The Shadow Chancellor of the Exchequer, Rachel Reeves, delivered the 36th annual Mais Lecture last week. Her speech, titled “Economic Growth in an Age of Insecurity”, set out her party’s blueprint for the British economy should they be elected, and gave us some food for thought on Labour’s proposed workforce reforms. Reeves structured her party’s plans around three pillars of domestic growth – the guarantee of economic stability, investment in business and the nation, and reform of the labour market. These three pillars are part of Labour’s wider proposal to focus on resilience and security, which Reeves termed “securonomics”.
This blog post looks at what Reeves said about the third pillar (reform of the labour market), Labour’s wider proposals both in and following their 2022 Green Paper (“A new deal for working people”), and how the proposed changes may impact employers and workers alike.
General comments
Throughout the lecture, Reeves emphasised that the leading goals of securonomics are higher living standards and security for working people. This can be achieved, she posited, by balancing the interests of both employers and workers and of both businesses and individuals, through Labour’s proposed reforms. Reeves explained Labour’s view that “human potential” can be harnessed by companies, in part by addressing the skills gap, the living wage, and by providing greater security and flexibility for workers. She highlighted independent research which found that “enabling workers to better combine family life and work can broaden labour market participation […] there are strong statistical relationships between job satisfaction and workplace performance”.
Day one rights
Labour would guarantee – as a day one right – protection from unfair dismissal, although Reeves confirmed that this would not prohibit probationary periods or fair dismissal processes. In the UK, most roles currently hold a qualifying period for unfair dismissal of two years. In addition, Labour’s Green Paper proposes removing the statutory cap on unfair dismissal compensation and extending the limitation periods for these claims in the Employment Tribunal.
The changes proposed by Labour may prompt a shift in approach by employers, leading to more stringent recruitment processes and heightened reliance on probationary periods. In addition, a greater focus on robust and carefully managed dismissal processes may be necessary to manage any additional risk posed by removal of the compensation cap.
While many economies similar to the UK have shorter qualifying periods for unfair dismissal, no period at all would place the UK in a minority. We may see a sharp rise in unfair dismissal claims should this proposal be brought in.
Reeves also reiterated Labour’s proposal that sick pay and parental leave would become day one rights.
All of these rights would be extended to “workers” (please see below). No further detail was given on these particular proposals, and to date the shake-up of unfair dismissal rights has received more press than these other suggested extensions. We expect that more information will be given the closer to a general election we are.
Zero-hour contracts
Labour would outlaw zero-hour contracts, instead aiming to introduce a contract reflective of regular hours worked over twelve weeks or more – although Reeves added that overtime or seasonal working could still be offered by employers.
Although there is no fixed legal definition of a ‘zero-hour contract’, the term is typically used to describe working arrangements where there is no guarantee of work or pay. Although Reeves emphasised Labour’s aim to strike a balance between supporting individuals and businesses and its efforts to create “flexibility that works both ways”, there is a risk that the abolition of zero-hour contracts may lessen flexibility for both workers and businesses. Workforce reduction is a potential side effect, as workers who enjoyed the flexibility of their previous arrangements may feel forced to leave. Similarly, we may see a strain on businesses and specific sectors, especially within the gig economy, which have been able to grow and retract even within economically turbulent times due to zero-hour contracts.
Trade unions and industrial action
Perhaps the largest raft of changes Labour is proposing is to trade unions and related legislation. Reeves did not go into detail on this point but did specify that the current regime would be replaced in order to lead to “fewer strikes and less disruption”. In the Green Paper, Labour proposed that this would be achieved by repealing the Trade Union Act 2016 (and thus associated restrictions on industrial action), simplifying the law around union statutory recognition (by lowering the threshold), and giving unions additional rights and protections.
As we have previously explored in our Effective Collective series, we have in recent years seen a rise in statutory recognition requests, and should the threshold be lowered we would expect to see more requests and a higher success rate. Labour’s proposal is a marked change from the Conservatives’ approach and would give trade unions a wider remit within the workplace.
Also in the Green Paper, Labour put forward its plan to introduce sectoral collective bargaining – through introducing “Fair Pay Agreements”, negotiated sector-by-sector between employers and unions. While this is a common occurrence in European jurisdictions, it would be novel in the UK. It would likely mean that employers who have not previously had to engage with trade unions will need to do so, which will bring with it a renewed need for legal advice and guidance.
Broader Labour initiatives
In the later part of the lecture, Reeves focused on the importance of championing women in the labour market. Labour would “harness women’s economic potential”, ensuring – Reeves promised – “good work in our everyday economy” and “renewed efforts toward ending the gender pay gap”.
These comments follow on from Labour’s wider proposals in the Green Paper to reform discrimination law (both in the workplace and outside), and tie in with its proposed Race Equality Act.
At present, equal pay claims can only be brought on the basis of sex, and a pay claim on the basis of another protected characteristic would need to be brought as a discrimination claim. Labour would extend the equal pay claims regime to allow pay claims to be brought on the basis of ethnicity and disability.
In addition, Labour plans to introduce the right to bring a discrimination claim based on two protected characteristics, which it terms “dual discrimination”. Labour’s approach to dual discrimination may not come as a surprise, given that a provision for this eventuality is already technically contained in the Equality Act 2010 (although it has not been brought into force).
What now?
The key areas discussed in the Mais Lecture will not be unexpected for those following Labour’s workplace proposals and plans. The introduction of “securonomics” is, perhaps, a more developed and coherent lens through which to view Labour’s proposals of day-one rights, banning of zero-hour contracts and approach to trade unions.
The previously published Green Paper proposes a range of wide-reaching reforms in addition to those in this blog post, covering pay, worker status, fire and re-hire, changes to enforcement, and beyond. Although not addressed above, some main areas to watch between now and the next general election include:
- Worker status: Labour intends to create a single status of “worker” for all but the genuinely self-employed. All workers will be afforded the same basic rights and protections (including sick pay, holiday pay, parental leave, and protection against unfair dismissal, as discussed in this blog post).
- Fire and re-hire: Labour intends to make fire and re-hire unlawful, by improving information and consultation procedures, adapting the legislation around unfair dismissal and redundancy, and ensuring that trade union requirements on notice and ballot do not inhibit action to protect terms and conditions of employment in these situations.
- Single enforcement body: Labour intends to establish a single enforcement body to enforce workers’ rights, and to also allow workers to bring civil cases for breaches of statutory health and safety regulations.
If you would like to discuss any issues relating to these proposals and how Freshfields may be able to assist, please contact your usual Freshfields contact or any of the contacts in this blog post.
