Talking Employment Law: The Employment Rights Bill - Part 3

In October 2024, the Government unveiled its Employment Rights Bill, which is currently making its way through Parliament to become law. This Bill introduces major reforms to workers’ rights.

In part 3 of the Employment Rights Bill podcast in the ‘Talking Employment Law’ series, Louise Keenan and Lucy White, members of the employment team at Clarkslegal, will discuss some of the main provisions of the Bill, including changes to: 

• Fire and re-hire practices
• Sexual and Third-Party Harassment
• Zero-hour contracts
• Tribunal Limitation Periods

Understanding these changes is crucial for your business. If you need guidance on how to navigate these proposed reforms, don’t hesitate to reach out to our employment team. Preparing now will ensure you’re ready when these changes take effect.

The Employment Rights Bill Podcast Series

• Part 1: Unfair dismissal and family rights
• Part 2: Changes to collective redundancies, flexible working and sick pay
• Part 3. Changes to fire and re-hire practices, harassment, zero-hour contracts and tribunal limitation periods

Transcript

Louise Keenan 00:06

In October 2024, the Government unveiled its Employment Rights Bill which is currently making its way through Parliament to become law. This Bill introduces major reforms to workers’ rights.

This podcast is part of a series of podcasts which will be discussing some of the main provisions of the Bill.  

We previously discussed the government’s proposals with regard to unfair dismissal, family rights, collective redundancies, flexible working and sick pay.  In this podcast, we will be discussing changes to fire and re-hire practices, harassment, zero-hour contracts and tribunal limitation periods. 

My name is Louise Keenan, I am an Associate in the employment team at Clarkslegal and I am joined by Lucy White who is Senior Solicitor at Clarkslegal.  

I will start by saying that as the Bill is making its way through parliament still, it is subject to amendment so some provisions may change by the time it is enacted and we have seen lately a few suggested amendments being proposed.  

So, let’s start with fire and rehire practices.
 
Lucy White 01:12
 
Yes, this refers to the practice of dismissing employees and offering them re-engagement on new terms, usually when they have refused to agree contract changes driven by the business. 

Employers have to have a sound business reason for wanting the change but this does not, currently, need to be crucial to the survival of the business.

This is changing under the Employment Rights Bill.  However, there has been a recent proposed amendment the bill so we’ll talk through both the current version and the proposed amended version.
 
Louise Keenan 01:44

They don’t make it easy for us do they
 
Lucy White 01:47

No, sadly not.

The current version is seeking to ban the fire and rehire practice in almost all cases, except where a business is at risk of complete financial collapse.

What it’s suggesting is that any dismissal for failing to agree a contract change will be automatically unfair unless the employer can show that the reason for the change was to eliminate, prevent, significantly reduce or significantly mitigate the effects of any financial difficulties that were affecting, or were likely to affect, the employers ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business AND in all the circumstances the employer could not have reasonably avoided needing to make the change.  

However, the proposed amended version of the Bill is watering this down slightly.

 Louise Keenan 02:46

Yes, it is suggesting isn’t it that this restriction on using the fire and rehire practices will only apply to, what it calls, ‘restricted variations’.

These restricted variations are variations around pay (which is any sum payable in connection with employment not just salary though regulations may carve out some things like benefits in kind and expenses), variations relating to the amount of work done where this impacts pay, variations re pensions, variations in the number of hours to be worked, reductions to time off that employees are entitled to, variations in timing and duration of shifts which meet conditions that need to be specified in regulations and other variations which are to be laid down in regulations.  It also applies to any attempt to insert a clause into contracts enabling an employer to make any of these changes unilaterally. 

So, for those that I have just mentioned, the new rules would apply. 

But for other changes like changes to territory or job title and duties etc – they would be covered by the existing rules so you could still use fire and rehire practices for those without having to show that you were in significant financial difficulty but the Employment Rights Bill does set out factors that will be considered in assessing if a dismissal was fair in these circumstances which include the reason for the variation, the consultation carried out, if there is a recognised union - the consultation carried out with the union, If there is no recognised union - the consultation carried out with anyone else representing the interests of the employee and who had authority to receive such information and any inducement offered in return for agreeing to the variation.
 
Lucy White 04:40

Yes, that’s right. 

Now this practice of fire and rehire, whilst legally permissible currently, has received a lot of negative attention in recent years.  So the idea behind the new bill is clearly to avoid undue pressure being put on employees to change their terms save where the business is in these severe financial difficulties but the new proposed amendment recognises that there are some changes that may need to be made (which presumably it considers less serious on the employee) which can be made under the usual rules which is going to be seen as a positive step for employers. 
 
