Future of Work: Navigating Employment Trends in the UK by 2025

Client Alert  |  January 15, 2025

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In this update, we examine the significant changes within the UK employment arena throughout 2024 and anticipate what lies ahead in 2025.

Below is a concise overview of developments and cases that we believe will capture interest, with additional details on each topic accessible via the provided links.

1. Mitigating sexual harassment (view details)

We evaluate the newly established legal obligation requiring employers to take reasonable measures to mitigate sexual harassment in the workplace – which also encompasses harassment by clients, customers, and other external parties – alongside the practical approaches that employers can adopt to ensure adherence.

2. Focus on dismissal and re-engagement (view details)

We report on recent legal shifts concerning the practice of ‘dismissal and re-employment’ of staff to implement unilateral adjustments to employees’ contractual conditions.

3. Case revisions (view details)

We analyze three crucial cases from 2024 concerning employment status determination, processes applicable to minor layoffs, and a recent ruling on the enforceability of post-employment restrictive agreements in investment contracts.

4. Update on Employment Rights Bill (view details)

We furnish an update on two amendments that the Labour Government has suggested for the Employment Rights Bill (the “Bill”).

5. Anticipations for 2025 (view details)

We reflect on the probable developments and cases that we expect will influence UK employment law throughout 2025.

Appendix

1. Mitigating sexual harassment

Effective from 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 mandates employers to take “reasonable steps” to avert sexual harassment in the workplace. This novel obligation imposes a proactive legal responsibility on employers to gauge risks and implement measures to prevent sexual harassment from occurring (and, where harassment has already transpired, from recurring).

The repercussions for employers who fail to take “reasonable steps” to prevent workplace sexual harassment can be serious: the Equality and Human Rights Commission is now empowered to initiate enforcement actions against such employers, while the Employment Tribunal may increase compensation for sexual harassment by up to 25% if employers are found in breach of this duty.

The assessment of whether employers have taken “reasonable steps” is objective, reliant on the nature of the employer and the specific facts and circumstances of each case. The interpretations of this duty by courts and tribunals are yet to be determined, and whilst what constitutes “reasonable steps” may differ by case, based on guidance published by the Equality and Human Rights Commission (which can be accessed here) and comprehensive advice from the Advisory, Conciliation and Arbitration Service (“ACAS”) (which can be located here) the following actions should be implemented:

a. Assess attitudes

Employers should undertake anonymous organizational evaluations to gauge employees’ comprehension and awareness of sexual harassment, as well as their perceptions of how the employer would react to reported incidents. Such assessments should be conducted regularly, with the findings utilized to pinpoint areas requiring action and to formulate training and policies.

b. Create policies

Employers should formulate comprehensive sexual harassment policies which encompass: (i) a definitive explanation and examples of sexual harassment; (ii) clarification of whom and where the policies are applicable; (iii) an outline of the reporting channels available; (iv) a summary of the complaint procedures and potential penalties for experiencing sexual harassment; and (v) a declaration of zero tolerance for victimization. Employers should pledge to monitor the efficacy of sexual harassment policies and modify them as required.

c. Promote awareness of policies

Employers should disseminate sexual harassment policies among all staff, underscoring the available reporting avenues. This may involve informing new staff about sexual harassment policies during onboarding sessions and issuing annual reminders to all employees. Sexual harassment policies may also be alluded to in (even if not integrated into) contracts of employment and/or other terms and conditions of employment.

d. Undertake risk evaluations

Employers should evaluate the risks associated with sexual harassment within the employment context, focusing on the workplace culture and environment. To address the identified risks, employers should implement mitigating actions and communicate transparently with employees regarding any such measures taken. It is essential for employers to routinely carry out risk evaluations to ensure compliance with the new obligation.

e. Deliver training

Employers should provide training for all employees on sexual harassment and victimization. Although the provided training should be tailored to the nature of the employer and the work environment, it should cover at the very least: (i) how to recognize sexual harassment; (ii) the actions required if employees encounter or observe sexual harassment; and (iii) the processing of sexual harassment complaints. It is recommended that employers keep records of who has undergone sexual harassment training and offer refresher courses at regular intervals.

f. Evaluate third parties

Employers should assess the risks of sexual harassment stemming from any third parties with whom employees will interact, such as clients, customers, and contractors. To mitigate this risk, employers should encourage staff to report any instances of harassment by third parties. Employers should also consider incorporating express terms in standard contracts with third parties mandating adherence to any existing sexual harassment policies.

