Welcome to the November edition of the ESP Solicitors monthly newsletter. In this update, we explore the new employment rights and employment cases, offering key takeaways and insights for HR professionals. To receive this update directly in your inbox, please sign up via the box on the right.
1. Employment Rights Bill: a summary of the key provisions
The Employment Rights Bill was published by the government on 10 October 2024. On 21 October it passed its second reading and is currently now at the parliamentary committee stage. Over 158 pages, the bill covers wide-ranging areas of employee relations. Below is a summary of the key provisions:
• All employees will have the right to claim ordinary unfair dismissal from day one of employment. However, in the case of all dismissals except redundancies, it is proposed that there will be an “initial period of employment” (currently envisaged to be the first nine months) where the effective hurdles for employers defending unfair claims will be lower. Reduced compensation may also be applicable in this period.
• Statutory Sick Pay will be payable from day one of an absence and all employees will be eligible, regardless of earnings. The government is consulting on setting SSP for low earners as a percentage of actual earnings where their actual earnings are lower than the SSP flat rate (currently £116.75).
• Employees working under zero hours or minimum hours arrangements will be entitled to receive an offer of guaranteed hours based on the hours that they usually work. They will also be entitled to reasonable notice of shifts and to payment for shifts cancelled or curtailed at short notice.
• Employees will be eligible for parental leave (18 weeks’ unpaid leave per child) and paternity leave (up to 2 weeks of leave following the arrival of a child) from the first day of employment.
• Fire and rehire – It will become automatically unfair to dismiss any employee where the reason for that dismissal is because they have refused to accept less favourable terms of employment, or because the employer wants to replace them with someone on less favourable terms. There will be a limited exception where the business is in significant financial difficulties and the employer could not reasonably avoid the variation.
• Third Party harassment – Employers will be liable for acts of harassment committed by third parties (for example customers, visitors or suppliers) unless they took all reasonable steps to prevent it.
• The new proactive duty to prevent sexual harassment will be expanded to make it clear that all reasonable steps need to be taken to prevent it (the current test omits the word ‘all’).
• When considering whether the threshold for collective redundancy consultation has been reached (20 or more redundancies at any establishment in a 90-day period), an establishment is to be regarded as the whole business, not any individual site, branch or factory. This will bring more redundancy situations within the scope of redundancy consultation.
• When considering flexible working requests, the employer will need to state which of the 8 statutory grounds it relies upon to refuse but will also need to show that the refusal was ‘reasonable’.
It is important to note that little will change overnight. The vast majority of provisions in the Bill are not intended to come into force until 2026 at the earliest. Similarly, not all provisions will make it through the parliamentary and public consultation process unscathed. Some could disappear altogether whereas others may be substantially varied by the time they hit the statute books. We will update on any developments, in the meantime, you can find a guide to The Employment Rights Bill here.
2. Duty to prevent sexual harassment in the workplace becomes law
On 26 October 2024 the new proactive duty to prevent sexual harassment in the workplace came into force. Employers are now under a legal duty to take reasonable steps to prevent sexual harassment in the workplace. Steps taken are not limited to the risk of harassment by colleagues but should extend to third party harassment risk too, read our blog on how to stay compliant.
There are two potential consequences if the duty is breached. Firstly, the Equality and Human Rights Commission can investigate non-compliance, issue unlawful act notices, require action plans to be prepared and, if the action plan is not followed, levy a potentially unlimited fine. Secondly, if an employer loses a sexual harassment claim in the tribunal, then the tribunal can uplift compensation by up to 25% if it finds that the employer failed to comply with the duty.
Take-away: Employers need to look carefully at the policies and processes which they currently have in place and consider critically whether any further steps should be taken to prevent sexual harassment. To assist with this, our ‘Preventing sexual harassment in the workplace checklist’ is intended to help HR professionals and business leaders asses and decide upon the most appropriate steps to avoid harassment in the workplace.
3. Claimant called a “bald c**t” by his colleague succeeds in sex-related harassment claim
Overview: To be successful under the Equality Act 2010 a harassment claim must meet the following criteria:
• it must be unwanted conduct;
• related to a protected characteristic (either sex, race, age, disability, sexual orientation, religion or belief or gender reassignment) or conduct of a sexual nature;
• which has the purpose or effect of violating the employee’s dignity or creating a hostile, degrading, humiliating or offensive environment.
Liability can only be avoided if the employer can show that it took all reasonable steps to prevent harassment from occurring. There is an important distinction between “sexual harassment” and “harassment related to sex” to understand the difference, read more here.
