employment Law, The UK and European Union
By David Hopper, Partner at Lewis Silkin LLP, with assistance from Rosie Moore and Gemma Taylor, Practice Development Lawyers at Lewis Silkin LLP
As BEERG members will be aware of from last month’s Analysis of the EU Legislative Pipeline, the employment law agenda within the EU is currently packed full of labour and employment law initiatives. Despite it having now withdrawn from the EU, the agenda is no less packed in the UK.
This document analyses these initiatives, ranging from those that are already going through the legislative process to calls for further legislation. It focuses only on those of most significance to labour relations specialists, reflecting the sheer scale of potential reforms being discussed.
As will become clear, UK employment law is in a profound state of flux thanks to the agenda of the UK’s new Prime Minister, Liz Truss. The challenge for BEERG members will be not only to keep up with these reforms, but to do so in a way that ensures that they remain competitive in an increasingly difficult market for attracting talent. Longer term considerations should also be borne in mind given the likelihood that the Truss government’s deregulatory zeal may well be reversed within a couple of years if, as the opinion polls currently suggest, she will soon be removed from power and replaced with a Labour government.
Group A – Done deals
At the moment there is no relevant UK employment legislation that has already been approved and is due to come into force.
Group B – Going through the legislative process
The Retained EU Law (Revocation and Reform) Bill
This Bill is intended to make it easier to repeal or reform retained EU law. Crucially, the Bill includes a “sunset” provision meaning that large amounts of retained EU law, including on informing and consulting employees, will automatically be scrapped by the end of 2023 if not positively retained or replaced (unless the deadline is extended). The Bill also aims to bring about an end to the supremacy of EU law in relation to any laws which are retained beyond the end of 2023.
Some particular reforms to EU laws (e.g., on holiday pay or post-TUPE changes to terms and conditions) are likely to be welcomed. However, if the Bill passes in its current form, it could result in a rushed and badly considered process of reform and create very significant disruption. We have written further about this development in our article.
Neonatal leave and pay
The Government is backing a Private Members’ Bill to bring a new right of up to 12 weeks’ paid leave to support parents whose babies need neonatal care into force. Pay will be the same as statutory maternity, paternity, or parental pay.
The Government is backing a Private Members’ Bill requiring employers to pass on all tips to staff and requiring a new Code of Practice to be written about fair and transparent tip distribution.
Group C – Calls for further legislation, government proposals and previous government commitments
The Truss government is proposing to proceed with the 2019 manifesto commitment to require a minimum service to operate during transport strikes. It also intends to require unions to put pay offers to a member vote, to ensure that strikes can be called only once negotiations “have genuinely broken down”. The relevant government department’s comments on this announcement suggest that this point in time will mirror the point at which an employer may approach employees directly to put offers to them in the event of collective bargaining having been exhausted, in line with the Supreme Court’s recent important decision in Kostal about which we wrote in this article.
“Fire and rehire” code
Following the P&O Ferries incident earlier this year, a new statutory code on “fire & rehire” is to be introduced. A draft was expected over the summer but has not been published. Employment tribunals would be required to take the new code into account when considering the fairness of dismissals and will have the power to award a 25% uplift to compensation if an employer fails to comply with the code. Employers would also be advised to note the growing trend of media/parliamentary/public criticism of companies that choose to sail very close to employment law winds.
Gender pay gap reform
The existing gender pay gap reporting requirements were set to be reviewed in the first half of 2022. There is no sign of this having happened, but a review remains likely, and could still happen this year.
Separately, the government has announced that, as a matter of general policy going forward, businesses with under 500 employees should be exempt from reporting regulations. It is currently unknown if the government intends to amend the gender pay gap reporting regime to increase the threshold in this way, but some commentators are suggesting that this is the plan. Any review of the gender pay gap regime will now need to consider whether the threshold should be raised, as well as the ongoing calls for adjustments to the calculation approach and other reforms.
Ethnicity pay reporting
The government has confirmed that it does not plan to make ethnicity pay reporting compulsory but will require “publication of a diagnosis and action plan” for organisations who choose to publish voluntarily. Guidance on voluntary reporting is expected soon and calls for legislation are continuing.
