Labour’s New Deal for Working People

The New Deal is aimed at improving the lives of working people by strengthening their individual and collective labour rights. The authors examine the more radical concepts.
Labour’s promises include:

• banning zero hours contracts;
• removing the qualifying period for certain employment law rights;
• banning ‘fire and rehire’;
• introducing collectively bargained fair pay agreements;
• introducing a right to switch off; and
• trade union reform.

Naturally, these will be popular policies with voters as they tackle issues that have become synonymous with abusive corporate practices inflicted on low-paid workers with little or no bargaining power. Minimum service levels legislation and zero hours contracts are two perfect examples.

Zero hours contracts

Zero hours contracts increased significantly from the early 2000s as tech firms such as Amazon and Uber grew and became more dependent on casual workers. Other sectors, such as hospitality and healthcare, have also adopted them.

Sports Direct came under scrutiny in 2013 when a Guardian exposé highlighted that 90% of its 23,000 staff were on these contracts. In short, zero-hours contracts were favoured by businesses heavily reliant on large numbers of low-paid staff with a huge ebb and flow in the work required. They delivered minimum protection for workers and maximum value for businesses. Frequently coupled with exclusivity clauses meant that, not only was an individual unable to rely on specified working hours, they were also unable to work elsewhere. This practice was outlawed by the Small Business Enterprise and Employment Act 2015.

More protection is still needed for gig economy workers but is an outright ban on zero hours contracts necessary? Consider certain higher paid individuals working on what could be termed zero hours contracts but where both parties want flexibility. An illustration is an experienced lawyer moving in-house with no defined hours of work. The lawyer is at a time in their career where they want the flexibility to turn away work and do not need the financial security of guaranteed hours but the employer will pay a high hourly rate. Under Labour’s plans, this arrangement would be unlawful and valid contracts between a company and an individual with equal bargaining power prohibited.

A more practical approach may be to impose greater restrictions on the application of these contracts as is the case in the Netherlands where, after 26 weeks, an employee can claim for a salary based on average hours over that reference period. After 12 months, an employer must make an offer for a fixed number of hours based on this retrospective period. However, crucially, the worker is not obliged to make a claim or accept an offer. This approach gives flexibility while establishing certainty for those who need it.

Unfair dismissal and employment status

These are perhaps the most radical proposals and include:

• introducing a day one right to unfair dismissal protection;

• removing limits on compensation;

• extending protection to all workers;

• extending the time limit (six months is expected); and

• outlawing ‘fire and re-hire’.

Historically, the length of service requirement has fluctuated with Conservative and Labour Governments; the shortest being six months under Labour in 1974. This would be the first time that a qualifying period has been removed altogether although some other G7 countries (for example, France and Japan) take this approach. The impact on recruitment could be significant as probationary periods could become obsolete meaning more emphasis and resources are required on the recruitment process.

The removal of the compensation cap would align ordinary unfair dismissal with whistleblowing and discrimination claims, but query the practical impact. There is no suggestion that the mitigation duty will disappear. Furthermore, the average unfair dismissal compensation in 2022 was £13,541. The fact that the average annual salary in the UK was £27,756 suggests that the removal of the cap will only make a difference in exceptional cases.

Perhaps more significant is the proposal to replace the three tiers of employee, worker and self-employed with only two tiers – worker and genuinely self-employed. Labour’s intention is to prevent ‘unscrupulous’ employers falsely limiting worker’s rights.

Creating more certainty and avoiding costly litigation around employment status is welcome but the irreducible minimum of personal service, control and mutuality of obligation is embedded in our jurisprudence and it is likely they will continue to apply. The challenges in determining status will likely remain when disputes arise and employers will have to consider the financial impact of extending holiday pay, sick pay and other benefits to a broader spectrum of workers.

Work-life balance

Labour is proposing far-reaching changes to workers’ rights to balance work and home life including a positive right to disconnect. While post-Covid we are all enjoying more flexible, mobile working, these ‘freedoms’ inevitably lead to difficulties in switching off. While employers have obligations under health and safety and working time legislation, falling foul of these obligations is relatively difficult.

The express right to disconnect may be progressive for the UK but similar rights already exist in many EU countries. However, consider legislation around similar rights such as shared parental leave. The take up has been minimal because many remain concerned about the impact on their future careers. Unless there is a clear and definable business culture championing the benefits of work/life balance, the right to disconnect may follow the same trajectory.

There are also proposals to reform certain family leave rights, including:

• extending statutory maternity and parental leave;

• making shared parental leave more attractive perhaps with financial incentives;

• introducing bereavement leave (as opposed to parental bereavement leave);

• strengthening protections for pregnant women; and

• making all family friendly policies a day one right.
   

More detail is awaited on implementation but there will be considerable ramifications for employer costs and logistics.

Trade union rights

For many, Labour’s proposals will be vote winners in a general election held against the backdrop of prolific industrial action affecting all aspects of our lives like travel, healthcare, education and even our legal system. Labour intends to strengthen trade union and collective bargaining powers by introducing fair pay agreements into the social care sector with a gradual introduction to other yet to be determined sectors.

Other reforms include giving trade unions the right to access workplaces, repealing current legislation limiting workers’ rights to ballot and stipulating minimum services levels, together with simplifying the statutory recognition process to enable gig economy workers to access trade unions more easily.

These are just some of the wide ranging reforms proposed. If, as is looking likely, we have a Labour Government in 2024, employers large and small will be facing fundamental change in the workplace which will inevitably come at significant operational and financial cost, and many employers will have to engage with trade unions for the first time.

In an age of unprecedented living costs in modern times, these changes will no doubt be welcomed by many.

First published in ELA Briefing (© Employment Lawyers Association)