Written evidence from the Law Society for England and Wales (ERB0086)

 

Submission from the Law Society of England and Wales to the Business and Trade Select Committee call for evidence on the Employment Rights Bill

 

6 December 2024

 

Introduction

 

  1. The Law Society of England and Wales is the independent professional body that works globally to support and represent 200,000 English and Welsh solicitors, promoting the highest professional standards and the rule of law. The Law Society represents a wide range of employment practitioners, including solicitors acting for employees, employers, businesses, and others.

 

  1. The Law Society broadly supports the ambitions of the Employment Rights Bill to provide new rights to employees and help deliver economic security and growth to our economy. Our primary concerns surround the implementation and actualisation of the new rights introduced by the Bill. If either new or existing avenues for accessing justice are not fully funded to handle increased caseloads, then the ambitions of the Bill will fail.

 

  1. As our primary concerns surround implementation of new rights and their effects on the justice system, we have answered questions in the order of most relevance to these issues. We have also engaged with the profession to identify possible loopholes and unintended consequences that may hinder the effectiveness of the Bill.

 

Protecting workers

             

Can the measures in the Bill be adequately enforced? What are the barriers to setting up a Single Enforcement Body (Fair Work Agency) and how can these challenges be overcome? 

 

Increased pressure on employment tribunals

 

  1. The Employment Rights Bill introduces many provisions to strengthen the rights of workers across the UK, including bans on fire and rehire and a suite of new rights for zero and low hours contract workers. While the rebalanced relationship between employers and employees is undoubtedly welcome, without sufficient resources to process and deliver judgement on cases, new rights will be considered ineffective and rogue employers will not be deterred from continuing to act contrary to the law.

 

  1. Proportionality also needs to be considered. Many of the new rights – for example those in relation to zero hours workers – will result in very small amounts of compensation being due e.g. where a shift is cancelled. The Government should consider whether these issues should go through the employment tribunal or whether they would be more efficiently addressed through the Fair Work Agency or ACAS.

 

  1. In the Bill, the Government recognises the need for suitable avenues to access justice through extending time limits for submitting an employment tribunal claim from three to six months. However, the Bill makes no mention of additional investment to help employment tribunals tackle the existing backlog of cases or expand their capacity to handle the likelihood of increased short-term pressure as new rights are introduced.

 

  1. Furthermore, new provisions such as unfair dismissal rights can only have a negative impact on the tribunal backlog. Even if a lower compensation cap is introduced (as is currently being considered), this is unlikely to deter employees from lodging claims for potentially small sums of money which may not be the most efficient usage of resources considering the growing tribunal backlog.

 

  1. The latest data for employment tribunals shows that for the first quarter between April and June 2024 the open caseload of single claims was 18% higher than in the same period last year. The total number of single claims and lead cases in multiple claims was just under 44,000, 18% higher than in 2023.

 

  1. The Law Society is aware of anecdotal accounts from practitioners that a lack of judges in employment tribunals is contributing significantly to delays.

 

  1. The Government should publish an impact assessment outlining how many new employment tribunal cases it expects the Bill to generate and how these will be managed. This assessment should be used to identify appropriate funding to help clear the backlogs currently plaguing employment tribunals and ensure the system is ready for the influx of new cases this Bill will generate. Funding should ensure there are enough judges and administrative staff to manage cases.

 

  1. This must be addressed if this Bill is to be a success. Without sufficient enforcement, the new rights created by the Bill will be ineffective, with claimants and respondents waiting years for a court date and justice.

 

Amalgamation of enforcement bodies

 

  1. The Law Society broadly supports the establishment of the Fair Work Agency. This single enforcement body has the potential to ease pressure off the employment tribunal and give individuals another avenue for accessing justice.

 

  1. However, the Bill is light on detail on how the amalgamation of existing bodies will take place, the timeline for doing so, and how it will be resourced.

 

  1. The rights introduced by this Bill affect several aspects of employment and detail will be needed to ensure that each component is combined efficiently so they may tackle employment cases effectively.

 

  1. Failure to do so risks allowing non-compliant businesses to continue breaking the rules with impunity. This will give non-compliant businesses an unfair advantage compared with compliant employers who wish to support their workforce appropriately.

 

  1. The Government should also outline a clear timeline for when each body will transfer its responsibilities and existing caseload to the new Fair Work Agency. Without a clear timeline, individuals looking to lodge a claim may go to the wrong body and experience delays, leading to gaps in access to justice.

