Employment law reform latest – is the government stalling or steaming ahead?

There was no reference to an Employment Bill in this year’s Queen’s Speech, despite employment law reforms promised in both the Conservative Party’s 2019 election manifesto and the previous (December 2019) Queen’s Speech remaining outstanding. The government nonetheless appears to have tentatively picked up the gauntlet of reform in an update to the House of Commons on workers’ rights, which confirmed its plans to respond to the practice of “fire and rehire” and to establish a new body to enforce workers’ rights.

Separately, reports are emerging that the government may consult on introducing a new right to work flexibly as early as this summer. This article considers likely developments in these areas.

‘Fire and rehire’ – more guidance but no legislation

Lambasting the practice of employers “firing and rehiring” - changing employment terms by way of dismissal and re-engagement (or by threatening it) - has found a receptive audience during the Covid-19 pandemic. British Gas and British Airways have come under significant public scrutiny and been condemned by trade unions for their use of the practice. A shortage of Weetabix is also on the cards this summer as unions threaten strike action following the company’s warning that it might “fire and rehire” as part of its implementation of new ways of working.

Public interest sparked the government to ask Acas to conduct a fact-finding investigation into fire and rehire last October 2020. The Acas report, published earlier this month, found that although the pandemic has drawn this long-established practice into the spotlight, its use has not drastically increased. Some contributors to the Acas report felt that fire and rehire could never be a reasonable practice because of the power imbalance when renegotiating contracts of employment. In contrast, other contributors thought that it does sometimes solve a logjam but its use in the early stages of negotiations is heavy-handed. Acas’s investigation also prompted calls for a tightening-up of the law around unfair dismissal and employee consultation.

In a move consistent with the government’s previous refusal to support Private Members Bills that would have tackled fire and rehire, it has confirmed that it will not legislate to regulate the practice in response to the Acas report - despite indicating to Parliament that it regards the practice as a “bully-boy” tactic. The government has nonetheless asked Acas to produce further guidance to encourage good workplace practices when employers are negotiating changes to their employees’ contracts. It will also face renewed pressure to support regulation of the practice when the Labour MP Barry Gardiner shortly introduces another Private Members Bill on the issue.
While those wanting decisive action will see the decision to ask Acas to produce more guidance as a lacklustre response, many employers will be relieved at the stance taken given the context of the ongoing pandemic and the imminent reduction in government support for business. If fire and rehire were to be prohibited, many businesses might have no option but to make necessary cost savings by way of redundancies. Given that the end of the furlough scheme is already likely to lead to significant unemployment, it is perhaps understandable that the government has opted against legislating in a way that might lead to yet more people losing their jobs altogether, as employers restructure their workforces to make them fit for a post-Covid world.

Single enforcement body – still happening but light on detail

The government has been saying for some time that it intends to create a new state body responsible for enforcing employment rights. Its announcement to the House of Commons and publication of the official response to the consultation marks nothing especially new.

The primary intention behind the creation of a new single state enforcement body is to defragment the current regime by combining the Employment Agency Standards Inspectorate, the Gangmasters and Labour Abuse Authority and HMRC’s National Minimum Wage Enforcement Team into one body. The idea is also to expand this new body’s remit into the enforcement of statutory sick pay, holiday pay for vulnerable workers and the regulation of umbrella companies – areas which have hitherto not been the subject of specific enforcement regulation.

While trying to avoid stepping on Acas’s toes, the single enforcement body will also provide guidance on employment legislation, paying special attention to the technical detail.

The new body’s enforcement arsenal will range from a compliance notice system to the application of civil penalties. New civil penalties will be introduced for any breaches of gangmaster and employment agency regulations that result in wage arrears: 200% of arrears with a minimum penalty of £100 and a maximum of £20,000 per worker. The new body will also be making use of a favourite HMRC tactic - the “naming and shaming” scheme will be extended from national minimum wage breaches to gangmaster and employment agency violations.

The idea of making companies jointly responsible for breaches within their supply chain or embargoing hot goods produced by a non-compliant supplier are, however, off the table.

There is still no detail of when the new body will be up and running or how it will be funded. The government’s consultation response states this is not a cost-saving exercise and that current resources would be maintained (but used more effectively), with funding for the additional areas of enforcement to be considered in the next spending review. This will not be a welcome message to those concerned that under-resourcing is the biggest current barrier to effective enforcement.

The consultation response does not touch upon the way it is envisaged that the body would regulate the new areas, such as holiday pay and umbrella companies. How will the single enforcement body tackle the complex calculations of holiday pay, specifically for vulnerable workers? Will there be fresh legislation regulating umbrella companies? We await further details.

Making flexible working the default – expect a consultation

Making flexible working the “default” was a 2019 Conservative manifesto commitment, and we commented in our article on the Queen’s Speech that the government might look to launch a consultation ahead of the Employment Bill. This now seems likely to happen as early as this summer.

There are no details yet of how the new right would work but it is likely to cover all types of flexible working, not just working from home. It could provide a right to work flexibly from day one, unless the employer can objectively justify saying no. And it could potentially go even further and require job adverts to state the scope for flexible working, although this seems less likely. Details of the proposed enforcement regime should also be covered in the forthcoming consultation, if and when it is published.

When will we see the Employment Bill?

The new flexible working rights and single enforcement body were expected to form part of the Employment Bill, which was not lined up in this year’s Queen’s Speech. The government is still saying that it will introduce the Employment Bill when parliamentary time allows, but there is no firm commitment on timing.

Summing up - what do employers need to know?

• Expect guidance on the practice of “fire and re-hire” but no new legislation.

• The single enforcement body is still a long way off. Assuming it eventually gets up and running, employers will need to be aware of the new regulatory attention on holiday pay and statutory sick pay. On the other hand, expanded enforcement powers may drive up industry standards as non-compliant staffing providers come under greater scrutiny.

• The expected consultation on flexible working may provide extra fuel for the debate over what the post-Covid “new normal” working looks like, but the timescale for any planned legislation remains unknown.

• Employment law reform could be inching its way back onto the political radar, but it remains unclear whether there will be any tangible progress in the near future on the changes under consideration.