Employment - market insights Q3/Q4 2024

A new Labour government 

In the lead up to the July General Election, Labour published two key documents setting out their intentions in the field of employment and trade union law. 

From an Employment Practices Liability (EPL) perspective, key proposals include: 

• Unfair dismissal: the right to claim ordinary unfair dismissal would become a day-one right, with no requirement for any period of qualifying service as currently 
• Compensation cap: it was suggested that the traditional cap on ordinary unfair dismissal claims might be abolished, so that compensation is, in principle, unlimited
• Employment Tribunals: measures would be introduced aimed at improving and speeding up the EPL claims process in the Employment Tribunal. The claim limitation period would also increase from 3 months, in most cases, to 6 months in all cases.  This could impact on the EPL claims market in increasing claims numbers and / or claims being issued later than they otherwise would have been
• Workplace rights: including restricting zero hours contracts, increasing minimum wage limits, making flexible working arrangements the default, and a right to “switch off” outside of work   
• Employment status: simplified regime so that employees and workers would be merged into one status of worker that catches both groups.   

Employers may need to review their policies, procedures and contracts to ensure compliance with relevant changes, and more broadly review their future staffing needs and strategy. Insurers may wish to review their EPL policy language to consider whether new descriptions of employment wrongful acts are needed, and whether exclusion wordings and excesses remain appropriate.   

Some of these proposed reforms were reflected in the government’s proposal for a new Employment Rights Bill, introduced in the King’s Speech on 17 July. 

The Code of Practice (Dismissal and Re-engagement) Order 2024  

The new statutory Code of Practice on dismissal and re-engagement (also referred to as fire and rehire), which came into force on 18 July 2024, sets out employers’ responsibilities when seeking to change contractual terms and conditions of employment.  It aims to encourage greater transparency over dismissal and re-engagement practices as well as meaningful staff consultation, seeking to ensure that dismissal and re-engagement is only used as a last resort.    

Employment tribunals will have powers to apply an uplift of 25% of an employee’s compensation if an employer unreasonably fails to comply with the code where it applies. 

Changes to TUPE regulations 2024 

Changes to the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations aim to protect employees’ rights on the transfer of a business or on the change of a service.      

The changes mean that employers can elect to inform and consult directly with individual employees without going through a representative, if the organisation employees less than 50 employees, or if the transfer takes place on or after 1 July 2024 and involves fewer than 10 employees.  

Business migration   

We saw a number of changes in this area introduced by the Conservative government, including in respect of the Skilled Worker route, with fewer roles falling eligible under this regime and the minimum salary threshold being increased.

The new government’s proposals in respect of business immigration focus less on limiting business visas or imposing further restrictions, and more on 'upskilling' to address skill shortages in the UK (thereby reducing the need for businesses to look overseas to plug a skills gap) and improving working conditions. Looking further ahead, the government has also suggested reform of the existing points-based system so that it is 'fair and proportionately managed'. Whilst we are unlikely to see a significant impact on business immigration regime in the immediate term, the future is not yet certain. 

Case developments

Update on equal pay

Miss M Thandi & others v Next Retail Limited (1) and Next Distribution Limited (2)

On 26 July 2024, the Employment Tribunal (ET) ruled that thousands of retail store workers, who are predominantly women, should have been paid equally to predominantly male warehouse operatives in relation to a number of terms, including basic pay, unconsolidated awards, Sunday pay premium, night-time premium, overtime premium, paid rest breaks and long service awards. 

The ET has gone on to accept that the various factors relied upon by the Respondents, such as market forces, to explain the difference in pay between the two sets of workers were not directly discriminatory – they were motivated by profitability and costs rather than the workers’ sex. However, the ET found that they were indirectly discriminatory, disproportionately impacting women (who made up over 77% of the retail workforce), and could not be objectively justified. The ET did find that a number of bonuses and premium payments could be justified however. Notably, the differences in these payments were not based solely on the cost to the business, which is unlikely to be persuasive as the sole basis for justification.

Whilst this is a first instance decision (ie a decision of the ET) and therefore not binding on other tribunals, it may be persuasive and provides an indication of the way future cases on this subject area may be determined. Cases such as this (and the equal pay claims currently underway against Asda and other major supermarkets) might become more prevalent in other sectors as equal pay issues gain more traction and publicity, and insurers may wish to give consideration to current policy wording given the potential level of compensation in such cases. By way of indication, the Respondents may be faced with paying around £30m to the claimants in this case. They are reported to be appealing the decision.