g. Formalize reporting mechanisms

Employers should provide multiple reporting avenues for those who wish to report sexualharassment grievances. Whenever feasible, employers ought to provide both anonymous and identified reporting pathways, allowing anonymous complainants the opportunity to file identified reports later if they choose. Employers should contemplate offering external online or telephonic reporting mechanisms for those preferring to lodge anonymous grievances.

h. Address grievances

Employers must clearly state that sexual harassment grievances may be filed at any moment: there should be no deadline by which grievances must be submitted. Employers should guarantee that any raised grievances are examined impartially and comprehensively. Attention should be paid to the preferences of the complainant, ensuring that the confidentiality of all involved parties is upheld. The results of any official grievances regarding sexual harassment should be made as transparent as possible to motivate future complainants to come forward.

i. Prevent retaliation

Employers should weigh the risks associated with retaliation when performing risk assessments. It might be essential for employers to implement measures to limit interactions between complainants and alleged harassers in order to safeguard complainants and to reduce any risks of retaliation. Employers ought to carefully evaluate all feasible alternatives to alleviate such risks before suspending the alleged harasser.

j. Assess actions taken

Employers should carry out assessments to gauge the effectiveness of policies aimed at preventing sexual harassment within the workplace. One suggestion is for employers to assess sexual harassment policies through anonymised questionnaires. Such questionnaires should prompt staff to explain whether they have experienced or observed behaviours that would qualify as sexual harassment, and, if so, whether they reported such behaviours. Employers should juxtapose the data obtained from these surveys with the number of sexual harassment grievances formally logged. This will enable employers to gain a clearer understanding of sexual harassment within the workplace and implement additional measures to promote reporting as necessary.

2. Termination and re-engagement

a. Code of Conduct

In July 2024, the Labour Government released a new Statutory Code of Conduct on Termination and Re-engagement (the “Code”) which delineates employers’ obligations when attempting to alter employees’ contractual conditions using the contentious method of ‘fire and rehire’ (where the employee is terminated and presented with re-engagement on less advantageous terms).

Neglecting to adhere to the Code does not, in itself, render an employer liable to legal proceedings, however, any non-compliance with the Code must be considered by the relevant court, tribunal, or committee when evaluating the fairness of an employer’s actions and, specifically, when determining compensation. Starting from 20 January 2025, the Employment Tribunal will also possess the authority to adjust any awards made by up to 25% for any unreasonable failure to comply with the Code.

A concise summary of the core provisions of the Code is provided below:

• Employers intending to modify employees’ contractual terms and conditions must be clear and open with the pertinent employees and should engage in consultation with the employees “for as long as reasonably feasible in good faith” to attempt to reach a consensus regarding any changes;
• Prior to introducing the prospect of termination and re-engagement with employees, the Code advises that employers should consult ACAS for unbiased guidance on their rights and responsibilities;
• The Code stresses that employers should not leverage the threat of termination as a “bargaining strategy” to coerce employees if they are not genuinely contemplating termination as a method to achieve the desired goals;
• If employers decide on termination and re-engagement:
  • The Code recommends that employers provide employees “with as much notice as reasonably possible” of the termination and consider extending the employees’ contractual notice periods to accommodate the changes; and
  • The Code encourages employers to solicit feedback from employees and pledge to review the alterations at a set future date; and
• Crucially, the Code does not pertain to the termination and re-engagement of employees arising from a genuine redundancy (lay-off) situation.

b. Employment Rights Legislation

Simultaneously with the release of the Code, the Labour Government has pledged to conclusively abolish the practice of ‘fire and rehire’ during the duration of this Parliament. According to the Employment Rights Bill, the termination and re-engagement of employees will be classified as unfair dismissals, except under specific limited circumstances. Employers may still be able to engage in this practice (subject to additional safeguards) if: (i) the alteration to the employment terms could not have reasonably been avoided; or (ii) alleviating financial challenges that are affecting the employer’s capacity to operate the business as a going concern is the reason for the alteration. These exceptions are designed to guarantee that businesses can reorganize to remain sustainable when business or workforce demands require it.

c. Supreme Court Injunction

Meanwhile, the Supreme Court has reinstated an injunction barring an employer from terminating employment contracts as part of a ‘fire and rehire’ operation aimed at unilaterally eliminating a permanent enhanced “retained” pay element that had been a component of the employees’ contractual rights following prior negotiations with the employees’ union.

