Employment law post-election – should we be feeling blue?

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Elizabeth Marshall believes that it is starting to become clear what we can expect from the Conservative Government in terms of changes to UK employment law during this Parliament.

Elizabeth Kirk_HSQ_7339Election fever has died away and David Cameron has firmly settled back into Number 10 for another five years. The contents of George Osbourne’s secretive red briefcase (containing the unexpected “Summer Budget”) were also revealed last month, giving us an indication of which pre-election promises are likely to be kept, and which are likely to be dumped quicker than yesterday’s news.

With this in mind, it’s starting to become clear what we can expect from the Conservative Government in terms of changes to UK employment law.

Starting with an issue that proved to be a contentious topic between all of the parties pre-election, we should mention the notorious zero hour’s contract (“ZHC”). In March 2015 the Small Business, Enterprise and Employment Act 2015 came into effect, banning the use of exclusivity causes in ZHCs. This move had a lot of support and, in reality, only a handful of these contracts still used such provisions. However, after all of their talk, the Conservatives aren’t planning any further changes to ZHCs, with Conservative Work and Pensions Secretary Iain Duncan Smith commenting that these agreements actually suit many people and can offer employees a work-life balance.

Another big talking point following the election has been the proposed in-out referendum on the UK’s membership of the EU – the Government has now confirmed that this will go ahead before the end of 2017. The EU currently has a huge impact on the way that employment law in the UK is shaped, both via its legislation and case law. In light of that, any departure from the EU could have a significant impact on all manner of UK employment laws, including the way that we deal with collective redundancies and the transfer of undertakings.

It’s still early days and it’s not entirely clear exactly what changes will be sought by the party. However, early whisperings suggest that David Cameron is planning to make an opt-out from laws such as the Working Time Directive and the Agency Workers’ Directive one of his goals in his negotiations with Europe.

Surprisingly, news reports have been filtering in over the past few weeks which suggest that these negotiations have already begun – if this is true, the referendum could take place much earlier than anticipated. Saying that, beginning the negotiations is one thing, but how long they go on for could be an entirely separate matter.

Leaving that aside, another issue that has been gathering a lot of media interest over the past few months are the Government’s plans around industrial action – no doubt this has been highlighted by the recent series of strikes by Transport for London.

The Conservatives have now published a draft Trade Union Bill, which proposes a number of measures aimed at limiting strike action – these are being heralded by some as the biggest crackdown on trade union rights for 30 years. Under the proposals, we could see a new turnout threshold (requiring at least half of the union’s members in the affected workforce to vote) as well as a new threshold for lawful industrial action in ‘essential public services’. In addition, we could see an increase in the notice period before industrial action can take place (to 14 days) and illegal picketing could be made a criminal offence.

In general it’s good news for employers, whose businesses can be severely disrupted by industrial action on short notice – as a minimum, the new time limits should give organisations enough notice to arrange an alternative workforce where necessary. Some might argue that the changes will effectively remove any incentive for employers to listen to their workers and settle disputes, and they could be right – we will have to wait and see what the outcome of the consultation is when it closes on 9 September 2015.

Another area that could see change moving forward is the Human Rights Act 1998 – the Conservative manifesto initially contained plans to replace the Act with a new British Bill of Rights and Responsibilities, with a view to curtailing the role of the European Court of Human Rights (“ECtHR”) in UK employment law.

The Human Rights Act 1998 was initially a Labour initiative, and the Conservatives have made it clear that they are looking to narrow the scope of the Act so that the UK courts are no longer bound by the ECtHR. In particular, a number of recent ECtHR decisions have led to worries that it has become overly involved in dealing with matters relating to the UK.

Although seemingly distinct from employment law, these changes could have an impact – to date, the Human Rights Act 1998 has helped to shape employees’ rights to privacy in the workplace, and the extent to which employers can monitor their staff. It has also brought in additional protection against employees being dismissed on the basis of political opinion, religious beliefs and their association with a union.

However, the Government has now backtracked on its plans, instead choosing to hold a consultation on whether to proceed with the Bill. It has also suggested that, even if it goes ahead, the new Bill will be limited in its application. As such, it is likely that the introduction of the Bill will result in the same level of protection as the Human Rights Act 1998, meaning it will have little impact on employment law in the UK.

One of the less publicised proposals following the election was the Government’s pledge to introduce a new requirement for public sector employers and companies with more than 250 employees to give staff up to three paid days off a year to do voluntary work. This would be in addition to the employees’ annual leave, and could leave employers short staffed during certain time of the year. However, a consultation will need to be held around this proposal first, so it’s unlikely that it will come into force until 2016 at the earliest.

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Many of the Conservative plans for employment were revealed by George Osbourne in his ‘Summer Budget’

Whilst some of the plans proposed by the Conservatives were dealt with in their manifesto, a number have come about via the recent Summer Budget announced on 8 July 2015.

In particular, the Chancellor announced the introduction of a “living wage” for the over 25s – this will be £7.20 an hour from April 2016 (rising to £9 by 2020), which is a sizeable uplift on the existing national minimum wage of £6.70.

Whilst this is undoubtedly good news for employees, it will not be welcomed by small to medium sized businesses or employers with a large workforce on low rates of pay, who will now need to find ways of meeting this unexpected (and potentially hefty) expense going forwards.

The Chancellor also revealed plans to increase the tax-free personal allowance to £12,500 – a new law will be introduced so that once it reaches this level, people working 30 hours a week on the National Minimum Wage won’t pay income tax at all.

These changes sound positive in principle – however, it will be interesting to see whether employers use this as an opportunity to avoid increasing salaries, resulting in their employees still receiving the minimum wage despite the tax relief.

The Chancellor also announced some fairly significant changes to the benefits that contractors currently enjoy. These include the replacement of the existing dividend tax credit with a new tax-free allowance of £5,000, and the likely increase in dividend tax rates. He has also suggested that IR35 will be re-examined to ensure that it is as effective as possible – this is likely to mean a tightening of the legislation. Taken together, these changes are likely to reduce the appeal that the acclaimed ‘contractor status’ currently holds, and could drive a number of individuals to consider whether they would in fact be better off overall as employees.

So where does this all leave us? Well, the full extent of the Conservatives’ proposals for reform remains to be seen – we are, after all, only three months into the five year term. It does seem, at first blush, that the Government will be pushing forward some of the proposals from their manifesto – however, only time will tell how those proceed and what form they eventually take.

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About Elizabeth Marshall

Elizabeth has worked in law firm Kemp Little's employment team since June 2012. Elizabeth advises a wide range of UK companies on day-to-day employment matters, including tribunal claims, the recruitment and termination of staff, the enforceability of contractual terms and compromise agreements. Elizabeth is a member of the Employment Lawyers Association.

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