The Employment Rights Bill (ERB) will have wide-ranging implications for employers, particularly in relation to their ability to dismiss employees fairly. In this bulletin we consider a number of questions which employers are asking us:
1. What do the Day One unfair dismissal rights mean?
Currently, employees must generally have worked for a minimum period of two years before they qualify for the right to claim unfair dismissal.
The ERB will repeal this qualification period meaning employers will be found to have unfairly dismissed an employee from DAY ONE of employment if they do not have a fair reason for the dismissal (usually conduct, capability or redundancy) and have not carried out fair procedures.
2. Are there exceptions to this rule during a probationary period?
Yes, there will be modified (‘lighter touch’) procedures where notice of dismissal is given during an ‘initial period’ – usually known as a probationary period.
However, the ‘lighter touch’ procedures will not apply to redundancies – so employers will have to follow a fair selection and consultation process in relation to redundancies of new staff from day one of their employment or else risk findings of unfair dismissal.
Employees will not be able to claim unfair dismissal if they have not actually started work on the effective date of termination of employment (except in specified circumstances).
3. How long will the probationary period be?
We are waiting for the Government’s consultation on the duration of this although the Government’s preference is nine months. Any dismissals qualifying for the ‘lighter touch’ procedures will have to take effect no later than three months of the end of the probationary period.
4. What will the ‘lighter touch’ procedures consist of?
Again we are waiting for the Government’s consultation on this but they are likely at least to involve a meeting with the relevant employee to discuss the issue/any concerns.
5. What should employers do now?
Although the new rules are unlikely to come into force until 2026, there are steps which employers can start to take now:
- Consider the length of probationary periods and whether these might need to be extended
- Review the robustness of recruitment procedures – screening, references/other checks, interviews and selection processes.
- Revise training procedures for managers so that they regularly assess employees in their probationary periods and are aware of the importance of doing so.
6. Are there any changes to collective redundancy rules?
Yes. Currently collective redundancy consultation requirements apply where an employer proposes to make 20 or more redundancies at one establishment in a period of 90 days or less. The obligation under the ERB will (as amended) be triggered where an employer is proposing to dismiss as redundant within a period of 90 days or less either:
- twenty or more employees at one establishment; or
- at least the “threshold number of employees”, to be defined at a future date (eg a specified percentage of a total workforce across all establishments) but not less than twenty across the employer’s establishments.
Taking the example of an employer who has five establishments with a total workforce of 500, who proposes to dismiss 18 employees at each establishment (90 in total). Under current law, the collective consultation obligation will not be triggered. However if in the future the threshold number is set by the Government at, say, 10% of a total workforce, the obligation on this employer will be triggered as more than 10% (50) of its
employees are affected, despite there being fewer than 20 affected employees at each of the establishments.
The maximum protective award payable for failing to consult with employee representatives will be increased from 90 to 180 days’ pay.
Following consultation, the amended ERB will not give employees the right to interim relief (meaning that they will not have the right to continue to be paid pending the final hearing for their collective consultation claim).
7. Will there be scope for ‘fire and rehire’ if staff refuse to sign up to new terms and conditions?
Scope for this will be severely curtailed. Currently, employees may bring claims for unfair dismissal if forced to accept new terms and conditions as an alternative to dismissal, but such dismissals are not ‘automatically unfair’. Employers must comply with the new Statutory Code of Practice on dismissals and re-engagement (which came into force last July) or else face any compensation awards for unfair dismissal being uplifted by up to 25%.
The new rules will make it automatically unfair to dismiss employees who refuse to sign up to variations to their terms and conditions. This means that a tribunal does not need to assess whether the employer acted unreasonably or failed to follow a fair procedure. The dismissal will simply be unfair.
There will be a very limited exception where the employer is in financial difficulties but this would need to be sufficiently severe – effectively the employer would have to show (and have documented evidence) it would face financial collapse if the changes were not made AND also not have been reasonably able to avoid the need to make the variation to terms AND have acted fairly in all the circumstances.
In these very narrow circumstances when fire and rehire is potentially permitted, the Code of Practice on dismissals and re-engagement will still apply. This Code is due to be updated in the coming months.
In practice, employers wishing to change employees’ terms and conditions might consider:
- reviewing existing contracts to establish if these give any scope for contractual variations (note that it may be tricky to rely on such clauses where the variation will be to the employee’s detriment)
- making pay increases or promotions subject to an employee’s agreement to sign up to new terms.
Please note that this bulletin contains general information on the Employment Rights Bill which is subject to change as the Bill proceeds through Parliament and new regulations are issued. Please contact us if specific, up to date advice is needed. You have the right to opt-out of receiving any bulletins from us.