Unfair dismissal – a 'day one right'

The Labour Party promised to lay an Employment Rights Bill (the 'Bill') before Parliament in its first 100 days in power and it did so on 10 October 2024.  It is the most ambitious set of employment law reforms for more than a generation and it is difficult to think of an area of employment law that will be untouched.  

Whilst the Bill is very lengthy, much of the detail has yet to be worked out.  The Government expects to begin consulting on the reforms in 2025, anticipating that the majority of them will take effect no earlier than 2026.

By now, those with even a passing interest in employment law will be aware that the Bill proposes to make unfair dismissal a 'day one right'.  It is one of the most fundamental changes being introduced. What will the removal of the two-year qualifying period for unfair dismissal claims mean in practice - and what will happen to probationary periods?

So far, the following is clear.

•  The requirement for employees to have at least two years' continuous service to bring unfair dismissal claims will be repealed.  (Currently, unfair dismissal as a 'day one' right only applies in limited exceptions where an employee can bring a claim for 'automatic unfair dismissal', such as dismissal for whistleblowing or asserting a statutory right.)    
• The Government has promised that the reforms of unfair dismissal will take place no sooner than autumn 2026.  

• The Bill makes it clear that claims of unfair dismissal cannot be brought if the employee has not yet started work (e.g. where a contract of employment is terminated before the employee started work under it).  (In relation to the limited 'automatic unfair dismissal' exceptions mentioned above, termination prior to an employee starting work can still result in an unfair dismissal claim, which is the current position.)

The situation becomes rather less clear in relation to probationary periods.  In its 'Next Steps' document, the Government has promised 'protection from Unfair Dismissal while allowing employers to operate probation periods'.  There has been a lot of press coverage about probationary periods, but, in fact, the Bill makes no reference to them.  Instead, it creates the new concept of 'initial periods of employment'.

Key points to note about 'initial periods of employment' are as follows. 

• Duration:  The Government will consult on the duration of initial periods of employment, which will be the subject of regulations made later by the Secretary of State.  However, 'Next Steps' suggests that the Government's preference is 9 months, which is longer than many were expecting.  Situations where the employer gives notice during the initial period of employment and the notice expires up to three months after such period will be included.
• Reasons for dismissal:  If a dismissal occurs during the initial period of employment, in order to dismiss fairly the employer will have to establish a reason related to conduct, capability, or a statutory ban (e.g. not being entitled to work in the UK) or 'some other substantial reason related to the employee,' but the process that will be required for a fair dismissal will be 'lighter touch' (see below).  Crucially, redundancy dismissals are not included so an employer who makes an employee redundant on 'day one' will need to follow the usual fair process that currently applies in order to avoid a claim of unfair dismissal (though the two-year qualifying period for statutory redundancy payments will remain).  
• Process for dismissal:  It is unclear how difficult it will be in practice to dismiss employees in the initial period of employment.  The Bill says simply that the employer will need to have taken steps that are to be set out in regulations later.  The 'Next Steps' document refers to 'a lighter touch process' to include a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague).  It remains to be seen what will actually be required.  
• Compensation:  The Government intends to consult on compensation for unfair dismissal claims during the initial period of employment, but has said that consideration will be given to Employment Tribunals not being able to award the full compensatory damages currently available. 

In the short term, employers should ensure they keep any contractual probationary periods under review.  In due course, it may be sensible to align them with the initial period of employment.  They should also think about developing and embedding robust performance assessment processes during the early stages of employment (and getting managers trained and used to using these) so that they are ready for when the law changes.