United KingdomSeptember 16 2024
It was great to welcome so many clients to our offices in London and to be part of a wide-ranging event that explored how businesses should navigate the changes resulting from the election of the UK’s new Labour government and wider changes during this Election Supercycle.
We were delighted to lead the conversation about Labour’s plans for the workplace of tomorrow. This blog shares some key practical takeaways for businesses.
We previously published a blog post following the King’s Speech giving detail on the proposed changes themselves (see here).
Labour had stressed during the election campaign its intention to create a single status of ‘worker’ for all but the genuinely self-employed. Whilst this didn’t get an express mention in the King’s Speech, it has been a Labour focus area for quite some time, so the expectation remains that it will be pursued. The upshot of that proposal is that a larger proportion of the workforce may be entitled to employment-style rights than was previously the case. This would be particularly significant in the gig economy (with the stakes being higher for those businesses trying to keep their workforce either within the middle ‘other worker’ band currently or in the self-employed band).
Any proposal to broaden the availability of employment rights should be viewed in conjunction with the proposal to enhance those rights – most notably to grant employees unfair dismissal protection from day one of their employment, when they are currently (with some exceptions) required to have two years’ service with their employer to access such rights.
The key takeaways from Labour’s proposals: Labour is gifting a much larger slice of the workforce day one rights, alongside an enhancement of various other rights (including a possible assumption that employees have a right to work flexibly). And workforce rights are going to have greater teeth – with the introduction of a new enforcement agency and considerably empowered trade unions (see our blog post on the impact of the proposals on trade unions here).
What might all of this mean for UK business?
Impact on the tribunal system
Employees are both increasingly savvy when it comes to their rights, and are often more willing to litigate. This, in combination with the rise in third party litigation funding to pursue mass employee claims means that a significant change in the employment law landscape as Labour proposes is likely to mean more employment litigation. Any rise in employment litigation will increase the pressure on the employment tribunal – a court that is still getting back on its feet after working through the significant backlog caused by the pandemic. Unless the government provides additional funding for the tribunals, employment tribunal litigation will undoubtedly become longer and more expensive – which is particularly stark given the lack of costs recovery in the employment tribunal. From an employer’s perspective, it may be wise to consider increasing funds allocated to employment tribunal litigation or becoming more adept at using alternative dispute resolution routes like mediation.
Impact on UK growth?
Labour has said that the proposals are intended to be pro-business and pro-worker. But can they really be both? It is doubtful that an increased number of hurdles for employers to manage their workforce is a recipe for improved national productivity. An increased workload for business begs a more fundamental question in relation to alignment with the government’s clearly stated priority to grow the UK economy. Prospective investors in the UK will see, from an employment perspective, a country with greater employee protections, potentially making it harder to exit underperforming employees and therefore manage their workforce in a way that might make commercial sense (though important to note that France, as an example of a country with strong and longstanding employee protections, has not suffered from limited inbound foreign investment in recent years). This should also be viewed in light of the proposals in relation to trade unions: potentially giving unions a greater seat at the table and increasing their leverage to take action if a dispute arises.
It remains to be seen what effect the proposals might have on the UK’s competitiveness on the global stage. Might Labour’s proposals inch us closer to our European counterparts in terms of complexity of labour regulation and the power of collective employee bodies? And the flipside of that – does this now transform from a gap to a gulf the difference between the UK and US employment landscape?
Change is clearly afoot in the UK employment landscape. It remains to be seen whether proposals will be diluted in light of pressure from business – we will continue to monitor key developments, particularly as new legislation is published in October. If you would like to discuss in further detail any of the points raised in this blog post, please contact your usual Freshfields contact.
