How will dismissals be affected by the new Employment Rights Bill?

As part of their manifesto and election promises, the Labour party advised they would be looking to implement the biggest overhaul in worker’s rights in recent history. Now that the details of the proposed Employment Rights Bill have emerged and debate and consultation has also taken place on several issues, the scope of this Bill is not as aggressive as previously thought but still contains some large-scale changes.

This blog post will be the first in a 5-part series dealing with different categories of changes expected based on this Bill. The first topic will be any dismissal related matters. Subsequent topics will include flexible working & family leave rights, zero-hours & agency worker rights, discrimination issues, and finally trade union related matters.

It should be noted, however, that numerous matters could be subject to further change on the basis of further consultation and feedback.

Limitation for bringing claims

First and foremost, the biggest overhaul in the realm of employment law that will impact businesses, workers, and lawyers alike, is that the statutory time period for presenting a claim at Tribunal will be extended from 3 to 6 months. This appears to be intended to apply to all claim types, with the exception of any breach of contract claims arising on termination of employment. The usual ACAS Early Conciliation process will still need to be followed, and it is expected that the same ACAS extensions to time limits will apply. This change is likely to result in an increase in the number of claims being brought to Tribunal, as one of the primary reasons claims are not taken further or are struck out is the claim being presented outside of the relevant time limit. This will be most keenly felt in the realm of dismissal and discrimination claims, where investigations and appeal processes often run claimants out of time.

Unfair dismissal – a day one right

Any ordinary unfair dismissal claim currently requires someone to have at least 2 years of continuous employment with the company they are claiming against, and this is due to be amended to be, in theory, a day-one right.

Whilst the principle of any employee being able to bring a claim from the first day of employment is extremely daunting for businesses looking to recruit, it has been clarified that in practice, employers will be able to enact a “light touch” dismissal within the first year of employment as a legal quasi-probationary period. This process ensures that employers can make informed decisions about whether a new employee is the right fit or is suitable for the role without as high of a risk of a claim being brought against them.

This “light-touch” process has not yet been expanded on, and it remains to be seen how flexible or onerous this will be for employers to use.

The reason for the dismissal can only be capability, conduct, statutory restriction, or “some other substantial reason” (SOSR). This new process cannot be used in redundancy situations given that 99% of cases redundancies are not personal to an individual employee but are company or department wide, and an employer is required to follow a separate legally mandated redundancy process for all employees in this case, regardless of their length of service. It can also only be used where the dismissal is taking place within the probationary period or the employer gives notice before the end of probation.

Fire and rehire

A particular type of dismissal that has gained a lot of attention and criticism in recent years is the practice of “fire and rehire”, where employees who refuse to accept new (often lesser) terms and conditions of employment are simply dismissed and offered their job back on the new terms instead. The practice has been labelled as exploitative, and the initial promises made for the Employment Rights Bill were for it to be outlawed entirely. At its current stage, the Bill only serves to severely limit situations where employers can use this tactic.

An employer will, under these new rules, be forced to negotiate with staff and any recognised Trade Unions, and defending any fire and rehire practices will become far more difficult.

It will become automatically unfair to dismiss an employee if the main reason for dismissal was their refusal to agree to changes in their contract. Employers will be able to defend this claim if they are able to show that the reason for the variation was to eliminate or reduce or mitigate the effect of any financial difficulties present at the time of dismissal, and which were affecting the employer’s ability to carry on the business, or would likely have this effect in the immediate future. It will not be sufficient to state general financial difficulties, and this will be a high burden of proof of “circumstances they could not reasonably have avoided”.

Even if an employer can successfully defeat an automatically unfair dismissal claim using the above defence, the Tribunal will then still go on to consider the normal tests for ordinary unfair dismissal.

Redundancy consultation

In order to ensure a fair dismissal takes place in law in redundancy situations (which are not covered by the matter above), employers are under duties of consultation. Without proper consultation, employers are likely to face unfair dismissal claims.

The new legislation will change when the duty of collective consultation will arise to be broader, and will remove the need for redundancies to all be in one establishment for this duty to be triggered. The new duty will be to consult collectively if redundancies are for either 20 or more employees in one establishment, or the “threshold number of employees” in the business overall. What this threshold will be is not yet determined.

If the duty to consult is not followed, employers are already subject to a harsh penalty of up to 90 days’ wages as compensation. This cap is intended to be doubled to 180 days’ wages which obviously increases the employer’s potential sanctions for failure to consult drastically. It is important to note that this increase in the compensation cap for failure to consult (known as a protective award claim) will also apply to TUPE consultations or mass contract variations.

How Harrowells can help 

We understand that for both employers and employees this is an uncertain time where you may have questions or need clarification, and we’re on hand to help.

If you feel you are involved in a situation where any of the above scenarios are ongoing and you need guidance through the process, please don’t hesitate to contact Harrowells for assistance.

If any claims arise as a result of these changes, we are also available to assist with settlement negotiations or litigation action.