The much-anticipated Employment Rights Bill has introduced pivotal changes aimed at strengthening worker protections, particularly around collective redundancies and fire and rehire practices. These reforms, outlined alongside the government's Making Work Pay consultation, mark a shift in the regulatory landscape for businesses, with significant implications for employers navigating these complex areas of law.
What Are the New Regulations on Fire and Rehire?
One of the standout changes under the new bill is the regulation of "fire and rehire" practices, which will now be automatically deemed unfair unless the employer can demonstrate that it is in significant financial difficulty. This represents a marked departure from the current framework, which allows more leeway for businesses in restructuring their workforce.
The fire and rehire model has faced increasing scrutiny due to high-profile cases (including the notorious P&O sackings) where it was seen as a method for reducing employee benefits or changing contract terms unfavourably. By tightening the rules, the government seeks to prevent the misuse of these practices while still allowing companies to restructure where absolutely necessary.
How Will the Employment Rights Bill Impact Collective Redundancy?
Changes to the collective redundancy framework are also on the horizon. The Employment Rights Bill proposes a significant shift in how the threshold for triggering collective consultation is calculated. The current law considers redundancies at individual sites or branches (referred to as “establishments”). However, under the new legislation, the concept of “establishment” is broadened to cover the entire business, making it easier for employees to reach the threshold for collective redundancy consultation.
What Are the Proposed Changes to Protective Awards?
As part of the bill’s broader reforms, the government is seeking views on whether the maximum period for protective awards—currently capped at 90 days—should be increased. Two key options are being considered:
Increasing the protective award from 90 to 180 days
Removing the cap on protective awards entirely
The government is considering these changes because the current protective award cap may not provide enough of a deterrent for employers. In particular, there is concern that employers are able to sidestep their obligations by reaching settlement agreements with affected employees. This allows businesses, especially larger ones, to avoid the full consequences of breaching collective consultation requirements. By increasing or removing the cap, the government aims to ensure that all employers, regardless of their size or resources, take their consultation obligations seriously.
Additionally, there is a growing recognition that protective awards should reflect the financial impact on employees more adequately and not be diluted by settlement agreements that often favour the employer. The goal is to make it more costly for employers to bypass legal obligations through settlements and to ensure better compensation for employees who are negatively affected by these practices.
Will Interim Relief Be Available for Fire and Rehire Claims?
Another key area under consideration is whether interim relief, already available in certain unfair dismissal claims, should apply to fire and rehire scenarios. This would allow employees pursuing claims under the new fire and rehire protections to continue receiving their salary until a tribunal hearing is concluded. The aim is to discourage employers from abusing these practices by offering immediate financial security to affected employees.
This new right, alongside tougher penalties for non-compliance, represents a significant step towards ending unscrupulous fire and rehire tactics, ensuring fairer treatment for employees during periods of economic uncertainty or restructuring.
What Are the Next Steps?
The government has opened a consultation to gather feedback on these proposed changes, with a deadline of 2 December. These reforms are part of a broader strategy outlined in the government’s “Next Steps” policy paper, which signals further employment law changes on the horizon.
If you would like to learn more about the Employment Rights Bill, we will be discussing it at our upcoming Employment Law Update Breakfast Seminar on 19 November 2024, which you can RSVP to by emailing zoe.joyce@laytons.com.
