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What would a Labour government mean for UK employment law?

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

What would a Labour government mean for UK employment law?

It’s conference season of course and the major political parties are doing their best to paint pictures of their own versions of utopia!

The most likely outcome will be the return after some considerable absence of a Labour government, so we’re going to have a look at what that is likely to mean for employers and employment law.

Before beginning our analysis, it’s worth pausing to note that conferences are the primary platforms for politically-charged rhetoric. Will Labour immediately implement the changes they are grandstanding? No, legislative reform takes time, and usually follows a period of consultation, so we would expect changes to take several months, if not years to filter through, and for many conference claims to be heavily filtered before becoming real law.

The trade union landscape

Traditionally Labour is the union-friendly party, and so we would expect that a Labour government, whose primary funder is the trade union movement, to take steps to provide additional opportunities for unions to develop their businesses.

‘Their businesses’ might seem a strange reference in the context of trade unions. But unions survive…and thrive…through collecting income from their members. That income is invested in union activities, but also in union employees in the form of salaries, benefits and pensions.

Decades of declining membership have seen unions merge, and outside of the public sector, many of the smaller unions have been absorbed into the likes of Unite and the GMB (who are no longer the preserve of the Boilermakers!)

A returning Labour party will present opportunities for unions to reset their agendas, as we’ll go on to explain.

Fair pay agreements

Deputy Labour leader Angela Rayner has championed “fair pay agreements”, under which representatives of workers and employers would negotiate minimum standards for pay and terms and conditions for their particular sector.

While the devil will be in the detail, this sounds like a replication of European ‘Social Plans’ which determine pay levels and termination compensation payments for each sector within the economy. This would be a major change for UK employers, who are currently used to setting their own pay and basing termination payments on national statutory standards, such as for the Living Wage and redundancy pay.

For employers, fair pay agreements would represent a significant devolvement of control and autonomy to the government and the unions, and many will fear rising costs from fair pay agreements.

Union resurgence 

The negotiation of fair pay agreements would undoubtedly involve a bigger role for trade unions, who would expect to be the employee representatives for each sector in the economy. Increasing their prominence presents opportunity to begin to reverse membership declines. It would also help unions gain a foothold in sectors they’ve previously struggled to influence, like the UK’s strong service sector.

TUC leader Frances O’Grady welcomed the proposals (unsurprisingly) saying:

“Giving workers and their unions more power to bargain collectively is the best way to improve pay and working conditions across Britain.”

Repeal ‘anti-union’ laws and increase union access to UK workplaces

Labour have also promised to repeal several anti-trade union laws, including the Strikes (Minimum Service Levels) Act 2023 passed earlier this year and the Trade Unions Act 2016, which introduced minimum turnout requirements for votes on industrial action.

In addition, the Labour Party have promised to introduce a new right for trade union officials to meet, represent, recruit and organise members, and to and give trade unions the right to access workplaces for the purposes of union activities.

Finally, Labour are proposing (again absent the details) to simplify the process for obtaining statutory trade union recognition, helping gig economy and remote workers to organise through trade unions.

These proposed changes present the current Labour party in a very different light to Blair’s Labour government, and many UK employers are likely to be concerned about the future of employee relations under Labour.

Day 1 unfair dismissal and other employment rights for workers and employees

Labour proposals seek to provide all workers – except the genuinely self-employed – to the same rights including protection against unfair dismissal from their first day in employment.

Currently only ‘employees’ have full employment protection rights (including to unfair dismissal and redundancy pay etc), and even then need 2 years continuous service to bring an unfair dismissal claim.

The change to day 1 entitlement to bring an unfair dismissal claim will be a major headache for employers who are used to  effectively trialing a new employee for 2 years to ascertain suitability.

Day 1 unfair dismissal rights 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.

Could employers decide to substitute away from certain activities to avoid the requirement to engage new employees? And could it have an impact 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?

Statutory sick pay

Labour say SSP will be increased for all workers including the self-employed and the lowest paid. We presume this means that lower earnings thresholds will be abolished and, when combined with increased SSP & a widening of entitlement, this represents an additional cost for employers.

Flexible working

Labour propose the right to request flexible working, currently requiring 28 weeks service, to be available to all employees. Making flexible working a day 1 right has long been expected to become law in any case, but Labour may take this further, changing the right to ‘request’ to simply being a ‘right’.

Again, we await detail, but many employers will be left wondering how they will run their organisations with a workforce able to decide it’s own working pattern and, presumably, location.

Minimum wage

The minimum wage will be increased to £10 per hour for all workers – the Living Wage, which applies to most employees 23 years and older, is already due to increase to £11 from April 2024. Increasing other minimum wage rates beyond current rates will make younger workers and apprentices more expensive to employ.

Ending “fire and rehire” practices

Labour have promised legislation to bring an end to ‘fire and rehire’, or ‘termination-reengagement’ as it used to be known before the new media-friendly tag.

Fire and rehire is already covered by a new ACAS code on the practice, which encourages employers to consult fully to try to gain employee’s agreement to proposed changes to their contracts.

By going further than the ACAS code, employers will feel that a Labour government would remove their ability to make necessary changes to maintain competitiveness & to reflect changing practices in the wider economy. This could lead to businesses folding, or relocating abroad in order to survive.

Ironically, in genuine cases where employers need to introduce change, abolishing fire and rehire could result in a rise in redundancy-related dismissals, effectively commuting ‘fire and rehire’ into ‘fire’.

Banning zero-hour contracts

A long-running contentious subject, the current government have already banned one-sided zero hours contracts (the type that required workers to keep hours available while the employer had no obligation to provide work for those hours), but Labour wants to go a step further, saying they’ll ban them all together.

For workers who want to be able to pick and choose when and how much they work, a ban on zero hours contacts will not be seen as a benefit. Employers in less predictable sectors like care and hospitality may well feel less able to meet peaks and toughs in demand.

It is a fact that many employers still misuse zero hours contracts, despite the volume of codes and advice available to them. An outright ban would certainly correct much of that misuse, but many employers will argue that a legislative ban is too blunt an instrument for an economically complex employment issue, when recourse for misuse already exists via the courts and tribunals.

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