By Ezio La Rosa and Annie Jandoli – Corporate Finance London

What Employment Law changes should we expect after the UK general election?

As the UK general election approaches, significant changes in employment law are on the horizon and, therefore, professionals are eager to know how the potential shifts in government could impact them. This article will discuss some of the major changes proposed by the Labour Party’s “New Deal for Working People”; the Conservative Party’s “Bold Action. Secure Future. Strong Leadership.” and the Liberal Democrats’ “For a Fair Deal” plan Manifestos.

Employee status

The first potential change to note is the change in “employee” status. The Labour Party and the Liberal Democrats have two contrasting opinions on the matter. Generally, unlike Italy, France or the US – which generally recognise the statuses of “employees” and “self-employed” – the UK, through its case law, recognises three different employment statuses, i.e., “employees”, “self-employed contractors” and “workers”. Employees generally enjoy a broad range of employment rights and protections which are not extended to those who are genuinely self-employed. “Workers”, on the other hand, fall into an intermediate category, receiving certain statutory rights (such as, for example, the national minimum wage, paid holidays and protections against unlawful wage deductions). However, unlike employees, workers lack rights to statutory unfair dismissal and do not qualify for statutory sick pay or leave benefits (such as maternity leave).

The Labour Party have indicated their intention to recognise a single “worker” status for all (thus, including “employees”) – save for the genuinely “self-employed” – as they sustain that ongoing litigation over employment status and a rise in “bogus, rather than genuine, self-employment” contracts have created significant inequality and distrust between individuals and employers. Labour Party aim to eliminate ambiguity and extend statutory rights (such as, inter alia, sick pay and family leave) to all individuals currently classified as “workers” or “employees”. As such, a person classified as a self-employed contractor by their employer only needs to convince an employment tribunal that they are a worker (a less stringent requirement than the employment test) to qualify for minimum benefits like holiday pay, the national minimum wage and sick pay.

Let us consider, however, the impact of this potential change on the gig economy, i.e., a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, created out of a desire for services to be on demand with limitless flexibility. This change would mean that any action effectively abolishing the “worker” status, will likely result in everyone who is not genuinely “self-employed” being classified as an “employee”: they would gain extra protections, including – for example – protection against unfair dismissal. For business models which depend on summoning individuals on short notice and having no obligation to provide them with work by using, for instance, the so-called zero-hour contracts described below, the measures proposed by the New Deal will pose significant challenges, which have been already highlighted by commentators.

Zero-hour contracts, also known as casual contracts, are usually for ‘piece work’ or ‘on call’ work. In practice, this means that zero-hours workers are on call to work when needed, and, while there is no obligation to offer them work, they are also not obliged to do the work when asked. In light of their proposal to abolish the “worker” status, the Labour Party also proposes to abolish zero-hour contracts in order to remove the uncertainty and the ‘one-sided flexibility’ that these arrangements offer.

The Liberal Democrats, on the other hand, seek to ‘modernise’ employment rights to make them fit for the age of the gig economy. One of the proposed changes on the matter is to establish a new ‘dependent contractor’ employment status, entitled to basic rights such as minimum earnings levels, sick pay and holiday entitlement. The Liberal Democrats also argue that the so-called zero-hour workers should receive 20% higher minimum wage at times of normal demand, to compensate them for the uncertainty of fluctuating hours of work.

Employee rights

Let us now delve deeper into the topic of employee protection. The Liberal Democrats propose to enforce employment rights through the creation of a new Worker Protection Enforcement Authority. This would consolidate responsibilities currently dispersed across three agencies, including enforcing the minimum wage, tackling modern slavery and protecting agency workers. This initiative aims at a more streamlined and efficient enforcement of workers’ rights, ensuring better compliance with employment laws and providing stronger protections for vulnerable workers. By centralising these functions, the Worker Protection Enforcement Authority could respond more swiftly and effectively to violations, thereby enhancing overall workplace standards. However, it has to be seen how quickly the new agency can be established and whether businesses may expect experience increased regulatory scrutiny, which could raise compliance costs and administrative burdens, particularly for small and medium-sized enterprises.

The increased use of technology and AI in recent years is also topic of discussion when considering employee protection. AI has, in fact, raised numerous issues relating to, inter alia, GDPR by increasing risks related to personal identity exposure and/or privacy invasion. The Labour Party, therefore, has proposed that, in relation to AI and digital workplaces, any proposal to introduce surveillance technologies in the workplace be subject to consultation and negotiation with trade unions or elected employee representatives. On the one hand, this indicates the Labour Party’s desire to balance the power dynamics between employers and employees, however, on the other, one may also consider the issue of compliance costs of such proposal, in that consultation and negotiation with trade unions or elected employee representatives would require additional time and costs which may, in turn, discourage employers from adopting beneficial surveillance technologies and therefore hinder innovation and security.