The government consulted on introducing disability reporting in 2021. Whilst we do not expect legislative change, an official response is still awaited so the idea remains on the agenda. We have written further about this issue in our article.
EHRC code of practice
A new Equality & Human Rights Commission Code of Practice on sexual and other harassment is under development. It is expected that the EHRC will consult on the draft content before implementation, and it is likely that the content of the new Code will be based on the EHRC guidance published in January 2020. The Code will have greater legal force than guidance, with employers required to update their policies and practices accordingly.
The Johnson government said that it planned to amend the Modern Slavery Act (which applies to employers with a turnover of >£36m) to:
- make existing reporting areas mandatory, not advisory;
- change the reporting deadline to 30 September each year; and
- require statements to be published on a new registry.
The registry has already opened, and reports can be uploaded on a voluntary basis (over 7,000 statements have been submitted).
Assuming this still goes ahead (and we do still expect legislation) companies will need to pay more attention to their statements as, once the new legislation is passed, there will no longer be the option of leaving out the trickiest areas. However, there would still be no penalties for non-compliance.
State enforcement agency
The Johnson government confirmed plans (originally announced under Theresa May) to create a new single state enforcement body by combining the Employment Agency Standards Inspectorate, the Gangmasters and Labour Abuse Authority and HMRC’s National Minimum Wage Enforcement Team into one body. The idea is also to expand this new body’s remit into the enforcement of statutory sick pay, holiday pay for vulnerable workers and the regulation of umbrella companies, areas which have not previously been the subject of specific enforcement regulation. However, much will depend on whether new funding will be made available and, while the government remains formally committed to these steps, the attitude of the new Truss administration towards them is not clear.
The Truss government has announced that, with effect from 6 April 2023, end users in the public and private sectors will no longer have to apply the IR35 rules. This means that in all circumstances where a contractor provides their labour via their intermediary (such as a personal services company) the responsibility for assessing whether the contractor is a disguised employee and, if this is case, operation of PAYE/NICs, will move from the end user and/or fee payer back to the contractor. Ultimately, this is likely to prompt a review of flexible resourcing models.
Other possible developments include:
- Reform of non-compete clauses in employment contracts (Government consultation – possibly idea has been dropped)
- Reform to current harassment laws (promised by Johnson government – unknown if/when reforms will now go ahead)
- Extended time limit for employees to bring claims under the Equality Act (suggested by Johnson government – unknown if/when this will now go ahead).
- New legislation to regulate Non-Disclosure Agreements (promised for some time now by successive Conservative administrations – unknown if/when this will now go ahead)
- Flexible working reforms (2019 Conservative party manifesto commitment but may no longer go ahead)
- Additional protection for redundant pregnant employees and those who are redundant within six months of return from maternity or adoption leave (2019 Conservative party manifesto commitment and promised for some time, but may no longer go ahead)
- Introduction of unpaid carers’ leave (manifesto commitment – unclear if will now go ahead)
- Increasing the length of break required to end continuous service (announced by Theresa May’s government but never actually enacted and fate now unclear)
- The right to request a stable/predictable contract (promised for some time but fate now unclear)
- The right to reasonable notice of work schedules and compensation for shift cancellation (Government consultation – probably now dropped).
The sheer scale of potential reforms being discussed is significant but, at this stage, it remains the case that the devil will be in the detail. For example, it has been reported in the press that the Prime Minister has now rebuffed the cabinet minister with responsibility for employment law for his “half-baked” labour market reform proposals.
Time will also be against the Truss government to achieve its aims, which might explain the urgency with which it’s looking to reform all EU retained law in 2023 before it might well lose power when the UK’s next general election is held as expected in 2024. Whilst businesses might well welcome certain of its proposed reforms, the lack of stability and predictability in the UK’s employment law rules may well outweigh their benefits, meaning that difficult years lie ahead for employers already grappling with responding to the UK’s wider “cost-of-living crisis”.