A recent Employment Appeal Tribunal reminds employers to take a long lens approach when considering whether conduct is related to a protected characteristic.
Facts: In Finn v British Bung Manufacturing Company, the Claimant worked in a male-dominated environment where harsh language was common. After a dispute with a colleague about machinery, the colleague insulted him by calling him a “bald c**t” and threatened him with violence. The Claimant was later dismissed and filed claims for unfair dismissal and sex-related harassment due to the comment about his baldness.
Initial decision: The Employment tribunal ruled in favour of the Claimant on the harassment claim, stating that the comment about his appearance (baldness) was personal unwanted conduct and intended to insult and create a hostile environment. The Tribunal found that baldness is more common in men, making the insult related to the Claimant’s sex.
On appeal: The Respondent appealed, arguing that since baldness can affect both men and women, it should not be considered sex-related harassment. However, the Employment Appeal Tribunal dismissed the appeal, ruling that harassment does not have to be exclusive to one gender to be related to sex.
Take-away: Employers must be able to demonstrate that they have taken ‘reasonable’ steps to prevent harassment in the workplace in order to minimise the risk of them being held vicariously liable for acts of their employees. Employers should highlight to their workforces that rude remarks will not be tolerated, and also the dangers of commenting on another’s personal appearance generally. For employers in sectors where offensive language or ‘banter’ between colleagues at work is common, be mindful that such remarks can result in Employment Tribunal litigation which can be costly and time consuming. These cases also invariably attract negative PR, which can impact on client satisfaction, recruitment and retention.
Employers should introduce clear policies on workplace bullying and harassment and keep those under regular review. Requesting staff input and providing training on an annual basis will also assist as will having a clear line of reporting for making and resolving complaints.
4. Bereavement leave: current law and proposed amendments
Overview: Employees who suffer any form of bereavement currently have very limited rights to take time off work to deal with it. Much currently falls to the goodwill and understanding of employers. Employees are often forced into taking time off sick or on holiday to deal with their loss.
The legal landscape is slowly changing. Since April 2020, employees have had a right to parental bereavement leave. This is a right of each parent to two weeks off work at any point in the 56 weeks following:
• the death of a child, if they die under the age of 18
• a child who is stillborn after 24 weeks’ pregnancy
Employees are entitled to these provisions from their first day of work. Unless the employer offers more generous terms, the time off is paid at the same weekly rate as statutory maternity pay. If more than one child dies, the employee is entitled to two weeks’ statutory parental bereavement leave for each child.
This law covers employees who experience the loss of a child, however, there remains no legal provisions in place for employees suffering wider bereavement.
Proposed amendment: The recently published Employment Rights Bill introduces a free-standing right to bereavement leave of at least one week (and pay for that week at the same rate as statutory maternity pay). Exactly which ‘loved ones’ will be covered will be set out in regulations. The existing provision for parental bereavement leave is unchanged and will sit alongside and in addition to this new right.
Whilst the vast majority of the Bill’s provisions are unlikely to take effect until 2026, the introduction of bereavement leave is likely to happen sooner rather than later. The government’s Next Steps policy paper states that this change will come in ‘immediately’. Given the time it will take for the Bill to make its way through Parliament, it is likely to be Spring 2025 at the earliest before the law changes.
5. Employment Rights Bill: Unfair dismissal as a Day 1 right
Overview: There has always been some form of qualifying period for employees before they gain eligibility to claim ordinary unfair dismissal. The current period is 2 years, giving employers ample time to assess the quality and conduct of new recruits and, if any issues arise, terminate employment with fewer risks.
Clause 19 of the Employment Rights Bill proposes to extend ordinary unfair dismissal protection to employees from their first day of employment. Under these new rules, the government estimates that approximately 9 million additional employees will be entitled to bring claims for unfair dismissal. As the government will not implement until autumn 2026 at the earliest, businesses should have ample time to prepare for the change.
Key considerations
Employers wishing to avoid the risk of an ordinary unfair dismissal claim will still need to attach it to one of the five potentially fair reason for dismissal from day one, being: (i) conduct (ii) capability (iii) redundancy (iv) illegality and (v) some other substantial reason. They would also need to show that dismissing for that reason was substantively and procedurally fair in all the circumstances.
Will there be any exceptions?
The removal of the qualifying period is absolute. The right to claim unfair dismissal will apply to all employees from the moment that they start work.
Initial period of employment
However, the government proposes having slightly different rules on liability (and potentially compensation) in what it terms the ‘initial period of employment’. The government has indicated in its ‘Next Steps’ policy paper that this would be the first nine months of employment. This will effectively be a statutory probationary period.
