What is on your HR agenda for the year? Following a period of relatively little legislative reform, 2023 will bring changes, but just what is expected? While the long awaited Employment Bill now appears to be shelved, some ad hoc changes are on the way, but the dominant theme is uncertainty. The controversial Retained EU Law (Revocation and Reform) Bill 2022-23 may result in the year ending with a 'Brexit bang' being more notable for legislation lost, rather than gained.
Here, Gowling WLG's Employment, Labour & Equalities team brings you our pick of the 2023 top 10 expected employment legislative changes. In part two, we will look at our pick of 10 expected case law developments:
- A Brexit clearout?
- The Blue Peter Approach – Here's one prepared earlier
- Family time
- Flexible working
- Harassment protection
- Fire & rehire statutory code
- Industrial action
- Holiday: return of the 12.07% method
- Near 10% increases to statutory rates
- Artificial Intelligence
Bonus: Extra Bank Holiday
Employment Law Legislative Reform 2023: At a glance
- 1 April - National Minimum Wage: Annual increases in force. National Living Wage increases from £9.50 to £10.42
- 2 April - Statutory pay rates: Statutory maternity, paternity, adoption and shared parental leave pay rates increase from £156.66 to £172.48.
- 6 April - Statutory pay rates: Statutory Sick Pay increases from £99.35 to £109.40.
- 6 April - Employment Tribunal awards: Annual increase expected
- 8 May - Extra Bank Holiday
- TBC - Enhanced protection against pregnancy and maternity discrimination
- TBC - Leave for carers
- TBC - Neonatal care leave and pay
- TBC - Changes to statutory flexible working request rules
- TBC - Protection from third-party harassment & prevention of sexual harassment dut
- TBC - Duty on employers to give all tips to workers without deductions
- TBC - Statutory code of practice on "fire & rehire"
- TBC - Minimum service levels during strikes
- TBC - Calculating holiday entitlement for part-year and irregular hours workers changes
- 31 December- Revocation of retained EU Law
1. A Brexit clearout?
On 22 September 2022, the controversial Retained EU Law (Revocation and Reform) Bill 2022-23 was introduced to the House of Commons providing for the expiry of the majority of retained EU law with effect from 31 December 2023. All EU-derived secondary and retained direct EU legislation will expire at the end of 2023 unless it is expressly retained, or the review period positively extended to the end of 2026. It also brings to an end the supremacy of EU Law, paving the way for UK courts and tribunals to depart from existing EU-derived domestic case law.
The Government's stated intention for the Bill is to "fully realise the opportunities of Brexit and to support the unique culture of innovation in the UK". Without taking any view on the policy aim, what can be said is that we have entered a period of considerable uncertainty. What will the Government choose to retain and possibly modify and what employment rights will simply expire as early as the end of this year?
The vast majority of existing employment legislation is highly likely to remain relatively unscathed, but the drastic sunset clause of 31 December 2023 is of concern. The sheer amount of legislation Government departments will need to review in such a short period is beyond daunting, even for the best resourced departments. In the longer term, for those rights retained, what will the change in the rules of interpretation mean for case law precedence?
Organisations including the Employment Lawyers Association have called on Parliament to examine fully the impact of the Bill's sunset clause. In its current form, the risk of unintended consequences is high. While reform may be welcomed in some areas, it needs to be carefully considered. In the words of Margaret J. Wheatley, "without reflection, we go blindly on our way, creating more unintended consequences, and failing to achieve anything useful."
Notable areas of impacted employment legislation include (non-exhaustive):
- The Working Time Regulations 1998 - paid annual holiday, 48-hour working week etc;
- Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000;
- Fixed-term Workers Employees (Prevention of Less Favourable Treatment) Regulations 2002;
- Agency Worker Regulations 2010;
- Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE); and
- Maternity and Parental Leave etc. Regulations 1999 in relation to unpaid parental leave.
One to watch!
2. The Blue Peter approach - here's one prepared earlier
While we await the fate of EU-derived employment rights, we do know that some new rights are coming. In December 2022, Grant Shapps confirmed that the Employment Bill, set out in the December 2019 Queen's Speech, is no longer "on the cards per se". Instead, the Government is backing seven Private Members' Bills, reflecting certain of the commitments that were due to be contained in the Employment Bill:
- Protection from Redundancy (Pregnancy and Family Leave) Bill 2022-23 - see below.