Louise Keenan 05:18

Yes, and it’s worth saying isn’t it that in practice a lot of employers don’t like to use the fire and rehire practice anyway because it’s quite drastic and it carries a lot of risk.  We have also seen the introduction of stricter rules being applied though the Code of Practice on dismissal and reengagement which can be taken into account by the Tribunal when assessing compensation for claims like unfair dismissal if not followed but the bill clearly goes further.     
 
Lucy White 05:48

Yes, and where the new more restrictive duty applies it is going to be interesting to see which companies are going to try and still use the fire and rehire practice and how the new test will be interpreted by tribunals and what evidence they will want to see to demonstrate the financial position of the employer.
 
 Louise Keenan 06:06

Yes exactly. Tribunals are not financial experts so are parties going to be expected to call a financial expert to give evidence on the state of the company – that’s certainly going to add to time and cost to the tribunal process.
 
Lucy White 06:21

Yes, and as we know tribunals are already stretched and clearly will be more so following the changes coming in.
 
Louise Keenan 06:29

Yeah.  So, employers who are thinking about contract changes now may want to consider whether they need to start that process soon if dismissal and reengagement is something that they were considering as clearly that option is going to disappear in many respects when the new law comes into effect.

Lucy White 06:46

So, let’s move onto harassment.  

If we start by considering sexual harassment.  

Currently, employers are required to take reasonable steps to prevent sexual harassment of their employees during the course of their employment.  Employment tribunals have the power to increase compensation for sexual harassment by up to 25% if there is a breach of this and the Equality and Human Rights Commission has the ability to take enforcement action. 

The Employment Rights Bill changes this duty to one to take ‘all’ reasonable steps. So, it’s currently ‘reasonable steps’ but will in the future be ‘all reasonable steps’.

 Louise Keenan 07:29

Yes, it seems like a small change on the face of it but it does actually have an impact doesn’t it. 

Lucy White 07:35
 
Yes, it means an employer is likely to have to demonstrate that there were no further steps that they could reasonably have been expected to take. This makes the duty harder for employers to comply with and opens employers up to challenges if employees can show just one further step that the employer did not think of, but should have taken.  

Regulations are likely to set out more detail of what reasonable steps may be and could include things like the carrying out assessments, publishing plans and policies, having clear reporting and complaints handling procedures etc.
 
Louise Keenan 08:15

Yes, a lot of employers carried out risk assessments in line with the current duty to take reasonable steps when it came in and so these would need to be reconsidered to see if further steps can be identified and anyone who hasn’t yet conducted a risk assessment would be wise to get that started asap.

Lucy White 08:33

Yes, now looking at third party harassment, which is another area addressed by the Bill.

 Louise Keenan 08:41

Yes, prior to 2013, the law held the employer responsible for harassment from third parties where the harassment occurred in the course of the employee’s employment, the employer failed to take such steps as were reasonably practicable to prevent the harassment and the employer knew the harassment had occurred on at least two previous occasions.    

Now, this law was repealed in 2013.  However, the Employment Rights Bill seeks to reintroduce a form of third-party harassment.  Employers will, under the Bill, be liable for third party harassment where the employee is harassed in the course of their employment and the employer fails to take all reasonable steps to prevent this.  The duty will, therefore, be more onerous on employers than the previous law, especially those whose employees come into contact regularly with third parties such as those in client facing roles.

 Lucy White 09:34

Yes, and the Employment Rights Bill also specifically confirms that reporting that sexual harassment has occurred, is occurring or is likely to occur, will be a protected disclosure for whistleblowing purposes. Now, arguably sexual harassment complaints would likely be protected disclosures anyway but specifically including them removes any argument to the contrary.

Louise Keenan 10:00

Yes. And the Employment Rights Bill also calls for Regulations requiring large employers (with 250 employees or more) to create and publish yearly equality action plans to address matters like the gender pay gap and to support employees through the menopause.  

Lucy White 10:16
 
Yes, and further regulations maybe made under gender pay gap provisions as well to require private and voluntary sector employers with 250 or more employees in Great Britain to publish information about the service providers they contract with for outsourced services.

Louise Keenan 10:36

So, there’s a lot of changes there and like we said it will be important for employers to complete risk assessments so they can understand and mitigate risks. Organisations will also need to consider potential wider reporting obligations and whether there are any steps they can take now to place the company in a better position.   

Lucy White 10:57

So, let’s turn now to zero-hour contracts. We know these have been viewed negatively for quite some time as they typically apply to low-income employees and offer little job security and limited rights. 

Up until a decade ago these could contain exclusivity clauses as well, which restricted zero hour workers undertaking other work but this was banned in 2015.   

Now in the Employment Rights Bill there are a number of changes to try to stamp out exploitative zero hours contracts.  These also apply to those on so called ‘low hour contracts’ and also to agency workers. 

