UK Employment: A Sea Change Ahead

The UK employment law landscape is rapidly changing following the election of the Labour government. New legislation coming into force on 26 October 2024 that tackles sexual harassment in the workplace and the recently published Employment Rights Bill that introduces significant reforms to workers’ rights have dominated headlines. Many businesses are considering how these changes will affect their operations and how to adapt to the Labour government’s vision of the UK workplace.

Stronger Protection Against Sexual Harassment 

The Worker Protection (Amendment of Equality Act 2010) Act 2023 coming into force on 26 October 2024 creates a new duty for employers to take reasonable steps to prevent the sexual harassment of their employees. Under the existing regime, sexual harassment in the workplace is already prohibited, but the legislative change will create an anticipatory duty on employers to proactively prevent sexual harassment of their employees. This new duty would also extend to circumstances in which employees are sexually harassed by third parties (including clients, service users, and visitors).

While the new preventative duty does not create a free-standing claim that employees can enforce directly, victims of sexual harassment may be entitled to receive higher compensation if they succeed in bringing a sexual harassment claim against their employer. As a result of the legislative change, the Employment Tribunal will have the power to increase compensation to sexual harassment victims by up to 25% if their employer is deemed to have breached this new duty. In addition, the Equality and Human Rights Commission (EHRC) has the power to conduct investigations and enforce the new duty against employers without employees needing to bring a claim.

Whether an employer is deemed to have taken reasonable steps to prevent sexual harassment will depend on the particular circumstances. Factors that will be taken into account include the size of the employer, the nature of (and the risks present in) that workplace, and the likelihood and types of third parties employees may have contact with in the course of their employment. Based on the EHRC’s guidance, it is clear that having suitable sexual harassment policies and procedures and rolling out training to the workforce will only be the starting point for employers seeking to discharge this new duty. Clearly, a more targeted approach that carefully assesses the risks inherent to the particular workplace will be required. Some businesses are already putting in place measures to reconfigure or streamline their internal reporting lines, bolster their enforcement and disciplinary processes, and carefully monitor how third parties will interact with their workforce.

The new preventative duty is arguably a result of the wider debate sparked by the ‘Me Too’ movement, advancing the conversation on how to protect employees from sexual harassment in the workplace. The new duty is expected to be further strengthened when the government’s much publicised Employment Rights Bill comes into force, which proposes stretching the new duty to require that employers take ‘all’ reasonable steps to prevent sexual harassment in the workplace and also contemplates that an allegation of sexual harassment will constitute a ‘protected disclosure’ for the purposes of whistleblowing legislation. Against this backdrop, business leaders will need to carefully consider if their compliance protocols remain suitable going forward. For companies looking to acquire other businesses, an assessment of that business’s approach to sexual harassment in the workplace will undoubtedly be a more prominent consideration during due diligence.

Employment Rights Bill Ushering in Employee-Friendly Reforms

The Employment Rights Bill is the Labour government’s marquee draft legislation, setting out its vision of reforms needed to better protect UK workers. The Employment Rights Bill includes a suite of worker-friendly changes the government intends to make to current employment legislation. The government has already started consulting on some of the reforms, although the majority will likely not take effect until 2026. Key changes coming down the track include:

Making Unfair Dismissal a Day-One Right 
The headline proposal in the Employment Rights Bill is to make unfair dismissal a day-one right for all employees. Currently, employees must be employed by their employer for at least two years before they can bring a claim for ‘ordinary’ unfair dismissal. By the government’s estimate, about 9 million UK employees have been working for their current employer for less than two years (and, accordingly, have limited protection against unfair dismissal). The government is proposing to abolish this waiting period.

While the proposal presents a radical change to how employee dismissals are managed, one key caveat is that the government envisages that employees may be fairly dismissed following a light-touch procedure during an initial statutory probation period (expected to be nine months). This less onerous process will need to be fleshed out in consultation; however, once implemented, the new day-one unfair-dismissal right will undoubtedly affect companies’ approach in hiring new employees, performance management, and the liability exposure associated with dismissing employees.

Strengthening Flexible-Working Rights 
The UK has, in the years following the COVID-19 pandemic, catered more extensively to flexible working amongst employees. Currently, each UK employee has the right to make a flexible-working request from day one of their employment. There are specific grounds on which an employer can refuse a flexible-working request, which are not expected to change (and no changes are anticipated to the compensation employees receive if their employer fails to discharge their statutory obligations regarding flexible-working requests). However, the Employment Rights Bill introduces a requirement that any employer’s refusal of a flexible-working request must be ‘reasonable’. While this change falls short of the government’s initial aim to make flexible working a ‘default’ right for most employees, it is likely that this proposal will change the cultural expectations for employees’ ability to work flexibly and place the onus on employers to demonstrate why a particular request cannot be accommodated.

Introduction of A Single Enforcement Body  
The Employment Rights Bill proposes the creation of a Fair Work Agency, a state enforcement agency that will provide a stronger framework for employees to enforce their rights. Currently, employment rights are enforced through a mixture of individuals submitting claims to an employment tribunal and various government bodies enforcing certain rights on behalf of employees. The new state enforcement body will take over the enforcement of discrete employment rights in the first instance, but the Employment Rights Bill envisages the body’s remit and powers will be extended in the future. As with other law enforcement agencies that have been established or strengthened by past governments, the key to the Fair Work Agency’s success will depend on whether it has sufficient resources to effectively deliver on its mandate.

The Employment Rights Bill presents the most significant reform to UK employment law in years. According to the government’s own impact assessment, the Employment Rights Bill is expected to impose a direct cost on UK businesses of up to £5 billion a year. In addition, the Employment Rights Bill is expected to have a wide-ranging impact on companies’ business practices, compliance costs, and tribunal claims.

Given most of the reforms in the Employment Rights Bill will not take effect until 2026, businesses have sufficient time to prepare. The trend line under the Labour government is clear, and companies that carefully assess how the upcoming changes to employment law will affect their business and adapt accordingly will be able to recruit, retain, and manage their talent effectively. 

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.