- Carer's Leave Bill 2022-23 – see below.
- Neonatal Care (Leave and Pay) Bill 2022-23 – see below.
- Employment Relations (Flexible Working) Bill 2022-23 – see below.
- Employment (Allocation of Tips) Bill 2022-23.
- Worker Protection (Amendment of Equality Act 2010) Bill 2022-23 - see below.
- Workers (Predictable Terms and Conditions) Bill 2022-23 – see below
3. Family time
As set out above, the Government is supporting a number of family-friendly employment Bills, which are currently making their way through Parliament:
- The Protection from Redundancy (Pregnancy and Family Leave) Bill 2022-23
Currently, employees who are at risk of redundancy during maternity or other family leave must be offered suitable alternative employment, if a suitable vacancy exists. If passed, this Bill will give the Secretary of State power to introduce regulations to extend this existing redundancy protection, so that the same protection is also available throughout a woman's pregnancy and for a six-month period following a return to work after maternity, adoption or shared parental leave.
- The Carer's Leave Bill 2022-23
If passed, this Bill will give the Secretary of State power to make regulations introducing a new entitlement of one week's unpaid leave per year for employees who are providing or arranging care for a dependent with a long-term care need. The leave may be taken flexibly for example as a half day, or in day blocks or a single one-week block. What will not be included is childcare (other than where the child has a disability or other long-term caring need that falls within scope of the regulations).
- Neonatal Care (Leave and Pay) Bill 2022-23
If passed, this Bill will give parents of a child who is receiving, or has received, neonatal care a statutory entitlement to 12 weeks' neonatal care leave, in addition to other parental leave entitlements such as maternity, paternity and shared parental leave. Neonatal care leave will apply to parents of babies who are admitted into hospital up to the age of 28 days, for seven days or more and can be taken up to 68 weeks from the child's birth. Employees with at least 26 weeks' service will additionally be entitled to neonatal care leave pay at the prescribed rate.
Many of the necessary legislative changes to implement the Bill will be via changes to the Social Security Contributions and Benefits Act 1992 through the introduction of new sections 171ZZ16 to 171ZZ24 – the sort of numbering suggesting it could be time for an update to simplify elements of the 1992 Act.
These Bills are expected to be passed in 2023, but unlikely to come into force before 2024.
4. Flexible working
As set out above, the Government is also supporting two flexible working employment Bills currently making their way through Parliament.
The Employment Relations (Flexible Working) Bill 2022-23 will enhance employees' rights to request flexible working by:
- removing the 26-week qualifying period;
- extending the number of flexible working requests an employee can make during a 12-month period from one to two;
- requiring an employer to consult with an employee before refusing a flexible working request;
- requiring employers to respond within two months, rather than the current three-month period; and
- removing the requirement for the employee to set out how the effect of their request may be dealt with.
The current list of business reasons for rejecting flexible working requests will remain unchanged.
The Workers (Predictable Terms and Conditions) Bill 2022-23 will give workers and agency workers the right to request a predictable work pattern where:
- There is a lack of predictability as regards any part of their work pattern (fixed term contracts of 12 months or less are presumed to lack predictability).
- The change relates to their work pattern.
- Their purpose in applying for the change is to get a more predictable work pattern.
The Bill mirrors the statutory framework for flexible working applications (as to be amended) in several respects, notably two applications may be made in a 12-month period. Also, employers, temporary work agencies or hirers (as the case may be) will be able to reject applications based on statutory grounds. However, it is likely that a 26-week service requirement will apply via subsequent implementing regulations.
Previously considered measures such as compensation for shift cancellation or curtailment without reasonable notice are not contained in the Bill.
Just how quickly these legislative changes will be made is unknown but unlikely before 2024.
5. Harassment protection
Back in 2019 the Government Equality Office (GEO) ran a consultation that primarily focused on sexual harassment, but also applied to harassment related to age, disability, gender reassignment, race, religion or belief, sex, or sexual orientation. The Government is now supporting the Worker Protection (Amendment of Equality Act 2010) Bill 2022-23.
