UK Employment Law Coffee Break: The King's speech, fire and re-hire and avoiding age discrimination

King's speech announces Employment Bill and draft Equality (Race and Disability) Bill

Yesterday at the state opening of Parliament, the King's Speech confirmed that the new government will push forward with plans to introduce "a new deal for working people to ban exploitative practices and enhance employment rights" in a new Employment Rights Bill. Plans were also announced for a Skills England Bill and draft Equality (Race and Disability) Bill.

Employment Rights Bill

The government's briefing paper accompanying the King's Speech states that it intends to introduce in the Employment Rights Bill the measures set out in its Make Work Pay plan that require primary legislation. Details of the measures in that plan are set out in our earlier Insight.

The wording of the briefing paper is unclear as to which of the Make Work Pay measures will be included at this stage in the new Employment Rights Bill, but the following are expressly referred to and may provide some indication as to what businesses can expect:

• Banning exploitative zero-hours contracts.
• Ending the scourges of "fire and re-hire" and "fire and replace".
• Making parental leave, sick pay and protection from unfair dismissal available from day one on the job for all workers. Ensure employers can operate probationary periods to assess new hires.
• Strengthen statutory sick pay by removing lower earnings limit as well as waiting period.
• Make flexible working default from day one for all workers – employers will be required to accommodate this as far as is reasonable to reflect the modern workplace.
• Strengthen protection for new mothers by making it unlawful to dismiss a woman who has had a baby for six months after her return to work except in specific circumstances.
• Establish a new Single Enforcement Body, also known as a Fair Work agency.
• Update trade union legislation so it is fit for a modern economy, including removal of minimum service levels.
• Simplifying the process of statutory recognition and introducing a regulated route to ensure workers and union members have a reasonable right to access a union within workplaces.

The briefing paper states that the bill will extend and apply to Great Britain.

It also confirms that the government "will deliver a genuine living wage that accounts for the cost of living and remove the discriminatory age bands to ensure every adult worker benefits".

Draft Equality (Race and Disability) Bill

The King's Speech also announced that the government will publish legislation in draft to "enshrine the full right to equal pay in law" for ethnic minorities and disabled people through a new draft Equality (Race and Disability) Bill.

It will also introduce mandatory ethnicity and disability pay reporting for larger employers (those with 250 plus employees) to help close the ethnicity and disability pay gaps. It is envisaged that surfacing pay gaps will enable companies to constructively consider why they exist and how to tackle them.

The draft bill is likely to extend and apply to Great Britain mirroring measures in the Equality Act 2010 relating to equal pay and gender pay reporting.

Next steps

We must now wait for the detail of the Employment Rights Bill when it is published; the government has stated that it will "work in close partnership with trade unions and business to deliver our New Deal and invite their views on how best we can put our plans into practice".

The briefing paper confirms that the government will “introduce” this bill within the first 100 days and the text should therefore be laid before Parliament by 12 October 2024, at which point it will commence the parliamentary process through both Houses. Even when the bill becomes law, some provisions may still not become effective in practice until secondary legislation has been passed, together with any supporting codes of practice.

We may see the proposed changes to the statutory national minimum wage implemented more quickly as these will only require implementation via secondary legislation. Employers will need to start factoring in the potential increase these changes will bring to their wage bill.  

The draft Equality (Race and Disability) Bill is likely to be subject to extensive consultation and the government will need to give careful consideration as to how its proposals are set out in legislation, given the complexities highlighted by the previous government's consultation on proposed ethnicity pay gap reporting and which ultimately concluded in a "voluntary" reporting approach to tackle ethnicity pay gaps, supported by government guidance.

The King's speech also reiterated the government's commitment to ensuring workers have the skills they need for the future; the government will establish a body called Skills England which will "have a new partnership with employers at its heart". It will also introduce reforms to the apprenticeship levy.

Other proposals of interest to employers will be the government's focus on mental health support, particularly among the young, and its intention to establish "appropriate legislation" to place requirements on those working to develop "the most powerful artificial intelligence models".

Fire and re-hire: New code effective 18 July

We have previously reported on a new statutory code of practice on "fire and re-hire". An order bringing it into force was approved by Parliament on 28 May 2024 and comes into force today, 18 July 2024.

The code clarifies that the practice of dismissal and re-engagement by an employer seeking to change terms and conditions is not unlawful, but that it should only be used as a last resort following meaningful consultation with employees and/or their representatives with a view to reaching an agreed outcome.