A “lighter touch” process might be acceptable for dismissals for conduct or performance during this period. Quite what this will look like will be fleshed out during consultation. It is clear that dismissing an employee during probation will still necessitate some form of clear and fair process, albeit with lesser sanctions for non-compliance.
Redundancy dismissals
Notably, dismissals for redundancy during the statutory probationary period will be exempt from the initial period of employment. This means that employees could still claim the full force of unfair dismissal protection from day one if made redundant, without any probationary protection applying. If this comes to pass, signing off on new hires could become increasingly difficult with businesses needing to be absolutely certain of additional need before offering positions.
How will compensation work?
Currently, compensation for ordinary unfair dismissal is split between a basic award (which reflects statutory redundancy pay) and a compensatory award (which is a just and equitable sum awarded taking account of losses, past and future, flowing from the dismissal) up to the statutory cap (currently £115,115) or one year’s salary, whichever is lower. Compensation can be reduced for matters such as contributory fault of the employee. No account is generally taken of length of employment when looking at the compensatory award. The same compensatory principles are followed if an employee was employed for 2 years or 20 years.
Once unfair dismissal becomes a day 1 right, we may end up with two different compensatory regimes, one applicable to dismissals outside of the statutory probationary period and one for dismissals during it. Indeed, the Bill includes provisions to limit potential compensation for successful claims during probation. Exactly how it will be limited is not currently stated but the government has committed to consulting on whether tribunals should award less compensation in such cases compared to claims made after the probationary period.
What can employers be doing now?
Although current new starters’ unfair dismissal rights remain subject to the two-year qualifying period (except in limited circumstances) it would be helpful to review recruitment, induction, training and initial appraisal processes now in readiness of the anticipated changes to the law. Contractual probationary periods are typically six months in duration. Employers could look at extending this to nine months in anticipation of the likely new initial period of employment.
Training managers to follow a clear, fair and accountable appraisal structure will also assist. The more ingrained these processes are, the better prepared your organisation will be to meet the increased risk in the future.
6. Government consults on appropriate level of statutory sick pay for low earners
Statutory Sick Pay (“SSP”) is paid to employees when they are absent from work due to sickness. Currently, SSP is not paid during the first three days of any absence. These are known as ‘waiting days’. If an absence continues after the ‘waiting days’, then SSP is generally paid to employees at a flat rate (currently £116.75 per week) for up to 28 weeks of absence. There is an exception where an employee earns less than the ‘lower earnings limit’ (currently £123 per week). Employees earning less than the lower earnings limit do not receive any SSP payments at all during sickness absence.
All this is due to change. Under clause 9 of the Employment Rights Bill, the government proposes to pay SSP from the first day of any absence and to remove the lower earnings limit requirement. There is obviously a risk of abuse if employees who earn less than the current flat rate for SSP when they are actually at work are entitled to a higher amount (the SSP flat rate) when they are off sick. To get around this, for those with weekly earnings lower than the flat rate for SSP (currently £116.75 per week), the Bill proposes to set SSP payments as a ‘prescribed percentage of the employee’s normal weekly earnings’.
Consultation
The government has launched a consultation seeking views on what that percentage replacement rate should be. The consultation paper outlines some illustrative examples setting out the broad costs for employers and potential impacts on low earners of different percentage rates. The examples range from 60% of earnings, which is the lowest rate that the government’s internal modelling suggests would not leave employees worse off, to 80% of earnings, as proposed in the 2019 Health is Everyone’s Business consultation.
The consultation remains open until 4 December. Any change is unlikely to come into effect until Spring 2025 at the earliest.
7. Protection from redundancy during maternity leave
Employees who face a redundancy situation when on maternity leave have special protection in law under Regulation 10 of the Maternity and Parental Leave Regulations 1999. This provision requires employers to offer any suitable alternative roles available in a redundancy situation to employees who are on maternity leave. Similar protections exist for those on adoption and shared parental leave. In April this year, the protection was extended to cover a period after the employee returns to work (generally 18 months from the due date) and also to cover pregnancy.
Facts: In the recent case of Hunter v Carnival Plc, the Employment Appeal Tribunal looked at the protection provided by Regulation 10 and whether it should ‘bite’ to keep an employee in role where the number of roles is reducing but not disappearing completely. Here, the Claimant was on maternity leave when a redundancy exercise took place in which 21 team leader posts were reduced to 16. The tribunal held that the remaining roles amounted to suitable alternative vacancies within the meaning of Regulation 10 and the Claimant should have been retained in one of them.
