Jul 2024 – Post-election talking points what are Labour’s plans for unfair dismissal?
Post-election talking points: what are Labour’s plans for unfair dismissal? The Labour party has pledged the “biggest upgrade to rights at work for a generation”. And a key part of this promise is the proposal to provide basic individual rights – including the right not to be unfairly dismissed – from day one of employment. What might this mean for employers and employees?
(a) What Labour has promised
Labour has promised “basic individual rights from day one for all workers”, ending the system that leaves workers waiting up to two years to access protection from unfair dismissal. But its “new deal for working people” goes on to reassure employers that this will not prevent fair dismissal for reasons of capability, conduct or redundancy or “probationary periods with fair and transparent rules and processes”. The party says it will ensure employers can operate probationary periods to assess new hires, but that newly hired workers will not be fired without reason or cause.
(b) Why change unfair dismissal law?
Labour claims that “the lengthy wait for basic rights means the risk of moving jobs falls too heavily on the worker” and the result is that “people are less inclined to move jobs, posing risks to productivity”. Labour believes that making employees less risk-averse about moving jobs will benefit them, as they can increase their salary by moving to better paid jobs, and benefit employers too, who are more likely to get the best candidate for the job. Greater job security may also boost the economy as workers who feel secure are more likely to spend. So, will it be a “win win”?
Could the proposal also have unintended consequences? Such as making employers play it safe when recruiting and not want to take a chance on someone different, reducing moves to improve diversity? Or, indeed, might employers defer any recruitment at all if adjusting headcount becomes potentially more costly? This will likely depend on the detail of how the change is introduced in practice, which we go on to consider next.
(c) What could this change mean in practice?
There are a number of different approaches that Labour could take. We consider the three most likely options here.
Option 1 – simply remove the qualifying period
The simplest and quickest way for Labour to give employees “day one” rights to unfair dismissal is simply to pass legislation which removes the requirement to have any qualifying period.
Without further changes to the ERA, this would mean that employers wishing to avoid successful unfair dismissal claims by employees would need to be able to establish one of the current “fair” reasons for the dismissal (capability or qualifications, conduct, redundancy, illegality or “some other substantial reason”). And the employer would also need to show that it had acted reasonably in the circumstances in treating that reason as sufficient reason for dismissal.
Further, in situations where the employer wants to dismiss the employee for conduct or capability it would need to follow the ACAS code of practice on disciplinary and grievance procedures. The code of practice does not refer to probationary periods, so unless it’s amended, the employer would have to follow the full procedure recommended for any other employee.
Requiring employers to go through the same process for employees with one day’s employment as those with 10 years, seems, arguably, unreasonably burdensome on business. It’s impossible to know how someone will perform in a job until they are doing it and it would seem fair for employers to be able to dismiss new joiners more easily if they consider that they are not up to the job. On the other hand, employers should be required to see if a new hire can perform well with support and training, rather than making an overly hasty judgment with potentially major implications for the worker in question.
This approach, however, seems incompatible with Labour’s reference to employers being permitted to use probationary periods.
Option 2 – any dismissal fair if done in probationary period
Another approach would be to remove the qualifying period, and at the same time amend the legislation to provide that employees in their probationary period could not bring an unfair dismissal claim.
This would be consistent with Labour’s promise that employers could use probationary periods, but doesn’t really amount to giving employees “day one” rights to bring an unfair dismissal claim. It would merely be reintroducing a qualifying period, albeit probably a much shorter one than the current two-year qualifying period. Six months probationary periods are common and this would, in effect, revert to the shortest qualifying period historically (under the Labour government between 1974 and 1979).
This approach would also seem inconsistent with the language being used by Labour, about still needing a process and reason for dismissal, even where the new hire fails their probationary period.
Option 3 – failing probation becomes a new fair reason for dismissal
A third approach is for Labour to remove the qualifying period and also to amend the law to provide that failing a probationary period is a new fair reason for dismissal.
This is likely to be coupled with asking ACAS to draft an amended (or new) statutory code of practice which deals explicitly with the appropriate process to follow in a probationary period. The advantage of a new code is that a shorter, simpler process could be used during a probationary period.
For example, this might be simply a requirement to have a meeting with the individual and give them the opportunity to make representations before making any final decision to dismiss. It would seem fair that employers are given a reasonable opportunity to assess if new employees are a good fit before being required to go through the more extensive series of warnings that is currently required to dismiss an employee with two years’ service for poor performance.
This seems the most likely approach.
Whichever approach Labour takes, there are still (as at the time of writing this article) unanswered questions about the details of the proposal.
Conclusion
Labour has promised “a full and comprehensive consultation on the implementation of our New Deal [for working people]”. We therefore assume that we will get more details of how this change will work in practice and employers will be able to respond to a consultation. We will put in a response to any consultation, so do get in touch with your views when a consultation paper is published.
In the meantime, employers will probably want to consider tightening their recruitment processes to make better hiring decisions. Many employers will also be looking at their employment contracts to consider probationary periods at all levels.
Labour’s plan to make work pay: delivering a new deal for working people – available here.
If you have any specific questions you would like advice on or if you would like information about what is discussed in this article, then please contact: Abi.Frederick@lewissilkin.com of Lewis Silkin LLP.