It sets out both general and specific considerations for employers when informing and consulting with employees and/or their representatives on the proposed changes, as well as reminding employers of the need to ensure compliance with any other existing legal obligations. Significantly, it provides that an employer "should" contact Acas for advice before raising the prospect of dismissal and re-engagement.

While a breach of the code will not itself result in a legal claim, where an employer or employee is found to have unreasonably failed to comply with it, a tribunal will have a power to increase or reduce compensation, as the case may be, in specified claims, by up to 25%.

The new government has already confirmed that while it is not proposing to ban fire and re-hire, the law will be reformed further to provide "effective remedies against abuse" on fire and re-hire, replacing the "inadequate statutory code of practice with a strengthened one". This is one of the measures expressly referred to in the briefing paper accompanying the King's speech.

Tribunal awards £3.2m for age discrimination against older worker

An Employment Tribunal has recently awarded £3.2m to an executive who was dismissed by his employer which had introduced a policy encouraging managers not to hire people over the age of 45 so that people had "enough time left in their career in order to develop".

The award to the executive, who was described as an "old fossil" and who "didn't know how to deal with millennials", reflected financial losses (including losses under a long term incentive plan), injury to feelings and losses associated with his subsequent relocation and sale of his home.

While the claimant, who was 58 when he was dismissed, was replaced by an employee aged 51, the tribunal rejected the employer's argument that this demonstrated that the under 45 policy was a suggestion rather than a rule.

The tribunal determined that the policy was "something very close to a rule" and that the focus on an age "so far away from a more typical retirement age" was unusual and "potentially suggestive of a mindset where assumptions were made about people and their abilities because of their age".  

The size of the award here reflects the very specific remuneration package that the executive was on. However, it serves as reminder for businesses of the financial and reputational costs that may arise on the potential termination of older workers.

The dismissal in this case took place in 2019 and recent years have seen businesses becoming increasingly aware of the benefits that older workers can bring and the particular considerations that apply to managing a more diverse workforce.

With the state pension age moving upwards and looking set to increase in the future, it is dangerous for employers to make assumptions about when individual employees will chose to retire, or even that they will do so at the point that they can claim state pension. It is essential that any dialogue surrounding retirement is employee led and supportive of their plans, rather than imposed by an employer with a view to applying pressure on the employee to retire.

Many employers are now developing policies to support employees in the run up to their retirement through coaching, flexible working and other staged retirement planning, together with the provision of specific benefits valued by older workers. Multi-generational workplaces encourage diversity of thinking and employers making assumptions about older workers risk losing the experience pool and valuable expertise this band of individuals bring to an organisation.

Decisions regarding recruitment, retention and promotion should always be based on an employee's skills and suitability for a role and not their age, sex, ethnicity or any other protected characteristic (except where positive action is being taken within the very specific and narrowly drawn exception in the Equality Act 2010).

Recent employment tribunal decisions have underlined the dangers for employers engineering workforce demographics to meet particular agendas. The new government has set out a number of measures that will support older workers, including its commitment around day one rights for all workers to encourage greater movement of workers across organisations, its plans to make flexible working a default and ensuring that all workers, including older workers, have the skills necessary for the future world of work.  

The Centre for Ageing Better recently launched its nationwide campaign to tackle ageism – "Age without Limits" – which seeks to change the way people think about ageing. Julian Hemming and Danielle Kingdon, employment partners, were recently joined by John Kiernan from the Centre to discuss the report and what employers need to consider when supporting employees who are considering redefining themselves at work or looking to retire, and how to avoid the pitfalls of age discrimination.

Julian comments that "the report is a must read for all organisations – with research showing that half of people aged over 50 in England experienced age discrimination in the last year, and at least a third of people hold ageist beliefs, it is vital for employers to create an open and supportive culture to help employees reignite their working lives or prepare for retirement. There can be a natural tendency for organisations to focus on attracting and nurturing new talent, but it is important to remember that more experienced workers will also have priorities and the job benefits they value will evolve during the course of their careers and failing to provide attractive working conditions for employees of all ages can result in the loss of valued experience. While employers must already operate within the statutory protections of the Equality Act, it is important to ensure that the work culture is age inclusive and that no unconscious bias is operating to prejudice workers in particular age groups."

We are advising a number of employers on their approach to supporting multi-generational working and retirement planning; if you would like to discuss this issue further and how we can support you in managing the legal and practical considerations which arise, please contact Julian Hemming or your usual Osborne Clarke contact.