First there will be a duty on employers to offer a guaranteed hours contract to qualifying zero-hour workers, low hours workers and agency workers.  This will reflect the hours that they regularly work over a reference period, which is to be defined but the government had suggested it may be 12 weeks.  There is a current proposed amendment to the Bill to make this 26 weeks but this is not backed by government so it seems unlikely it will be picked up. 

The employer will have to make an offer for this contract to the relevant worker at the end of each reference period, so employers will have to have a way of tracking this and making repeat offers. 

Regulations will be required to set out, for example, who qualifies as a low hours’ worker here so we don’t have a complete picture yet on who this will impact. Though, again there is a proposed amendments to the Bill to suggest this is those working 8 hours or less a week but it is not an amendment supported by government and so it may not be adopted.
 
Louise Keenan 12:41
 
Do you think there will be an option to opt out, for example for zero hour workers who like their arrangement and don’t want to keep being offered the guaranteed hours model. 

Lucy White 12:52
 
There’s reference to being able to contract out by collective agreement but not on an individual basis. There have been calls for this process to switch from the employer having to offer the contracts to the worker having a right to request it which would deal with the issue you mention and this is a proposed amendment that has been put forward but it doesn’t have the government’s backing so it seems unlikely to be taken forward. 

There’s also interesting issues arising like how employers will deal with seasonal workers.
 
Louise Keenan 13:25

Yes, because they’re hired for busy periods only so an employer is not going to want to offer a guaranteed contract to a seasonal worker that would result in having to keep the worker on past that busy period. 

Lucy White 13:38

That’s right and under the new provisions any guaranteed hours offer should not be made on a fixed term basis unless it is reasonable and then there’s provisions setting out when it might be reasonable which may help with things like this temporary demand but information is still needed in regulations and it is not clear cut.

Organisations are going to have to really think about engagement models and risks and there are anti-avoidance measures in the legislation to avoid employers purposefully structuring arrangements to circumvent the new rights so it’s going to be a very complicated process for employers to assess their risks now and consider alternative working arrangements where the new system poses issues for them.
 
Louise Keenan 14:22
 
Yes, there will also be a duty on employers to provide reasonable notice of shifts (including the date, the start and end times and hours to be worked) to certain workers.  This includes zero hour workers and those on low hours contracts but also others such as those with no contractually guaranteed shifts and agency workers.  Once again, some of the detail is to be provided in regulations and things like what is ‘reasonable notice’ are to be consulted on.

These workers will also be entitled to compensation if their shift is cancelled, moved or curtailed at short notice.  Again, details are to be set out in regulations including the amount of compensation but it won’t be more than the amount they would have got had they worked the shift. 

For agency workers, it will be the agency that will be responsible for the payments, even where the end hirer has changed the shift, and so end hirers may find agencies start negotiating this as part of their commercial arrangements.   
 
Lucy White 15:23

There will be extra provisions in the Bill as well aimed at preventing workers from being penalised for exercising their rights, for example it will be automatically unfair to dismiss workers in certain circumstances relating to these rights including dismissals because someone has asserted their rights or accepted or rejected a guaranteed hours contract.

Louise Keenan 15:41

All in all, the new provisions don’t go so far as to ban the use of these types of contracts but they’re clearly complex and put more obligations on employers so you may find in practice they reduce the chance of employers wanting to use them.

Lucy White 15:56

Yes and, at this stage, as we’ve said employers should be looking at their workforces and identifying how many of these types of workers they engage.  Those operating shifts will need to review their current processes to see how efficient these are and whether they could be improved to help deal with the changes.  Much of the detail for these changes will be coming in regulations and so it’s difficult to fully prepare or understand the risks here but for large organisations identifying these workers in their business may take time so it is worth starting it now and giving thought to whether there are alternative ways to engage these workers.

Louise Keenan 16:34

A final point to mention, is in relation to tribunal time limits.  

Employees currently have three months to pursue most claims in the employment tribunal.  However, the Employment Rights Bill is proposing to increase the time limit to bring all types of claims in the employment tribunals from three to six months.

However, there appears to be an exception to this in regards to breach of contract claims which remain outstanding on termination which would still have their current time limit of 3 months from the termination date.  It’s not clear if this was intentional or accidental. 

This will clearly have a significant impact on employers. They may well face more claims and will need to consider what they can do now to try to preserve evidence and witness accounts of events given the longer period that may lapse between events and claims.
 
Lucy White 17:24

Yes, absolutely.  

So that brings us to the end of this podcast. As the bill progresses we will certainly have more updates for you, and hopefully more clarity on some of the points we’ve discussed. If you would like any further advice on what we’ve discussed, or guidance on getting your business ready for the bill, please do reach out to our employment team. Thank you for listening.