On appeal: The Employment Appeal Tribunal disagreed. Under Regulation 10(2), “Where there is a suitable available vacancy, the employee is entitled to be offered (before the end of her employment under her existing contact) alternative employment”. In this case, the tribunal had been wrong to find there was a ‘vacancy’. By the time the Claimant had been selected for redundancy, there was no vacancy because the remaining 16 roles were not vacant. The EAT distinguished the position where two roles are being amalgamated into one different role, because that would be a new vacancy.
Take-away: This case is a reminder of the special rules in redundancy situations for pregnant employees, those on maternity, shared parental or adoption leave and those who have recently returned from such leave. It is also a reminder of the limitations of those special rules. There is no requirement to automatically keep employees who have the protection of Regulation 10 in a role where, as part of a redundancy process, those roles are reducing but are not disappearing.
8. Fire and Rehire: Changes in the Employment Rights Bill
The Employment Rights Bill introduces key changes to ‘fire and rehire’ practices (otherwise known as ‘dismissal and re-engagement’). This process involves dismissing an employee who refuses to accept new contractual terms and offering them re-engagement on the revised terms. While currently legal (provided there’s a sound business reason and proper consultation) this practice carries inherent risks such as unfair dismissal claims and has been widely criticised as unjust to employees who are typically in a less powerful bargaining position than their employers.
Current Legal Framework
Under current law, ‘fire and rehire’ is allowed if it falls within the potentially fair reason of ‘some other substantial reason’ (“SOSR”) under the Employment Rights Act 1996. Employers must demonstrate a legitimate business reason and that they have consulted employees appropriately. If these conditions are met, such dismissals can be fair.
Proposed Changes
The new Bill makes significant changes. Once enacted, it will be automatically unfair to dismiss an employee for refusing to accept changes to their terms of employment or for replacing them with another employee under new terms. There is a limited exception for businesses facing imminent financial distress, but this is narrowly defined, meaning that most employers won’t be able to use fire and rehire once the new law takes effect.
Preparing for the Changes
Although the Bill likely won’t become law until 2026, employers can take steps now to prepare:
1. Consider variation clauses: Check contracts of employment for express variation clauses to allow for (some level) of contractual change without having to rely on agreement or fire and rehire.
2. Audit current contracts: Address problematic contract terms while fire and rehire remains legal.
3. Focus on employee agreement: Employers will need to secure employee buy-in for future changes by offering incentives in exchange for voluntary agreement.
9. Failing to give employee a leaving card was not sex-related harassment
Overview: In legal terms, harassment is only unlawful under Equality Act 2010 if it is ‘related to’ a relevant protected characteristic. Alongside sexual harassment, there are seven protected characteristics relevant to harassment: sex, age, race, disability, sexual orientation, gender reassignment and religion or belief.
The test of conduct needing to be ‘related to’ a protected characteristic is wider than the test for direct discrimination, which requires treatment to be ‘because of’ a protected characteristic. However, there does have to be some form of connection. Inoffensive conduct will not be harassment if it is not, in some way, ‘related to’ the claimed protected characteristic.
Facts: This was illustrated by the recent case of Conaghan v IAG GBS Ltd. The Claimant was made redundant. She brought a host of claims including sex-related harassment relating to a failure to give her a leaving card when her employment ended.
To successfully claim sex-related harassment, the Claimant was required to show that the failure to give her a leaving card was:
1. Unwanted conduct;
2. Related to her sex;
3. Which had the purpose or effect of violating her dignity or creating an intimidating, hostile, degrading or offensive environment for her.
Decision: The tribunal held that the employer’s failure to send a leaving card was none of these things. It did not overcome the hurdle of being ‘related to’ the Claimant’s sex. The tribunal found that two other male employees who were made redundant at the same time as the Claimant hadn’t received leaving cards either. There was no connection to her sex at all and her harassment claim failed.
10. And finally… employer gets wind of alleged age-discrimination by its employee
A tribunal recently had to consider whether a man had suffered age discrimination when an older colleague broke wind on him.
Facts: In the case of XYV v Birmingham City Council the Claimant’s colleague, who was in his 50s, broke wind on the Claimant as he ate his lunch. He later threatened that he could get rid of him. The tribunal found that this was age-related harassment. The Claimant’s colleague referred to the Claimant, who was younger than him, as a “pup” and said he was “only a trainee” and, on a separate occasion, a “youngster”.
Comment: This case is a rather extreme example of the challenges faced by multi-generational workplaces. Employers and HR teams need to foster a culture of mutual respect across the different generations working side by side. Expected standards should be made clear and behaviour such as that shown to the Claimant in this case should not be tolerated.
