Employment Law changes may increase litigation in 2024

The past five years have been characterised by employment law inertia, without any significant legislation passed affecting the world of work.

As we head toward the end of 2023, it is positive to see this begin to change with a period of significant legislative activity that will take us into 2024. But what is changing exactly, and what effect is it likely to have on employers and their people in 2024 and beyond?

Louise Taft, consultant solicitor in our employment law team discusses in this article featured with Law360.

What changes will be made to EU employment rights?

There will be a great deal of uncertainty for employers in 2024, as the Retained European Union Law (Revocation and Reform) Act comes into force on Jan. 1, 2024.

As the bill passed through Parliament, there was significant controversy. In its original form, it would have revoked all EU-derived regulations unless they were reinstated. Thankfully, this presumption was reversed, and now only specific regulations will be revoked.

This means that the Working Time Regulations, the Transfer of Undertakings (Protection of Employment), or TUPE, Regulations, the Part Time and Fixed Term Workers Regulations, and Agency Workers Regulations will now all remain.

However, that isn’t the end of the story.

The act will also make technical changes to the interpretation of all EU-derived legislation, which employers will need to be aware of, including the Equality Act. It abolishes the supremacy of EU law and general principles of EU law, and changes the test for appellate courts on departing from retained EU law, which will now be known as assimilated law.

These changes are essentially an invitation to seek to overturn the way that courts and tribunals have interpreted EU-derived employment rights and have the potential to result in more litigation in 2024. That could well increase the already considerable tribunal backlog, and mean that the law remains uncertain while cases make their way to the higher appeal courts, creating a great deal of uncertainty for employers.

In an attempt to mitigate some of this uncertainty and maintain the status quo, several draft regulations attempt to reproduce various elements of EU law that could have otherwise fallen away.

Employers can expect uncertainty concerning holiday pay

The changes to the Working Time Regulations, which come into force on Jan. 1, 2024, attempt to codify principles from EU case law on holiday pay so that:

• The calculation of holiday pay for at least four weeks’ leave must include commission and regular overtime;
• Workers can carry over all their statutory holiday entitlement where they have been unable to take it due to family related leave;
• Workers can carry over up to four weeks for a maximum of 18 months when they have been unable to take holiday due to sickness; and
• Workers can carry over up to four weeks indefinitely where the employer fails to recognize they are entitled to paid holiday under the regulations, fails to give them a reasonable opportunity to take holiday, or fails to inform workers that any leave not taken in that year will be lost.

In theory, this simply makes sure that the existing position on holiday pay is maintained from Jan. 1, 2024, when EU supremacy and general principles of EU law are abolished.

However, having these rights expressly set out in the regulations may bring them to the attention of some employers and workers who were previously not aware of these rights.

The government has also taken the opportunity to allow employers to roll up holiday pay for part-year and irregular hours workers. They will accrue holiday entitlement at 12.07% of the number of hours they have worked, subject to a maximum of 28 days.

This reverses the current ban on rolled up holiday pay, and the July 2022 U.K. Supreme Court decision in Harpur Trust v. Brazel on calculating holiday pay for part-year workers. In that case, the teacher was working term time only. Employers will now be able to pay irregular and part-year workers an additional sum to cover their holiday, rather than when that holiday is taken.

The new regulations also remove the need to keep daily records of working hours for Working Time Regulations purposes. However, details of hours worked are still required for minimum wage compliance and could be needed to defend claims that workers are required to work in excess of their maximum working week or are not being given adequate rest breaks.

Although the intention of the new regulations is to simplify holiday rights, they may cause as many problems as they solve. For example, there is no definition of “regular overtime” in the calculation of holiday pay, so practitioners can expect litigation on how “regular” overtime has to be before it is included.

While that litigation finds its way through the tribunal system, businesses will need to make some difficult calls on this until there is a precedent.

