The Employment Rights Bill: What We Know (and Don’t Know) So Far... Part II

In the second blog of our three part update on the Employment Rights Bill we cover the reforms to zero hours contracts, collective consultation and fire and rehire practices.

WHAT ARE THE REFORMS TO ZERO HOURS CONTRACTS?

Zero hours contracts, being an employment agreement under which the employer is not obligated to provide a minimum number of hours to an employee, are common in the UK, offering flexibility for both employers and employees. However, they are criticised for lacking certainty in earnings and hours, especially for low-paid and vulnerable workers. The Bill aims to address this by guaranteeing hours, providing security and predictability. Despite its good intentions, the provisions in the Bill relating to zero hours contracts have been criticised for being too complex, particularly for employers with seasonal labour demands.

A zero or low hour worker (including agency workers) will qualify for an offer of guaranteed hours if, over the expected 12 week reference period, they work a number of hours which is in excess of the minimum hours under their contract, provided they do so with a level of regularity set by regulations. Simply put, employers will be required to make an offer to workers which reflects the true hours they have worked over the previous reference period.

Additionally, workers will have rights to reasonable notice of shifts and payment for cancelled or moved shifts. As mentioned, these rights are extended to agency workers to prevent an agency arrangement being used as a loophole for zero hours contracts. These changes may lead to fewer zero or low hours contracts, with a possible shift towards fixed-term contracts instead. It’s important to note that it will be automatically unfair to dismiss a worker if the reason or principal reason is that they accepted or rejected a guaranteed hours offer or that the employer sought to avoid compliance with the duty to offer guaranteed hours.

HOW CAN EMPLOYERS PREPARE FOR THE NEW ZERO-HOURS CONTRACT RIGHTS?

To prepare for new zero-hours contract rights, employers should audit their workforce to identify workers on zero or low hours contracts, understanding the scope of changes needed. Identifying seasonal labour demand fluctuations can help determine if fixed-term contracts will be more appropriate.

Employers should review and upgrade systems for managing shifts and changes, and consider implementing sophisticated technology to handle new requirements efficiently. For agency workers, employers need to be aware of new rights, including guaranteed hours contracts, reasonable notice of shifts, and compensation for short-notice cancellations. The responsibility for offering guaranteed hours primarily lies with the hirer, though it can shift to the agency in some cases.

Employers should ensure management teams are trained and aware of these new obligations to ensure compliance and smooth implementation. Robust systems and technology will be essential for managing these changes effectively.

WHAT ARE THE NEW LAWS GOING TO BE SURROUNDING COLLECTIVE CONSULTATION?

• Current Rules: If an employer proposes 20 or more redundancies within 90 days at one establishment, this triggers collective consultation. Collective consultation involves allowing employees to elect employee representatives, notifying the Secretary of State of the proposed redundancies, and consulting with representatives or trade unions. No dismissals can occur for at least 30 days (20-99 employees) or 45 days (100+ employees) from the start of consultation.
• Proposed Changes: Initially, the Employment Rights Bill proposed to trigger collective consultation for 20 or more redundancies across different sites/establishments. This was to prevent employers being able to make large-scale redundancies without collectively consulting because the redundancies were being made across multiple sites/establishments and the proposed redundancies in any one establishment was fewer than 20, albeit the total number of redundancies across the establishments was much more. However, this proposal has been scrapped as it would have meant that some large employers would be in a continuous cycle of collective consultation. A compromise has been proposed instead.
• Compromise Amendment: The latest amendment to the Bill triggers collective consultation when 20 or more employees at one establishment or a "threshold number" across the business are proposed as redundant within 90 days. The threshold, yet to be specified, won’t be less than 20. For example: If the threshold is set at 50 redundancies or 10% of the workforce, 45 redundancies in a 400-employee business would trigger collective consultation, even if spread across different sites. This change ensures broader protection for employees.

• Additional Amendments: Employers can now consult with employee representatives separately and reach different agreements with different representatives across different parts of their business.
• Increased Protective Award: The Government intends to double the protective award available for employees to claim for their employer’s failure to collectively consult. Currently, the maximum is 90 days’ actual pay per employee. Once the Bill is in force, it will be a maximum of 180 days’ actual pay per employee, serving as a strong deterrent to employers to avoid bypassing collective consultation rules.

WHAT ARE THE IMPLICATIONS OF THE NEW RULES ON COLLECTIVE CONSULTATION?

The implications of the new rules on collective consultation are significant but seemingly manageable. The Government's decision to scrap plans for triggering collective consultation for 20 or more redundancies across multiple sites reduces the immediate impact. However, the final threshold set by Parliament will be crucial. If it's low, employers will need to track redundancies across all sites, plan consultations accordingly, and potentially reconsider recruitment strategies, possibly favouring fixed-term contracts over permanent ones to avoid triggering collective consultation, bearing in mind that employees on fixed term contracts do not count towards the 20 employee threshold for collective redundancy purposes.

HOW CAN BUSINESSES PREPARE?

• Stay Informed: Keep up with Parliament’s final position to understand your obligations.
• Form Representative Bodies: Facilitate your workforce to form an employee representative body with a mandate to act as employee representatives in redundancy situations, to save time if collective consultation is triggered.
• Corporate Restructuring: Larger businesses could consider restructuring to ensure different batches of employees are employed by different legal entities, avoiding the threshold.
• Monitor Redundancies: Large and small businesses should track redundancies over a rolling 90-day period (looking back and forward) to ensure compliance with collective consultation requirements. Even small businesses can fall within the collective consultation rules if they propose 20 or more redundancies within a rolling 90 day period.

WHAT DOES THE BILL MEAN FOR FIRE AND REHIRE?

The new Bill aims to curb fire and rehire practices, where employers terminate contracts and re-engage employees on less favourable terms or replace them with new hires willing to accept such terms. This practice gained notoriety with P&O Ferries' dismissal of nearly 800 employees in 2022, replacing them with employees willing to accept less advantageous terms. The Bill introduces stricter collective consultation rules and provisions to limit fire and rehire practices unless no alternative exists. It makes it automatically unfair to dismiss employees for refusing contract changes unless the employer can prove imminent financial difficulties. Additionally, firing employees for refusing less favourable terms and then hiring others for the same work on different terms will be unlawful. Non-compliance with an updated statutory Code on fire and rehire will result in a protective award uplift of up to 25%. These measures aim to protect employees from unfair dismissal and ensure fair treatment in contract negotiations.

WHAT IS THE IMPACT OF THE NEW FIRE AND REHIRE PROVISIONS?

The Bill's provisions apply even when varying terms for a single employee, making it unfair to dismiss them for refusing less favourable changes to their contract of employment unless the financial difficulty exception applies. This could render contract negotiations meaningless as there will be no consequence for an employee’s refusal to accept new terms. Employers will have to work harder to agree changes to terms with employees, possibly offering incentives such as additional holidays in exchange for working longer hours. Consultations to vary terms might need to be longer in order to reach agreement.