“Things can only get better”? An EPL claims perspective

After many weeks (feels longer) of election campaigning and speculation, we now have a result. The Labour party has won a landslide majority of a scale not seen since the first Blair administration in 1997 that played out to the backdrop of the above hit song.

Usually at general election time, my answer to questions about the ramifications for employment law and claims is usually “Er,… probably not that much”.  This election result however could prove to be very different, and see changes to the employment law landscape that have the potential to significantly impact upon the Employment Practices Liability (“EPL”) claims market.

In the build-up to today's result, Labour published two key documents which set out their intentions in the field of employment and trade union law; their 2021 green paper, updated by the more comprehensive ‘New Deal’ document published in May 2024 (“Labour’s Plan To Make Work Pay: Delivering a New Deal for Working People”).

Here, I highlight some of the most eye-catching proposals and comment on how they might impact upon EPL claims.

Perhaps the singularly most significant proposed changes from an EPL claims perspective are those in relation to unfair dismissal claims, being one of the most common types of claim.

Qualifying Service

First is the suggestion that the right to claim ordinary unfair dismissal would become a day-one right, with no requirement for any period of qualifying service.  If enacted, that would make for a radical change. 

Currently, an employee must have at least two years’ service to pursue such a claim, unless one of the very limited exceptions apply (such as ‘whistleblowing’ dismissals).  For decades previously, the length of qualifying service for unfair dismissal claims has yo-yoed between one and two years’ service depending on the view of the particular government of the time. A move to abolishing any requirement would be a significant development that may result in a higher number of unfair dismissal claims, as many more people in the employment market at any one time would be eligible.

Compensation Cap

Second is the possibility that the traditional cap on ordinary unfair dismissal claims (currently whichever is the lower of one year’s gross salary or the statutory limit of £115,115) might be abolished, such that (like discrimination claims) compensation is in principle unlimited.  This additional proposal appeared in the earlier 2021 green paper and, whilst it was noticeably absent from the 2024 New Deal document (prompting speculation that it has been quietly abandoned), it is possible that the proposal will be enacted – there has been no affirmative statement that it will not be.

Again, if enacted, that would also represent a sea change to the long-standing position of there being capped compensation in ordinary unfair dismissal claims, with obvious consequences to the EPL claims market and the exposure to insurers and employers; claims will in theory be capable of higher value, will be more attractive to higher earning claimants, and settlement demands may harden.

Probationary Periods

Notwithstanding the above, the New Deal document suggests that employers will still be able to operate probation periods.  Specifically, the document makes a commitment to “… ensure employers can operate probationary periods to assess new hires” and that the proposed change will not prevent “probationary periods with fair and transparent rules and processes.”

However, the devil will be in the detail, and it is unclear what those statements will mean in practice.  For example:

  • Do they mean that dismissals within a probationary period will be wholly exempt from the unfair dismissal regime such that, in effect, there will in fact still be a qualifying service requirement, albeit a much shorter one?
  • Or do they mean that there will be some specific, legislatively-defined lower-bar of fairness to meet when dismissing someone during probation, such that the normal legal principles of unfair dismissal law are relaxed during probation (for example, legislating that a dismissal during probation will only be unfair if a minimum level of procedure is not followed but that no substantive challenge on the merits can be made)?
  • Or is the intention that normal unfair dismissal law will apply in full to probationary dismissals, but that some new official ACAS Code of Practice about probationary dismissals will be devised that Employment Tribunals will be obliged to consider when assessing fairness?
  • Or might it be that the issue is left entirely for the Employment Tribunals to grapple with by themselves, and, over time, develop a new body of case law establishing whether the context of a probationary period affects the fairness of the dismissal (and if so, to what extent)?
  • Or could it be that dismissals during probationary periods will have more limited compensation rights?
  • Or something else entirely?

Also uncertain is how a probation period will be defined, and what constraints might be placed on its length for these purposes.

Time will reveal the answer to these questions, but it seems clear that, to at least some extent, we can expect to see a greater prevalence of unfair dismissal claims in the coming years.

Labour’s proposals include various measures aimed to improve and quicken the EPL claims process in the Employment Tribunal, such as greater digitisation and other efficiencies, alongside better empowering Tribunals to deal with enforcement of compensation awards.

The most eye-catching proposal however is to increase the claim limitation period from 3 months (in most cases) to 6 months in all cases.    This will inevitably impact on the EPL claims market in (i) increasing claim numbers or (ii) claims being issued later that they otherwise would have been, or more likely a combination of both.

Labour’s proposals also include a number of commitments in the area of rights during employment, including:

  • Prohibiting zero-hours contracts where such are ‘exploitative’, and introducing a right to have contractual hours that reflect average regular hours
  • Increasing minimum wage limits
  • Enhancing discrimination laws, including in relation to maternity protection, sexual harassment, menopause, and equal pay & pay gap reporting
  • Moving flexible working arrangements to become the default rather than the exception
  • Introducing a new right to bereavement leave
  • Review of parental leave rights
  • New collective grievance procedure obligations
  • A right to ‘switch off’ outside of work, and greater regulation of monitoring and surveillance technology within work.