Employers will benefit from the simplification of TUPE transfers

Changes have also been made to the TUPE regulations, which come into force on Jan. 1, 2024, and will allow individual rather than collective consultation in small businesses of fewer than 50 employees, or where the transfer involves fewer than 10 employees, irrespective of the size of the business as a whole.

This will simplify smaller-scale TUPE transfers where there is no union involved. Employers will no longer have to elect employee representatives with whom to consult in these circumstances, but can instead hold individual meetings with employees.

Multiple changes to the Equality Act 2010 will implement EU law

There have also been some changes to the Equality Act 2010 which, again, are designed to implement EU law and come into force on Jan. 1, 2024.

The changes mean that women can now seek equal pay when their pay is set by the same “single source” as their male counterparts.

This has been used most notably in recent supermarket cases where shopworkers are compared with distribution workers. Breastfeeding mothers who experience less favorable treatment because of breastfeeding will now benefit from this being considered direct discrimination because of sex.

Another positive move is that women will now be protected from unfavorable treatment in connection with their pregnancy or maternity, even after they return from maternity leave. Women will also be protected when they have an equivalent entitlement to compulsory, ordinary or additional maternity leave.

Finally, employers will be liable for direct discrimination if they make discriminatory statements about recruitment, even if there is no active recruitment process underway. Meanwhile, the regulations also confirm that assessing whether someone meets the criteria for disability in the Equality Act includes considering their ability to participate fully and effectively in working life on an equal basis to others.

This allows claims that there is some aspect of work that creates difficulties for individuals with disabilities. Finally, the regulations introduce a new section of the Equality Act to cover what is termed indirect discrimination by association. This allows someone who does not share a particular protected characteristic, such as sex or race, for example, to still claim indirect discrimination if they are put at “substantively the same disadvantage” as those who do share it.

While we have yet to see many cases that rely on this principle, it could in theory be used by a man seeking flexible working in circumstances when women in the organization suffer the same disadvantage of restrictions on working from home or part-time hours.

There is a new duty for employers to prevent sexual harassment

The Worker Protection (Amendment of Equality Act 2010) Act introduces a new duty on employers to take reasonable steps to prevent sexual harassment of their employees, with the power to increase compensation by 25% when this is not done.

Human resource departments should be urgently reviewing what organizations put in place to prevent harassment, as pointing to a policy in a staff handbook few read is unlikely to be enough.

Employers should be aware of tweaks to flexible working

The Employment Relations (Flexible Working) Act passed over the summer and makes technical changes to the existing framework, allowing up to two flexible working requests per year.

It also requires employers to consult with employees before refusing a request and allrequests should be considered within two months.

The act is expected to come into force during 2024, but doesn’t make flexible working a “day one right,” even though this has been promised by the government. So, while employees still need to have been with an employer for 26 weeks before they have the statutory right to request flexible working, this could change in the near future.

The government has also recently issued a call for evidence on nonstatutory flexible working, i.e., requests outside the statutory scheme.

It isn’t clear yet whether this would lead to further statutory change or perhaps guidance issued via the Advisory, Conciliation and Arbitration Service.

What else is on the employment law radar in 2024?

There are a host of other considerations that those advising employers will want to monitor over the coming year, including:

• Regulations extending the protection from redundancy to pregnant workers and those recently returned from parental leave;
• The removal of the bonus cap in financial services;
• The Workers (Predictable Terms and Conditions) Act, which will give the right to request a more predictable working pattern;
• The Carers Leave Act, which will give carers the right to one week’s unpaid leave per year; and
• The Employment (Allocation of Tips) Act, which will impose obligations on employers regarding tips, gratuities and service charges.

It is positive to see employment law move from inertia to action, but there is likely to be a great deal of uncertainty ahead for employers and workers as the industry gets to grips with the unintended consequences of some of the employment law changes. With this in mind, it looks likely that 2024 will be one of increasing litigation. This could add to the already considerable tribunal backlog and make advising clients difficult while the law remains uncertain.

For help and support with an employment law issue, get in touch with our employment team.