Employment Law – Keeping up with the changes

As we enter into 2025 there is a long list of employment law changes we expect to see coming into place for all employers, particularly following the new Employment Rights Bill which was published in October 2024. The Employment Rights Bill looks to implement many of the changes that Labour had proposed under their “Make Work Pay” plan which was part of their pre-election manifesto commitments.

Whilst the list of proposed changes is lengthy and will apply to all employers regardless of size and sector, we have highlighted some of the key proposed changes which are particularly relevant for those employers working in the financial services sector.

Day One Rights

The Employment Rights Bill will introduce various basic rights as day one rights, that is a right that an employee has on day one of their employment. This includes the entitlement to paternity leave and parental leave as well as protection from “ordinary” unfair dismissal.

The unfair dismissal change will likely have the biggest impact for employers with the current two years’ service qualification, familiar to many employers no longer applying. Employers are understandably concerned by this change, particularly in relation to how they can fairly dismiss an employee during a probationary period when there are genuine performance issues.

The proposed changes will still allow employers to dismiss during an initial period of employment (which could be either 6 or 9 months) on performance grounds without facing an unfair dismissal claim so long as they follow a “light touch” process. That process has yet to be confirmed. However, the change will mean the need to ensure probationary periods are being effectively used and managed is more important than ever. Whilst this change is not expected to come into place any earlier than Autumn 2026, employers can look to ensure they are implementing “best practices” to make the transition to the day one unfair dismissal protection less disruptive.

Flexible Working

Flexible working will be the default from day one except where it is not reasonably feasible and as such requires an employer’s refusal of a request to be reasonable based upon set specified grounds. Employers will be required to document in writing the reasoning for any refusals. With hybrid working an issue that many employers in the FS sector are still grappling with, we may see an increase in flexible working applications as a result.

Employers will need to give greater consideration to the job roles being carried out and justifying any particular needs of the roles and limits on flexibility i.e. office-based working, within the job descriptions during the recruitment processes. Employers will also need to undertake a review of their flexible working policies and practices and ensure that managers are aware of how to handle requests.

Harassment

October 2024 saw a new positive duty imposed on employers to take reasonable steps to prevent sexual harassment in the workplace. The Employment Rights Bill looks to strengthen this new duty by requiring employers to take “all” reasonable steps to prevent it. This will effectively impose a higher compliance standard on employers. With various reports continuing to suggest that sexual harassment within the FS sector is still an issue, employers should already be implementing practices and policies to ensure they are compliant with the current duty. Increasing the duty to take “all” reasonable steps will reinforce the need for employers to take these proactive steps.

Further, the Employment Rights Bill also looks to introduce employer liability for harassment of employees by third parties for example clients or intermediaries. This is based upon any protected characteristics with the exception of marriage or civil partnership and pregnancy or maternity (not just sexual harassment). Employers will need to consider the risks of third parties harassing their employees and what steps they can be taking to mitigate those risks.

Ban of Fire and Rehire practices

In recent years we have seen the Fire and Rehire practices (a method by which employers can look to vary the terms of an employee’s employment) come under the spotlight with further measures being put in place to help regulate this area including an updated ACAS code of practice.

However, under the Employment Rights Bill, the Government will make it automatically unfair to dismiss an employee if the reason for the dismissal is that they did not agree to a variation of their contract or to employ another person or reengage the employee under varied terms.

The key exception to this will be where the reason for the changes is to address financial difficulties effecting the employer’s ability to carry on business. This is likely to be a high threshold and will limit the ability to make changes to terms of employment.

The change is anticipated to come into place in 2026.

In addition to the change expected under the Employment Rights Bill, a new Order will come into force on 20 January 2025 which will enable Employment Tribunals to award up to a 25% uplift on protective awards for failing to follow the ACAS Code of Practice in respect of fire and rehire.

Right to disconnect/switch off

Whilst not included in the Employment Rights Bill, the Labour Government has included the right to switch off/disconnect within their “Next Steps” plan. This is a change which has attracted a lot of media attention and would give employees the right to switch off/disconnect i.e. not have to check emails or be contacted, outside of their working hours.

We do not know exactly how such changes will look and it is anticipated that there would be some exceptions to this to deal with essential roles/emergency situations. This is unlikely to cover situations such as demanding clients. This is an area we would expect to have some form of opt-out/opt-in process in place.

Non-compete provisions

Whilst this does not form part of the Employment Rights Bill, it is worth mentioning the previous Government’s proposal to introduce a 3-month cap on non-compete restrictions in employment contracts. This was a proposal which was announced by the former Conservative Government in May 2023, however, it was to be dealt with when “parliamentary time allows”. Given the use of non-compete restrictions in the FS sector, the proposed limit on the length of non-competes was causing concern. The changes were not implemented prior to the change of Government, and it does not appear on the current Government’s agenda. As such, whilst the change would be considered “employee friendly”, it appears to be off the agenda for the time being, leaving it up the Courts to determine on a case by case basis as to whether a non-compete clause in a contract of employment is enforceable.

If you have any queries or would like to discuss any of the proposed changes discussed in this article, please do not hesitate to contact us to one of our Employment team.

Samuel Gray
Solicitor, Employment
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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