If passed, the Bill:
- introduces a duty on employers to take all reasonable steps to prevent sexual harassment of their employees and provides for a 25% compensation uplift in sexual harassment cases where there has been a breach of the employers' duty; and
- re-introduces protection from third-party harassment subject to an "all reasonable steps" defence. Unlike the new preventative duty, this is not limited to sexual harassment, but also covers the other relevant protected characteristics.
Just how quickly the legislative changes will be made is unknown, but it's unlikely to be before 2024.
In addition, the Equality and Human Rights Commission is to be tasked with writing a statutory Code of Practice on Harassment. The new Code is likely to raise the bar in defining what employers need to do to prevent workplace harassment and will have greater legal force than the existing guidance.
6. Fire & rehire statutory code
Over the last couple of years the practice of "fire & rehire" ("dismissal & re-engagement") has come under increasing scrutiny from politicians and unions. On 24 January 2023, the Government launched a Consultation on a statutory Code of Practice on Dismissal and Re-engagement (together with the draft statutory Code), which runs until 18 April 2023.
The draft Code is intended to act as practical guidance, clarifying the steps employers are expected take when seeking to change contractual terms and conditions of employment where there is the prospect of dismissal and re-engagement. The expected steps include providing information, engaging in meaningful consultation and exploring alternatives.
The Code will apply where an employer is considering dismissal to effect changes to terms and conditions but still needs the roles to be filled. The Code will apply regardless of whether the roles might be filled by the employer's existing staff or by new hires.
While the use of dismissal & re-engagement is not being banned it should be used as a last resort, and failure to follow the Code could result in a 25% uplift to compensation awards in relevant cases. Employers need to take note of what is to come as:
- The draft Code does not supplant existing legal requirements, but it does significantly supplement them.
- Employers will need to introduce more formal, and well-documented procedures to demonstrate compliance with the Code.
- There is no minimum number requirement to trigger the information & consultation required under the Code.
- The expected information & consultation goes beyond the familiar existing rules as apply in relation to collective redundancy consultation and TUPE in expecting:
- employers to continue to engage with the workforce about the changes, even after new terms have been agreed; and
- employers to provide practical support (for example, by phased introduction of changes or extending contractual notice periods) when new terms are to be imposed by dismissal and re-engagement.
7. Industrial action
The highly controversial Strikes (Minimum Service Levels) Bill was introduced in Parliament on 10 January 2023. If enacted, the Bill will allow the Secretary of State to set minimum service levels (MSLs) for services falling within the categories of:
- health services;
- fire and rescue services;
- education services;
- transport services;
- decommissioning of nuclear installations and management of radioactive waste and spent fuel; and
- border security.
Where a union calls a strike in a service to which minimum service regulations apply, the employer would be able to give the union a "work notice", identifying the workers that are required to work and the work they are required to do during the strike. The employer must first consult the union and must not identify more workers in the notice than are "reasonably necessary" to meet the minimum service. The union will lose its immunity from liability in tort if it fails to take reasonable steps to ensure compliance by any union members identified in the work notice. The Bill would also amend unfair dismissal rights, so that any worker identified in a work notice who takes part in the strike to an extent not permitted in the work notice will lose their automatic protection from dismissal.
Much of the detail of the new law is left to be set out by the Government in regulations, including the minimum service levels themselves and the scope of the relevant services. This has prompted concern about a possible lack of effective democratic scrutiny over the new restrictions. There also seems to be no effective mechanism under the Bill for a union to challenge a work notice that goes further than is "reasonably necessary".
The Government has said that it will first consult on MSLs for fire, ambulance and rail services, and that it hopes not to have to use these powers for other sectors included in the Bill. The Government "expects parties in these sectors to reach sensible and voluntary agreements on delivering a reasonable level of service when there is strike action but will step in and set minimum service levels should that become necessary". Unsurprisingly, the Bill is facing major opposition from unions.
