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What’s happening in employment law in 2021?

06 January 2021

Although the Covid-19 pandemic still dominates the agenda, the employment law landscape continues to evolve. In this article, we review the significant developments in 2020 and look ahead to what’s on the horizon for employment law in 2021.

Key employment law developments in 2020

Many of the employment law changes in 2020 were introduced in response to the Covid-19 pandemic. The most significant was the establishment of the furlough scheme. There have also been various other emergency measures, ranging from the changes to sick pay entitlement through to the new right to carry forward holidays that could not be taken due to the pandemic (see our Coronavirus hub for all the details).

The pandemic understandably delayed the progress of most other non-Covid-19 legislative developments. Several changes to employment law nonetheless took place during the early part of 2020 because the legislation to bring those changes into effect was already in place before the pandemic took hold. For example:

  • Employers became obliged to provide a more detailed written statement of employment particulars to all staff (including workers) by day one of employment.
  • Working parents gained a specific entitlement to two weeks' paid bereavement leave  in the event of losing a child under the age of 18.
  • The reference period for calculating statutory holiday pay increased from 12 weeks to 52 weeks.
  • The “Swedish Derogation” (exempting certain agency workers from the principle of equal treatment) was abolished.
  • The threshold for demanding information and consultation arrangements reduced from 10% to 2% of employees.
  • Employers became liable to pay employers’ national insurance contributions at 13.8% on termination payments exceeding £30,000.

The Equality and Human Rights Commission (EHRC) also issued significant new guidance on harassment.

The courts were also impacted by Covid-19, but nonetheless managed to publish some important decisions, most notably the welcome decision in Morrisons (in which the Supreme Court concluded that an employer was not vicariously liable for misuse of personal data by a rogue employee).

At a European level, the ECJ also published some significant decisions, including Marclean (employers need to look back as well as forward when calculating if collective redundancy thresholds are met), Yodel (a gig economy driver was apparently self-employed) and Govaerts (the Acquired Rights Directive may require an employment contract to be split up and transferred to two employers).

The Employment Tribunals have rapidly implemented new technology for hearings in order to deal with the growing backlog of claims, alongside new rules of procedure designed to make hearings more efficient and flexible.

Last but not least, at the very end of 2020, the UK government finally struck a trade deal with the EU  just before the Brexit transition period ended, with some interesting potential immediate and longer-term implications for UK employment law.

Expected employment law developments in 2021

Covid-19 will of course continue to dominate government and parliamentary time in the weeks and months ahead, so there may be little room for new legislation or policymaking.

However, the government has recently launched two consultations, on the reform of non-compete clauses (which explores whether non-competes should be paid or banned altogether) and on whether exclusivity clauses should be banned in contracts with low-paid employees.

The legislative change with the biggest impact on the immediate horizon is undoubtedly the reforms to IR35.  The changes are currently set to take place in April 2021. The new rules require medium and large sized businesses in the private sector to assess the employment status of those contractors who provide their labour through their own intermediary and, if appropriate, operate PAYE and NICs (don’t leave planning to the last minute). These reforms were originally supposed to take effect in April 2020 but were delayed due to the pandemic. There will be calls for further delay but, at the time of writing, the reforms are still expected in April 2021.

At some point in 2021, we may finally see the new Employment Bill which was originally promised in the Queen's Speech in December 2019 but also delayed due to Covid-19. The Bill is likely to introduce or pave the way for various new employment laws including:

  • Making flexible working the default. As set out in the Conservative party's election manifesto, the government intends to make flexible working the “default position” unless an employer has a good reason. A full consultation is expected, but the Employment Bill is likely to include provision for new rights.
  • Leave for neonatal care.A new right to 12 weeks' paid leave for parents whose babies spend time in special hospital neonatal care units is likely to be included in the Bill and eventually come into force in 2023.
  • A week's leave for carers. The Bill is also likely to introduce a new right for working carers to take up to 5 extra days’ leave per year to help them carry out their caring responsibilities.
  • Extending redundancy protection to pregnant employees and maternity returners. Currently, employees have priority for alternative employment if made redundant during maternity leave. The government plans to extend this period of redundancy protection to cover the period from when an employee notifies their employer of their pregnancy (whether orally or in writing) until six months after the end of their maternity leave. Similar protections will apply to parents returning from adoption or shared parental leave.
  • The right to request a more predictable and stable contract.The Bill is also likely to introduce a new right for all workers with variable hours to request a more stable and predictable contract after 26 weeks' service. It is possible that the Bill will go a little further and introduce new rights for workers to be given reasonable notice of their working hours and to be compensated where their shifts are cancelled or curtailed without reasonable notice.
  • Single labour market enforcement agency. The government intends to set up a single body with responsibility for state enforcement of employment law for more vulnerable workers. Its remit would encompass matters such as gangmaster licensing. It would also take over minimum wage enforcement from HMRC and have a new role in enforcing holiday pay for vulnerable workers. The Bill is expected to make provision for the establishment of the new agency, but it is likely to be many years before it is up and running.

The government committed some time ago to legislating on non-disclosure agreements (NDAs) to make them void unless they meet certain requirements and the employee has received specific legal advice on them. We may see legislation on this during 2021, either in the Employment Bill or separately. The EHRC may start consulting on a new Code of Practice on Harassment, building on the major guidance it published last year (see above). It’s also possible that we will see some progress on ethnicity pay reporting.

More immediately, we are expecting two very significant Supreme Court decisions – in the Uber case (concerning whether Uber drivers have worker status) and in the Royal Mencap Society case (about whether sleep-in workers are only entitled to national minimum wage when woken up for work).

Elsewhere in the courts, we may start to see decisions about Covid-19-related issues, such as disputes about health and safety at work or furlough.

Perhaps the most interesting issue to watch will be whether the UK government seeks to change any aspect of EU-derived employment law. Changes to employment rights that affect trade or investment would breach the government’s non-regression promise in the Brexit trade deal, but more minor changes are allowed and it remains to be seen if the government acts early to exercise its new freedoms or if it is unwilling to rock the boat with the EU. Meanwhile, the Supreme Court is considering three cases on holiday pay in 2021, which could potentially provide some indication of their approach to settled ECJ caselaw in the new post-Brexit world.

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