 

  1. As detailed above, employment tribunals are already bogged down by significant backlogs, and the new rights introduced by this Bill are likely to lead to increased short-term pressure on enforcement. The Government should therefore outline its assessment of the resources needed by the Fair Work Agency to ensure it is equipped to handle this significant pressure.

 

  1. The Government should also consider whether the Fair Work Agency could offer a fast-track system to deal with lower value claims.

 

Are there weaknesses or loopholes in the Bill that could be exploited or have unintended consequences? 

 

  1. The Bill, as currently drafted, is an extremely wide-ranging and complex piece of legislation. Through our engagement with the profession, we have understood that many solicitors have already begun to identify potential unintended consequences and legal loopholes surrounding unfair dismissal, day one rights, sexual harassment, fire and rehire and collective consultation.

 

  1. It is likely these areas will not represent the full extent of the potential legal loopholes and unintended consequences associated with the Bill and that further legal loopholes/unintended consequences will become apparent when tested in the courts.

 

Day One unfair dismissal rights

 

  1. The provisions within the Employment Rights Bill relating to unfair dismissal have the potential to allow employees on fixed term contracts to judge their dismissal as unfair when their contract has expired. 

 

  1. The Bill will bring in a new right not to be unfairly dismissed from day one of employment through clause 19 and schedule two, which removes the current qualifying period for most unfair dismissal claims. The legislation refers to a light touch process for dismissals during an ‘initial period’.

 

  1. For example, if an employee is hired on a fixed term contract to cover a period of maternity leave, the employer may need to consider how to redeploy them at the end of the contract and whether dismissing them at the end of the contract could count as unfair dismissal. The Government should clarify whether this would be the case or not.

 

  1. We would support a light touch process that reflects that new employment is the beginning of a new relationship and is as clear as possible so that it does not give rise to unintended legal challenges. The Government should provide clarity on this point as it could potentially create extensive uncertainty and lead to employers becoming more cautious about offering full employment contracts.

 

  1. Another possible reaction from the business community could be that some employers choose to make redundancies ahead of changing terms and conditions, and/or stripping back the terms and conditions included within their current standard employment contract. Alternatively, many employers may opt to put new employees on fixed term contracts in order to mitigate this problem, which may contribute to job insecurity – contrary to the Government’s aspirations.

 

  1. A further possible outcome is that businesses may be less likely to take a risk on a job candidate. For example, if a candidate has a poor health record, the introduction of day one unfair dismissal rights is likely to see employers hire a ‘safer’ candidate – contrary to the Government’s aspirations of prompting the economically inactive to return to work.

 

Sexual Harassment

 

  1. Clauses 15-18 amend the Equality Act 2010 to strengthen the prevention and reporting of sexual harassment. The Employment Rights Bill requires employers to take ‘all reasonable steps’ to prevent sexual harassment.

 

  1. While employers will be familiar with the notion of taking “reasonable steps”, the inclusion of the word ‘all’ runs the risk of setting an unreasonably high bar for employers to meet.

 

  1. This has disproportionate consequences. For example, an employer might be designing their policies and action plans to take “reasonable steps” to prevent harassment and put together what appears to be a comprehensive package of measures. If the employee can point to any single additional reasonable measure that the employer could have taken, but didn’t, then the claim may be upheld even if the employer had attempted to do all they could.

 

  1. We recommend that alongside the Bill, the Government should provide comprehensive and specific statutory guidance of what ‘all reasonable steps’ are. This would help to guide businesses on the additional steps they should take to protect employees and help to realise the Government’s ambitions of a safer and more accountable work environment.

 

Fire and rehire

 

  1. The provisions in the Bill intended to discourage the practice of fire and rehire and fire and reengage place a disproportionate burden on employers as they essentially leave employers no room for manoeuvre if an employee refuses a change in terms – regardless of how reasonable the change, how legitimate the business reasons are for the change or the extent of consultation and negotiation which has taken place with employees.

 

  1. The insolvency exception within the Bill by which employers can justify dismissal is too narrow. These provisions have the potential for significant unintended consequences. The drafting of the section incorrectly supposes that the only legitimate circumstances in which the employer may need to make a contested contract variation are when the employer is in financial difficulties.

