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Labour to scrap ‘2 year rule’ for unfair dismissal

New Deal for working people - labour party green paper
labour party green paper for employment rights

Labour party employment law pledges, employer’s guide – day 1 unfair dismissal protection

One of the more eye catching employment proposals arising from the Labour party is sure to have employers choking on their morning porridge.

In their employment rights green paper ‘A New Deal for Working People’ Labour say:

“Labour will ….. scrap qualifying time for basic rights, such as unfair dismissal, sick pay, and parental leave.”

The current situation – the right to bring an unfair dismissal claim

Currently only employees have a right to bring an unfair dismissal claim, and then only once they have clocked up 2 continuous years of service.

Labour’s proposals go further than previously, when employees needed only 1 year of service to bring such a claim.

Under their New Deal for Working People, Labour have said that they will scrap the qualifying period altogether.

Widening the right to bring an unfair dismissal claim to workers

Unfair dismissal claims are currently restricted to employees, and other categories of workers are excluded.

Labour have also said that they will abolish the current categories of employment status, merging employees and workers into one single ‘worker’ status:

“All workers, regardless of sector, wage, or contract type, will be afforded the same basic rights and protections. This includes rights to sick pay, holiday pay, parental leave, protection against unfair dismissal and many others.”

The additional rights will impact particularly on sectors like hospitality and care, and also the gig economy where zero hours (Labour also intend to ban zero hours contracts) and other forms of worker contracts are common.

Employment law is currently confusing, with many different categories of employee, worker, off-payroll worker etc. A single category of ‘workers’ engaged to provide services personally will simplify matters, and will go some way to tackling inequalities & ending the exploitation of labour in some industries, notably the care industry.

Whether one-size can really fit all though, is a bigger question and the devil, as always, will be in the detail.

Should employers expect a surge in claims?

Returning to the topic of unfair dismissal rights, it’s worth pointing out that there is already a day 1 right to bring various types of claim, e.g. discrimination claims and claims for breach of contract, and some of these rights extend to workers as well as employees.

The 2-year bar on bringing an unfair dismissal claim is, however, popular with employers, who feel they have an opportunity to properly get to know an employee’s capability for their role, and can decide to serve notice in a relatively low risk way if there are any doubts.

We have no doubt that employers will be deeply concerned at the increased risk of litigation, and the requirement to follow lengthy processes before dismissing an underperforming worker, processes that can be, and often are, shortened for employees with less than 2 years in the current regulatory environment.

Day 1 unfair dismissal rights & the inclusion of workers into the right will inevitably lead to a surge of claims against employers, with associated rises in legal costs and the prospect of having to spend more time contesting claims against them. As anyone who has gone through an employment tribunal process will know, the time and cost in defending a claim is significant.

Might an increase in rights reduce employer’s appetites to employ new staff?

Because of the increased litigation risk as a result of the removal of the 2-year rule, some employers may decide to substitute away from certain activities to avoid the requirement to engage new employees.

It’s likely to have an impact too on the attractiveness of the UK for foreign employers, who currently regard the UK’s relatively employer-centric employment laws as an attraction for locating here.

Many of Labour’s proposals in their green paper will align the UK’s employment laws with our socialist cousins in Europe. Given that Labour are, at their roots, a Socialist party, such ambitions should not be too surprising.

New deal for UK employment law

The New Deal for Working People is not so much a revolution in UK employment law, but more of an intent to rip it up and start again. Employers will worry that change of the scale and speed proposed could lead to economic disruption with the country still recovering from the shock of the pandemic and post-Brexit economic ramifications.

An old boss once taught that ‘big wheels turn slow’. Whilst he meant it in the context of business leadership, it applies equally to politics – we need only look to Liz Truss’ disastrous premiership to see the damage that can be done in a very short time – it’s natural for Labour to want to migrate employment laws towards a more socialist footing, but I hope we can do this one step at a time, with a clear view of the implications of each step.

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