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Employment Law & Worker Rights – The Labour Manifesto

So finally the long-awaited election labour party manifesto has arrived. After much conjecture and some political oscillation between the trade unions and the Party, we now have a clearer picture as to Labour’s intentions on employment law and worker rights. There were, to quote Radiohead, no alarms and no surprises. This was largely what we were expecting – a series of well trailed proposals to, as Labour contend, “kickstart economic growth”. Not everyone agrees with that analysis and the Conservatives and Reform have baulked at the proposals arguing that they will “screw Britain’s winners” and cost business. So let’s have a look at the detail, which unlike other areas of their manifesto, exhibits areas of genuine boldness.

The Labour Party has pledged to initiate legislation for its Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People (The “Plan”) within the first 100 days, if they are elected. I had already set out some of the main areas a Labour Government would focus on if they got into power in my article here.   

Putting these proposals into law of course will take time and despite Labour's initial 100-day promise, employers will be relieved to know that, in general and perhaps with one main exception, they will have time to plan for the introduction of some significant changes to employment law as Labour have committed to “consult fully with business” before legislation is passed. 

Labour & Employment Law: The Key Policies

The Plan – The Main Policies of the Labour party

As foreshadowed, Labour proposals include banning zero hours contracts, ending fire and rehire, and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal. They also plan a right to switch off to promote a more favourable work/life balance. They will strengthen the collective voice of workers, including through trade unions, and create a Single Enforcement Body to ensure employment rights are upheld.

They also plan to ensure that the minimum wage is a genuine living wage. The Labour minimum wage policy will change the remit of the independent Low Pay Commission so it accounts for the cost of living. They also propose to remove the age bands, so all adults are entitled to the same minimum wage.

Labour propose to put women’s equality at the heart of their objectives by strengthening rights to equal pay and protections from maternity and menopause discrimination and sexual harassment. They pledge to take action to reduce the gender pay gap which they describe as ‘building on the legacy of Barbara Castle’s Equal Pay Act’.

Labour plan to introduce a landmark Race Equality Act, to enshrine in law the full right to equal pay for Black, Asian, and other ethnic minority people, strengthen protections against dual discrimination and root out other racial inequalities. Whether this will in fact be taken forward given the protections already afforded by the Equality Act 2010, remains to be seen.

The party has committed to championing the rights of disabled people and to introduce the full right to equal pay for disabled people. Building on gender pay gap reporting, they would introduce disability and ethnicity pay gap reporting for large employers and tackle the Access to Work backlog. It will be interesting to see what ancillary legislation is brought forward as currently there is no legal right to insist on collecting data relating to race and disability and an accurate reporting system will only work if data collection is mandated rather than voluntary.  

Labour pledge to reform the points-based immigration system for workers from abroad, with appropriate restrictions on visas, and by linking immigration and skills policy. Employers who breach employment law or the immigration rules will be barred from hiring workers from abroad.

The Plan – the interesting bits


The Status of Worker

Labour have pledged to launch a detailed consultation on the current three-tier employment status system which differentiates between employee, worker and the genuinely self-employed (which has separate employment rights and taxation systems) with the aim of creating a “simpler” two-tier system with individuals either being classified as “worker” or “self-employed”. They point to the rise of the gig-economy and the current complexity which leaves vulnerable workers and unsuspecting employers struggling to apply the complex legal framework to these often innovative ways of working.  Labour’s ambition here is to give those in the new worker status the full set of employment rights that only employees currently benefit from as well as any new rights passed into legislation.

What the changes mean

This will be very significant for employers and those working in the gig economy who will now have significantly enhanced statutory rights, including rights to maternity, paternity and other family-related leave and unfair dismissal rights. Inevitably, gig employers will inveigh Labour to re-think or dilute their proposals, as such rights will further erode the viability of their business models. On the other hand, workers will be delighted.

Changes to the Law of Unfair Dismissal

The Labour party employment policy includes a significant shift in employment law, proposing that all workers (as outlined above) should have the right to protection from unfair dismissal from ‘day one’ of their employment. Currently, employees only obtain this right after two years of service, allowing employers greater ease in terminating contracts for reasons such as unsatisfactory performance without extensive procedures. However, under the Plan, employers would need a justifiable reason for dismissal from the outset and must follow a fair process, potentially including lengthy performance improvement plans. The manifesto hints at probationary periods with clear rules, but lacks detail on how these would operate, leaving questions about the balance between protecting workers and maintaining flexibility for employers during the initial employment phase. This represents a considerable change that would require employers to adjust their dismissal and employment strategies significantly. Associated with this but not mentioned in the Plan (despite earlier discussion on the topic), is the removal of the cap on compensation in unfair dismissal claims.  

What’s the impact of the changes to the law of unfair dismissal

Both changes would have a considerable impact on employers and the way they approach hiring and firing. Changing the service length element of claiming unfair dismissal protection is technically something that a new Labour Government could push through quickly, as there is scope in existing legislation to make this change without consultation or parliamentary approval. It seems unlikely that this will be pushed through without some consultation, but our view is that this change is likely to come first. Inevitably it will catch many unwary employers out. Query also how the already creaking employment tribunals service will cope with what we predict will be a step change in new claims.

Employment Tribunal Reform

Currently claimants have (for the majority of claims) three months in which to issue an employment claim against their employer or former employer and yet that issued claim can often sit in the system for many months and even years before a final hearing. Labour have committed to continue with the digitisation of the system which is already underway with the introduction of the MyHMCTS system and hopefully to increase funding into this neglected part of the legal system.  Without this, their ambition to increase the time limit within which employees can make a claim in the Employment Tribunal to six months from the current three months will just exacerbate the strain on the employment tribunals service.

Labour’s proposals are bolder than their main rivals. Whether they are perceived as welcome depends on your political persuasion and whether you are looking at them through the lens of an employer or a worker. Few, if any, employers will welcome changes that will strengthen the hand of their employees and add costs to the employment relationship. Labour have committed to consulting in respect of their proposals and it remains to be seen how far these proposals change before they end up on the statute book. As the Chinese might say, we may be living in interesting times come 5th July. 

Our thinking

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