 

  1. This is simply not the case – there are many reasons why an employer may need to change terms. For example, change in legislation, regulatory requirements, compliance with government mandates (e.g. net zero, workplace relocations, changing customer demands, harmonisation of terms etc.).

 

  1. Not only do these provisions, as currently drafted, create practical impossibilities, restricting the introduction contract variations also further hinders the ability to adapt to change in the business environment which risks overall stagnation and possibly discourages investment. Ultimately, this serves neither employer nor, importantly, employee.

 

  1. However, we understand that the intention of the Government is to encourage employers to consult with their workers and make every effort to seek agreement in order to bring about change which we acknowledge is fundamental to industrial relations.

 

  1. For example, a potential unintended consequence is that this provision does not allow for employers to impose variations upon their contract that may alter their role. This reality is becoming a growing challenge for businesses that are having to adapt to a fast-changing business environment with new technologies.

 

  1. Alternatively, it may decrease businesses’ risk appetites in creating new job roles or departments as the cost of altering or restructuring in light of the provision would be too high. Furthermore, it could create situations where the employer is unable to lawfully impose variations upon a contract due to a change in law or due to other legitimate externalities.

 

  1. Other practical but small-scale examples include:

 

  1. We recommend that the Bill is amended to provide further exemptions at clause 22(4)(a) and provide employers with more flexibility regarding imposing contractual variations once best efforts have been made by the employers to reach an agreement with the workforce.

 

  1. At a minimum, we recommend clearer guidance on the use of fixed term contracts and their interaction with the Employment Rights Bill due to the potential use of fixed term contracts as de facto probationary periods.

 

Collective consultation

 

  1. The Bill proposes to remove the ‘at one establishment’ requirement from the test for identifying when the duty to collectively consult (when employers plan to make 20 or more redundancies) will apply. The reasons for this are unclear, particularly as employers need to consult individually with all employees at risk of redundancy (including those with under two years’ service from autumn 2026) in order to avoid unfair dismissal claims.

 

  1. We believe this proposed change has a detrimental effect on both employees and employers. In removing this limb of the test, one risks losing the ‘local voice’ that employees value and which was integral to the EU Directive from which this right is derived.

 

  1. Equally, removing ‘at one establishment’ makes the duty exceptionally difficult for larger employers or employers with complex structures to comply with. Employers can operate over many different establishments with thousands of employees and it cannot be assumed that there will be central ‘hub’ where redundancies or proposed redundancies are recorded. The risk in removing the ‘at one establishment’ limb is that employers will focus on compliance at the expense of meaningful consultation.

 

Are there areas of employment law not covered by the Bill that weaken workers’ protections? 

 

  1. There is a need to reform how employment status is defined. Determining whether you are an employee, a worker or genuinely self-employed requires the ability to understand complex legislation. For individuals, not knowing your employment status means not knowing what employment rights you deserve. For businesses, this situation can lead to uncertainty about their responsibilities and what can be demanded from workers.

 

  1. If the definitions of each employment status are clearer there will be less dispute as to what employment rights different types of workers are owed. It will also make it harder for unscrupulous employers to mislabel workers as being self-employed, thus denying them the rights and protections they deserve. This will lower the number of disputes that have to be resolved through the adversarial process of the employment tribunal.

 

  1. The Government has also acknowledged the importance of this, stating that the Bill will bring in a ‘move towards a single status of worker and transition towards a simpler two-part framework for employment status’.

 

  1. While the Law Society supports a review into the employment status system, we believe that the review should be open-minded as to whether creating a single status of worker is better than reforming the current three-tier system. The current three-tiered approached has shown flexibility, which has allowed the law to move with the expectations of the labour market. Moving to a single status system could push many precarious workers into the self-employed category, thus removing the current rights they have.

 

Impact on businesses

 

What impact will the areas covered by the Employment Rights Bill have on small, medium and large businesses? 

 

  1. The scale and complexity of the changes proposed by the Bill (and beyond) should not be underestimated. The Government will need to ensure that reforms are introduced in a manageable way so that businesses of all sizes have the opportunity and time to comply.

 

  1. Many employers will not have the resources to pay for legal advice on how to meet the new requirements so ACAS should be encouraged to produce guidance across the board to help with compliance.

 

  1. The Government should publish clear timelines for when provisions will come into force and work with professional bodies like the Law Society to produce communications specifically aimed at SME businesses.

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