In Tesco Stores Limited v Union of Shop, Distributive and Allied Workers, the High Court had initially granted the injunction based on the premise that there was an implied term within the employees’ contracts that prohibited termination of employment as a method to eliminate the employees’ entitlement to retained pay. Although the Court of Appeal overturned this judgment, the Supreme Court reinstated the injunction, determining that the intent of the parties during the negotiation of the enhanced pay provision could not have been for Tesco to hold an unrestricted unilateral right to terminate the employees’ contracts to deprive them of this entitlement.

While the circumstances surrounding the Supreme Court decision were quite unusual, the case underscores the significance of detailed drafting when attempting to solidify the outcome of rights negotiated with unions, as well as the susceptibility of ‘fire and rehire’ methods to legal scrutiny. When employers intend to utilize this process to alter employees’ terms of employment, they should give considerable thought to the specific context and history of the arrangements they propose to modify.

3. Case updates

a. Assessing employment status

The determination of whether an employment relationship exists is guided by the three criteria from Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance, which can be summarized as follows: for an employment relationship to exist: (i) the individual consents to provide a service for a company in return for compensation (“mutuality of obligation”); (ii) the individual is subjected to a certain level of control, such as regarding how, when, and where the work is performed (“control”); and (iii) the contractual stipulations.

and the connection between the parties as a complete unit aligns with an employment relationship.

HMRC v Professional Game Match Officials Ltd was a case initiated by HMRC which claimed that part-time football referees should be classified as employees, thus national insurance and income tax ought to have been subtracted from their payments. The Supreme Court determined that mutuality of obligation and control were evident in the individual match day agreements for these referees. In its ruling, the Supreme Court established that mutuality of obligation does not have to persist throughout the entire contractual relationship but can exist only for the duration of the work performed, and that control is context-dependent and can be deemed sufficient even when it pertains to only minor aspects. With this guidance now provided, the Supreme Court has referred the case back to the First-tier Tribunal (“FTT”) to ascertain whether the contracts constituted employment contracts, considering the third criterion mentioned above.

Implications for employers

This case acts as an important reminder of the factors necessary to establish an employment relationship and underscores the potential risk of reclassifying self-employed contractors, even when the circumstances for such a change initially appear remote. The Supreme Court has also offered some insight into the degree to which mutuality of obligation and control are required for reclassification, and we will be keenly observing the next ruling in this matter once the FTT has revisited it.

b. Redundancies

In the UK, whether a dismissal due to redundancy (i.e., a lay-off) is deemed ‘fair’ relies on whether an employer has reasonably deemed redundancy to constitute a valid reason for dismissing the employee. Judicial precedents have established that an employer typically does not act reasonably in cases of redundancy dismissal unless they have engaged in discussions with the affected employees while the redundancy proposals are still in development. Furthermore, if an employer plans to lay off 20 or more employees within a single location over a 90-day period, it must conduct collective consultations with the impacted employees according to the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).

Although the mandate for collective consultations is only legally enforced under TULRCA for what are categorised as ‘large-scale’ redundancies, some argue that as a best practice in industrial relations, the broader workforce should also be involved in discussions for ‘small-scale’ redundancy actions that fall below the TULRCA thresholds. In the case of De Bank Haycocks v ADP RPO UK Ltd, Mr. De Bank Haycocks alleged he was unfairly chosen for redundancy. After initially having his claim rejected at the Employment Tribunal stage, the Employment Appeal Tribunal upheld his claim, finding that there was insufficient meaningful dialogue during the formative stage of the redundancy process due to a lack of general workforce consultation by ADP RPO UK Ltd (“ADP”), which they concluded was requisite for sound industrial relations practices in all redundancy scenarios.

ADP contested this ruling to the Court of Appeal, which accepted the appeal, affirming that there is no obligation for general workforce consultation in the case of ‘small-scale’ redundancy efforts that fall below TULRCA thresholds. Provided there is sufficient individual level consultation, that will be adequate.

Implications for employers

This ruling should reassure employers conducting small-scale or individual redundancies that general workforce consultation is not necessary for a just redundancy procedure. Nonetheless, it also stresses the need to allow individual employees to share their opinions on factors that might influence the employer’s decisions, such as the reasoning, selection criteria, and pools for redundancies, at a formative point in the redundancy process when their input could shape outcomes.

c. Post-employment restrictive covenants

In the UK, the enforcement of post-termination restrictive covenants is only valid if they safeguard a legitimate business interest and do so in a reasonable manner. This implies that the duration and range of any restrictive covenants must not surpass what is essential to protect the employer’s legitimate interests.