8. Holiday: Return of the 12.07% method
Last year, the Supreme Court in Harpur Trust v Brazel held that The Working Time Regulations 1998 (WTR) generally require that a 'calendar week method' is used to calculate holiday pay, rather than a 'percentage method'. Capping annual holiday pay at 12.07% of annualised hours for ease of calculation is not permitted. This results in part-year workers being entitled to a larger holiday entitlement than part-time workers who work the same (in some cases more) total number of hours across the year.
As a result, the Government is proposing to introduce legislation allowing employers to pro-rata holiday entitlement for part-year and irregular hours workers, so that they receive leave in proportion to the total annual hours they work. Under the proposal, a new "52-week holiday entitlement reference period" will be introduced making the calculation: hours worked in previous 52 weeks x 12.07% = annual statutory entitlement in hours.
Legislative recognition of the 12.07% method will simplify holiday pay calculations for those with irregular and those with part-year hours. After all, getting holiday entitlement and pay right should be easy.
And, are there more WTR reforms to come? The WTR fall within the ambit of The Retained EU Law (Revocation and Reform) Bill currently working its way through Parliament. As it currently stands, the WTR will be revoked on 31 December 2023, unless deliberately saved or replaced beforehand. Assuming the Bill continues to progress, we can expect further consultation in the coming months on the accrual and calculation of holiday pay free of EU case-law, the reclassifying of so-called 'inactive on-call time' and changes to record keeping requirements.
9. Near 10% increases to statutory rates
From 1 April 2023, the National Minimum Wage (NMW) rates increase. All NMW rates are increasing by 9.7%, with National Living Wage (NLW) (for those aged 23+) rising to £10.42. This is the largest increase to the NLW since its introduction in 2016 and reflects the steep rise in inflation and cost-of-living crisis. Employers may find they employ more people on the cusp of NLW rates and therefore may need to pay greater attention to NLW compliance.
Statutory sick pay will rise to £109.40 in April 2023 (from the current rate of £99.35) and the weekly prescribed rate of statutory maternity pay and other types of family-related leave will be £172.48 (up from £156.66).
10. Artificial intelligence
In September 2022, the Government published a policy paper entitled 'Establishing a pro-innovation approach to regulating AI', containing proposals for the regulation of artificial intelligence (AI), predominantly through regulator guidance. This was accompanied by a House of Commons Science and Technology Committee inquiry into the governance of AI and a call for evidence.
In the inquiry, MPs are currently considering the responses to the call for evidence and exploring how the Government can ensure AI is used in an ethical and responsible way with effective governance. This is a huge topic with significant implications for employers using AI. For more, see the Employment Lawyers Association's 'Response to the Call for Evidence: Governance of Artificial intelligence'.
At European level, the draft AI Liability Directive will establish harmonised rules for AI, which will help victims (either individuals or businesses) access compensation for damage caused by AI systems. The new rules will make it easier to obtain compensation for breaches of privacy, or damages caused by safety issues, as well as where there is discrimination in a recruitment process involving AI technology (unlawful discrimination based on algorithmic processing).
The legal process for victims when it comes to proving that someone's fault led to damage will be simplified through two main features. The first is a so-called "presumption of causality" where a relevant fault has been established and a causal link to the AI performance seems reasonably likely. The second feature is a right of access to evidence from companies and suppliers of the AI systems. The European Parliament and the Council will need to formally adopt the AI Liability Directive under the ordinary legislative procedure before it can be published in the Official Journal of the European Union and enter into force. That is likely to take some considerable time.
An area to watch – modern working practices bringing modern working concerns to be addressed. See our on demand webinar Artificial Intelligence – Help! My manager is a machine for more on this emerging topic.
Bonus: Extra Bank Holiday
And finally, remember there will be an extra Bank Holiday on Monday 8 May 2023 to mark the coronation of King Charles III.
As with other bank holidays, there is no statutory entitlement to time off, but employers may include bank holidays as part of a worker's leave entitlement. Whether employees who work on this bank holiday are entitled to additional pay for the day, or to reclaim the leave, is a matter for discussion between employees and employers. Employers may wish to consider that schools will be closed, so many parents will have to make alternative childcare arrangements to work on the day.
For more information about what's coming on the horizon for employment law in 2023, contact a member of our Employment team