The Employment Rights Bill received its third and final reading in the House of Commons in April and is due to complete its committee stage in the House of Lords next month.
Following extensive amendments in the Commons, the current version of the Bill (at over 300 pages) is nearly twice as long as the original version published a year ago.
Although the Bill is likely to be added to the statute book in the next few months, most of the measures will not be commenced until 2026 at the earliest.
Unfair dismissal
The Bill abolishes the two-year qualifying period for unfair dismissal but introduces a new framework for a lighter touch unfair dismissal regime during an “initial period of employment”. In previous government statements, this has been described as an exception for probationary periods, though it may turn out to be wider than that.
It means that employees must have started work to benefit from the day one right. Existing provisions on automatically unfair dismissals will be retained and will continue to apply from the point the employment relationship starts.
To come within this more relaxed regime during the initial period of employment, an employer will need to demonstrate a potentially fair reason for dismissal which relates to the individual employee. This means that dismissals on redundancy grounds during the initial period of employment will not fall within these new rules.
Yet to be made regulations will define the length of the initial period of employment and how it is calculated. This is understood to be a minimum of six months and could be as long as a year: currently, the government supports a compromise of nine months. Regulations may also specify that a dismissal will be regarded as fair if certain procedural steps have been followed. These might include, for example, holding a meeting with the employee before reaching a decision to dismiss and confirming the reasons for the decision in writing.
On the face of it, protecting all employees from unfair dismissal from day one will have a broadly equal impact on all employers. However, complex organisations like universities will need to invest more time reviewing their existing procedures than most other businesses. If they want to take advantage of the new “light touch” unfair dismissal regime, they will need to align their procedures on probationary periods with the new statutory framework. Again, this may not be straightforward, particularly for academic staff.
Zero hours contracts
Universities have taken a lot of criticism for using zero hours contracts in certain circumstances. As of 2023–24 there are around 4,000 academics on a zero hour contract. Although we don’t have the data, it is likely that the numbers are higher for other staff.
As it stands there are three groups of measures to protect zero-hours workers:
- The right to guaranteed hours after the end of every reference period, which reflects the hours worked during that period;
- The right to reasonable notice of shifts (including change and cancellation); and
- The right to payment for cancelled, moved and curtailed shifts where sufficient notice has not been given
Similar rights will be extended to agency workers via a new schedule, which was inserted in the Bill at report stage in the House of Commons. The government introduced provisions at this stage which would make it possible for employers and workers to modify the application of these provisions via a collective agreement.
Regulations will define the reference period for guaranteed hours and other conditions of entitlement, as well as the procedural requirements around the offer of a new contract. They will also specify the minimum notice period for the cancellation of shifts, the compensation due and when it must be paid.
According to the Bill’s impact assessment, the education sector as a whole has a higher-than-average user of variable hours contracts, an assessment that reflects our experience advising higher education clients. What may raise eyebrows in the sector is the potential for significant direct and indirect costs in complying with these measures, which are among the most complex in the Bill. They will need to wait for the regulations before making detailed plans, but at this stage, providers should establish which workers and agency staff are likely to be covered by these provisions.
It would also be worth exploring the possibility of entering into a collective agreement to create tailor-made arrangements to protect variable hours workers in place of the statutory regime. However, with a caution that we are still awaiting details of any restrictions on “contracting out” in this way.
The use of fixed-term contracts with fixed hours is not targeted by these measures, although there may be some anti-avoidance measures to prevent abuse. This is encouraging news for higher education institutions, which had been concerned about measures in the Workers (Predictable Terms and Conditions) Act 2023. This Act will no longer be brought into effect.
Collective redundancies
You don’t have to have read much about higher education recently to be aware that the majority of universities now have some kind of redundancy scheme in place. There are three interlocking groups of measures in the Bill concerning collective redundancies.
The rules on the numerical threshold that triggers the collective consultation requirements will be changed by introducing a new rule for multiple site redundancies. Though the threshold for single-site redundancies will stay at twenty, an alternative method of calculation will be applied when the workers involved are spread across different sites – once again, the details will be set out in regulations still to be published.
It will become automatically unfair to dismiss an employee for not agreeing to a variation to their contract, or if the employer dismisses the employee to replace or to re-engage them on varied contractual terms (so called “fire and rehire”, something which some universities have been called out for).
However, there is an exception to these rules if the employer can show the reason for the variation was to “eliminate, prevent, significantly reduce or significantly mitigate the effects of financial difficulties which, at the time of the dismissal, were affecting the employer’s ability to carry on the business as a going concern” and could not reasonably have avoided the need to make the variation.
While this new rule also applies to one-off dismissals, it is most likely to be engaged where an employer is seeking to restructure, where the obligation to consult collectively will usually apply too.
These new rules create a new category of “automatically unfair” dismissal – ie an unfair dismissal claim to which the employer will have no defence – will make it very difficult for employers to restructure without paying the employees involved significant compensation.
This is because the defence that dismissal was to mitigate “financial difficulties” is so narrowly drawn. We had been expecting amendments to this provision to be put forward in the House of Lords, but there is no sign of these so far.
The maximum period covered by a protective award for breach of collective consultation requirements will be increased from 90 to 180 days. However, proposals to introduce a new right to claim interim relief where they have been breached have been dropped.
Fire and rehire
As highly unionised organisations, universities will be acutely aware of the increased penalties for failing to comply with collective redundancy consultation. Consequently, breaches of these requirements are rare in the sector. To maintain this record employers will need to quickly get across the new rules.
Likewise, fire-and-rehire is rare (though reports are growing), but universities should be aware that the Bill’s provisions to target this practice could also be engaged when negotiating with their unions about changes to terms and conditions, if dismissal and re-engagement are being considered as a last resort.
There are other measures in the Bill relating to trade unions and industrial action, which are outside the scope of this article. These include the repeal of almost all of the last government’s trade union legislation, which is likely to take effect later this year. There is an overview of these measures in our briefing here.
The combination of good HR practices and very vocal union opposition to any breaches means that higher education providers, while far from perfect, are pretty good employers overall.
The Bill is targeted elsewhere, but with the rules changing (and likely to continue changing with subsequent legislations), employment rights compliance cannot be taken as a given and universities will need to make active efforts to stay up to date.