Literacy Capital Plc v Webb involved a founding director of the company Mountain, who signed an investment agreement as a loan note holder after stepping down from her previous role. The investment agreement included restrictive covenants. Following Mountain’s appeal to the High Court to impose the restrictive covenants on the former director, the High Court determined that the restrictive covenants in the investment agreement stemmed from the defendant’s role as both a former director and employee of the pertinent company. In light of this, the High Court executed a restraint of trade assessment to evaluate the legality of the provisions. The court concluded that the covenants were unenforceable because they were: (i) excessively lengthy (ten years instead of the customary one or two years); (ii) overly expansive in geographical scope (covering the whole of the UK and Channel Islands when the business operated only in two English counties); and (iii) limited too wide a range of business activities, extending well beyond the company’s core operations.

Implications for employers

This case underscores the necessity of ensuring both the duration and scope of restrictive covenants are reasonable when drafting them. Employers should be particularly careful about linking durations to events that may lengthen the restrictive covenants excessively (for example, in this case, the redemption of loan notes). It also serves as a crucial reminder that even when restrictive covenants are part of a commercial agreement, a court may perform a restraint of trade analysis if it believes the restrictive covenants relate to an individual’s role as an employee.

4. Update on Employment Rights Bill

In our previous publication “A New Deal for Working People”? – Labour Government Introduces Employment Rights Bill in the UK on 16 October 2024, we detailed the actions the Labour Government has implemented and aims to undertake under the Employment Rights Bill. An Amendment Paper was released on 27 November 2024, outlining various changes to the Bill proposed by both the Labour Government and other Members of Parliament. We have presented a brief summary of two of the amendments suggested by the Labour Government that we believe will be relevant to our clients. The Bill is presently under review by the Public Bill Committee, which is expected to report to Parliament on 21 January 2025.

a. Unfair Dismissal during Initial Employment Period

The Labour Government has previously committed that, while the Bill designates unfair dismissal as a “Day One” right, there would be a “lighter touch” process for dismissals taking place during an initial period of employment. The Labour Government has now put forward an amendment that would permit the Secretary

of State to delineate a limit on the compensatory award for workers who successfully assert unfair dismissal during the initial phase of employment. Such a limit could provide employers with additional assurance regarding the extent of any potential liabilities incurred when executing dismissals in this preliminary employment period.

b. Employment Tribunal Deadlines

The deadline for submitting numerous types of UK employment claims in an employment tribunal currently concludes three months from the date the claim originates, subject to an extension of up to six weeks for pre-claim conciliation. The Labour Government has suggested in the Amendment Paper that this deadline be extended to six months. This modification should not come as a shock, as it was hinted at in the comprehensive reforms the Labour Government proposed leading up to the UK General Election. We examined this proposal in our publication What Employers Can Anticipate in the UK under the New Labour Government on 8 July 2024.

5. Anticipations for 2025

In addition to the modifications to the Employment Rights Bill mentioned above, we anticipate that the Labour Government will persist with its thorough evaluations of the various long-term initiatives outlined in its original “Plan to Make Work Pay” before the 2024 General Election. We analyzed these commitments in our publication “A New Deal for Working People”? – Labour Government Presents Employment Rights Bill in the UK on 16 October 2024. The long-term initiatives which the Labour Government has pledged to consult regarding include:

• employment classification – the Labour Government has pledged to engage with businesses on its proposals to enhance protections for the self-employed and to simplify the existing employment classification framework by transitioning towards a singular status of ‘worker’;
• parental and caregiving leave – the Labour Government will execute extensive reviews regarding the consequences of potential reforms to the parental and caregivers’ leave systems; and
• collective grievances – the Labour Government has committed to engage with ACAS on its proposals to allow employees to voice collective grievances about conduct within the workplace.

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The following attorneys from Gibson Dunn prepared this update: James Cox, Heather Gibbons, Georgia Derbyshire, Olivia Sadler, Finley Willits and Josephine Kroneberger*.

Gibson Dunn attorneys are available to help address any inquiries you may have regarding these advancements. Please reach out to the Gibson Dunn attorney you typically work with, any leader or member of the firm’s Labor and Employment practice group, or the following authors in London:

James A. Cox (+44 20 7071 4250, [email protected])

Georgia Derbyshire (+44 20 7071 4013, [email protected])

Heather Gibbons (+44 20 7071 4127, [email protected])

Olivia Sadler (+44 20 7071 4950, [email protected])

Finley Willits (+44 20 7071 4067, [email protected])

*Josephine Kroneberger, a trainee solicitor in the London office, is not licensed to practice law.

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