Many of these proposals currently lack detail, but one can expect each new right introduced to be complimented by an ability to claim in the Employment Tribunal for alleged breach.  Accordingly, we expect a general increase in EPL claims in these areas, particularly as regards wholly new rights which are initially unfamiliar to employers.

Labour also proposes reform in the area of collective dismissals.

First, it proposes to broaden the scope of collective redundancy consultation obligations. Currently, the obligation to consult collectively with staff representatives applies when 20 or more redundancies are proposed at an ‘establishment’ within a business, which has been interpreted by the courts to mean (in most cases) the particular physical location of the employees, meaning that the obligation may not arise even where a large number of redundancies are proposed across a business with several sites. This was the case in the demise of the Woolworths chain, where it was ruled that collective redundancy consultation obligations only applied at individual stores where at least 20 redundancies were proposed, meaning the obligation did not arise in many locations, notwithstanding the cumulatively large scale of redundancies proposed across all of the stores combined. Labour’s proposal is, in effect, to reverse that position and look at the entirety of a business.

Second, it proposes to reform the law to greater address the practice of ‘fire and rehire’ where an employer seeks to dismiss employees if they refuse some change to their terms and conditions, and offer to re-employ them on the new terms desired.

Both proposals raise complicated practicalities and consequences that are beyond the scope of this article (for example, as regards ‘fire and rehire’, it is unclear quite how it is proposed that the existing laws of unfair dismissal and collective consultation need further material reform to address the issue, unless perhaps it is proposed that Employment Tribunals would be required to make its own much more forensic commercial judgments about a business’s assessment of its need to alter terms, which would be quite a departure from the usual principle that Tribunals should not substitute their own view but rather apply a range of reasonable responses test when assessing the fairness of a dismissal). However, the point is that enhanced rights and obligations in these areas mean scope for EPL claims, whether in the form of established claims for unfair dismissal or protective awards, or new rights of action.

Another significant proposal is that the current employment status regime that distinguishes people as employees, workers or self-employed, be simplified such that employees and workers be merged into one status of worker that captures both of those groups.

In many ways, this will be welcome by both employers and employees/workers, as the dividing line between the two sets of status has become increasingly blurred and sometimes difficult to easily identify in practice, often leading to satellite litigation about status.

However, the consequence of moving all non-self-employed working people to a single new enhanced status of worker will inevitably mean greater employment rights to a greater number of people, and in turn, a greater possibility of EPL claims. For example, at present only employees can bring claims for unfair dismissal; workers cannot. If workers’ rights are to be upgraded to those enjoyed by employees, the proportion of the workforce able to pursue such claims may increase significantly.

Labour also proposes to enhance the rights of trade unions and their members. Proposals include:

  • Repealing legislation introduced in 2016 that imposed additional requirements on unions when organising industrial action ballots
  • Allowing unions to conduct industrial action ballots electronically rather than only by post
  • Enhancing protection against dismissal and detrimental treatment to union members
  • Granting trade unions enhanced rights to access employer workplaces “in a regulated and responsible manner” for recruitment and organising purposes
  • Requiring employers to regularly inform workers of their right to join a union.

These points raise some interesting practicalities and consequences that are beyond the scope of this article (for example, will the proposed new right of access be limited to physical access or also electronic, will it involve a reciprocal right to time off work by employees to engage with the accessing union, and what constraints or prerequisites will apply before access is granted?). Many of the proposals might be enforceable only by the union rather than individual workers. However, it is nevertheless an area that could lead to an increase in EPL claims at the individual worker level.

Labour has promised to legislate in the field of employment law within its first 100 days of office, and to consult with businesses, workers and society at large before doing so.

It remains to be seen how many of the above, and other, proposals will be included in that initial wave of legislation, or when any changes legislated upon would actually come into effect; it may be that the implementation of changes is staggered. It may also be that more controversial changes, such as the unification of employee and worker status, will be a longer-term project. Indeed, the New Deal paper concedes that it is “… acknowledged that there are other areas of the New Deal that will take longer to review and implement. We will carry out full and detailed consultation on our plans to move towards a single status of worker and we will conduct a review of parental leave within the first year …”.

An ancillary issue is to whom the changes will apply to. It is unclear, for instance, whether the removal of the qualifying service requirement for ordinary unfair dismissal claims will apply to all employees or only to new starters who commence a job after the legislation comes into force.

Whilst immediate changes are unlikely, it does seem likely that the next year will see some significant changes taking effect.

Finally, given the sheer scale of Labour’s majority in Parliament, it may be that in time the Government will feel emboldened to introduce other, even more ambitious, proposals that have not previously been mentioned.

Comment

There is much by way of detail to come, and the timescales are unclear, but it appears that the next few years will be a busy time for all those involved in EPL risk.

In due course, employers may need to review their policies, procedures and contracts to ensure compliance with relevant changes, and to more broadly review their future staffing needs and strategy, including consideration of whether it would be advantageous to implement change sooner rather than later.

Insurers may wish to review their EPL policy language to consider in particular whether new descriptions of employment wrongful acts are needed, and whether exclusion wordings and excesses remain appropriate. Premiums might also be reviewed.

Things can only get better? Well, they seem certain to get busier!

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