The controversial Employment Rights Bill will become law after legislation cleared Parliament on Tuesday afternoon.
After weeks of the Bill ping-ponging from the House of Lords to the Commons over controversial ‘day one’ rights, the government agreed earlier this month to drop its pledge of ‘day one’ rights in exchange for certain protections kicking in after six months.
This comes after six industry groups wrote a joint letter to Business Secretary Peter Kyle on Monday, stating their support for Parliamentarians to pass the Bill after the ‘day one’ right was amended.
However, the government then sought to ditch the £118,000 compensation limit as a quid pro quo to appease unions after dropping its ‘day one’ manifesto pledge.
Jo Mackie, employment partner with law firm Michelmores said: “The proposed uncapped damages for unfair dismissal will encourage claimants and strike fear into employers.”
She added that “employment tribunals should not be a gateway for unscrupulous employees to try and get a pay out which is unjustified. It does not respect genuine claimants and causes businesses to fear hiring anyone who is out of the usual mould of employees for fear they will take umbrage and claim. “
The Bill was rushed out within 100 days of Labour taking office, with an initial 28 individual measures, including ending exploitative zero-hour contracts and banning fire-and-rehire tactics, establishing bereavement and parental leave rights from day one of employment, and removing the lower earnings limit and waiting period for statutory sick pay.
However, it faced fierce debate and criticism from multiple stakeholders, especially the business community, after it was estimated to cost employers £5bn annually.
Over its passage through both Houses, there has been a glut of reforms, including pushing back the default implementation date for flexible working to 2027.
The implementation date for day-one rights for paternity leave and unpaid parental leave was pushed back to April 2026, and so-called fire-and-rehire practices and obliging firms to protect staff from harassment by third parties will take effect in October 2027.
However, its headline-grabbing idea of ‘day one’ employment rights has been pushed to 2027, and amended from ‘day one’ to six months, which is still a significant change from the current two-year model.
Added pressure on Tribunals
In addition to the costs the overhaul of employment law will impose on businesses, lawyers have been warning about the effect it will have on an already struggling Employment Tribunal.
As of this week, according to Ministry of Justice (MoJ) figures, there is a record 515,000 open claims by individuals or groups awaiting resolution of their employment disputes at the Tribunal in the third quarter.
While unresolved individual claims, which involve just one current or former member of staff, rose by some 33 per cent to 52,000, meaning a previous record set at the height of the pandemic has now been broken for two consecutive three-month periods.
The Bill, which made up a large portion of the Labour manifesto, will now be put forward for Royal Assent, becoming the Employment Rights Act, with changes rolling out gradually through 2026/27.
Colin Leckey, Partner in the employment team at Lewis Silkin, stated, “There will definitely be a sense of relief among employers that it’s the end of the road and an end to prolonged uncertainty.”
Tories vow to repeal the law
Commenting on the news of the Bill passing, Kyle said: “I am delighted that the Employment Rights Bill has completed its passage through the House of Lords today.
“This landmark legislation, now soon to be in law, will drag Britain’s outdated employment laws into the 21st century and offer dignity and respect to millions more in the workplace,” he added.
Tory shadow business secretary, Andrew Griffith, said: “It’s ironic Labour’s job-destroying Unemployment Bill passed the very same day official figures confirmed unemployment has risen and payrolls have fallen every month this Government has been in office.
“Relentless pressure from the Conservatives forced the Government to finally perform a U-turn on their disastrous ‘day one’ rights, accepting instead a six-month probation period. This will save literally thousands of jobs that would otherwise be lost.
“But this was and remains a bad bill. It will pile costs onto small businesses, freeze hiring, and ultimately leave young people and jobseekers paying the price for Labour’s capitulation to their union paymasters.
Conservatives will reverse all the damaging measures in this Bill and get Britain working again.”