On a similar note, proposals to expand employee rights include making certain entitlements effective from the first day of employment. The Labour Party, for example, seeks to render unfair dismissal claims an automatic right. To date, an employee can only claim that they have been dismissed for an unfair reason if they have worked for a qualifying period of two years. The Labour Party, however, seeks to implement the so-called “Day-One Rights” which entails removing the qualifying period requirement and, rather, being able to claim unfair dismissal from the first day of employment (similarly to wrongful dismissal claims which are an automatic right).

The Liberal Democrats’ proposals to expand employee rights comprise expanding parental leave and pay, making them day-one rights: “millions of parents are being denied the choice to spend more time at home during that all-important first year with their child because the UK still lags behind other countries on shared parental leave”.

Flexible working

Flexible working has become a central topic of discussion in the post-pandemic world. The Labour Party’s proposed “Right to Switch Off” initiative addresses the notion that remote working should not equate to being available 24/7. Advocates argue that this policy would significantly enhance work-life balance and mental health, ensuring that workers are not overburdened. By promoting fair employment practices, they believe it would also lead to increased productivity. However, this initiative raises several questions. For instance, what happens if an employer needs to contact an employee after hours for a genuine work emergency? Critics question whether this should provide grounds for a complaint and whether employees are justified in completely disconnecting from work duties outside their regular hours. While the policy aims to protect employees, it may also need to consider the realities of modern work environments where flexibility can sometimes mean being responsive to urgent matters outside traditional working hours.

The Conservative Party, if elected, has pledged to introduce new legislation for Predictable Work Patterns by Autumn 2024. This Act aims to address unpredictability in employment, affecting aspects such as tasks performed, work schedules, the number of hours worked, specific days of work, times worked on those days, and the duration of employment contracts. Proponents argue that this legislation would enable employees to plan their work schedules in advance, reducing the stress of receiving timetables on short notice or dealing with last-minute changes. This predictability would, in turn, allow for better management of personal commitments and improve overall flexibility. Supporters believe that such a policy would increase job satisfaction, potentially leading to higher retention rates and productivity. However, critics raise several concerns: they question whether this predictability might lead to decreased motivation among employees who may feel less compelled to adapt to changing demands.

Wages

On the pay front, the Liberal Democrats plan to establish an independent review to recommend a genuine living wage across all sectors, and to reform the Statutory Sick Pay (SSP) system.

The proposed living wage review aims to align the SSP with the National Minimum Wage (currently set at £11.44/h for those aged 21 and over) – and make it available from the first day of absence for workers earning less than £123 a week – to provide better financial security for sick workers, promoting health and well-being in the workforce. What is the SSP system currently? In brief, if eligible for the SSP system, you would be paid SSP for all the days in which you are off sick that you normally would have worked, except for the first three, for an amount equal to £116.75 per week for up to 28 weeks. Therefore, the Liberal Democrats aim to reform the SSP regime in response to criticisms that the rate is too low and too many people are excluded, either because they do not earn enough, or because their period of sickness absence lasts fewer than four days.

On a similar front, the Conservative Party aims to cut National Insurance (NI) contributions by 2%, to continue their campaign of NI reduction, which has seen the main rate cut from 12% to the current rate of 10% this year.

Equality Act

Another potential major change worth noting is that of the Conservative Party’s intention to change the Equality Act 2010 to apply to ‘biological sex’. Having been introduced in 2010, the Conservative Party argues that the Equality Act is not up to date with the evolving interpretations of sex and gender. Equalities minister Kemi Badenoch stated that “whether it is rapists being housed in women’s prisons, or men playing in women’s sports where they have an unfair advantage, it is clear that public authorities and regulatory bodies are confused about what the law says and what to do – often for fear of being accused of transphobia”. The Conservative Party is “clear that on fundamental matters of personal identity there should be one approach across the country, so [they] will also legislate so that an individual can only have one sex in the eyes of the law in the United Kingdom”.

In terms of employment law, this change could potentially affect various aspects of workplace equality and non-discrimination policies. Currently, the Equality Act 2010 protects individuals from discrimination on the grounds of gender reassignment, alongside other protected characteristics such as sex, race, and disability. If the Act were amended to refer only to ‘biological sex’, it might exclude protections specifically for transgender individuals, making it legally permissible to differentiate based on biological sex in situations where it was previously prohibited.

All of these proposed changes highlight a pivotal moment for UK employment law, where the direction taken could significantly impact both the workforce and employers. As we await the election results, it is clear that the outcomes may re-shape the future of work in the UK, potentially setting new standards for employee rights and business practices.