UPDATE - On 16 December, the final point of contention between the House of Commons and the House of Lords was resolved. With the Lords conceding their objection to the removal of the cap on compensation for unfair dismissal, the Employment Rights Bill was passed. This paves the way for Royal Assent to be given prior to the Christmas parliamentary recess beginning.
The progress of the Employment Rights Bill once again faltered when it returned to the House of Lords on 17 November, with the Lords again insisting on its amendments. But with the Bill not due to return to the Commons until 8 December, the UK Government announced on 27 November that the day one unfair dismissal right has been abandoned.
Unfair dismissal changes
According to the UK Government, following discussions with trade unions and business representatives, it has been agreed that the current two-year service requirement is be replaced by a six month service requirement. The UK Government has also committed to ensuring that the unfair dismissal qualifying period can only be varied by primary legislation meaning any future change will be subject to full parliamentary scrutiny. Reports suggest this change will take effect from 1 January 2027, with employees who have at least 6 months' service at that date having protection from unfair dismissal.
The compensation cap on unfair dismissal is also to be removed. The current cap is the lessor of 12 months gross pay or £118,223. Having regard to how employment tribunals calculate any award, it is not anticipated that this will have a material impact on the level of awards made for the majority of employees. However, it may well have a more significant impact for employers when dealing with claims or negotiating departures relating to very high earners. In this regard, it is worth noting that the most recent tribunal award statistics show the average unfair dismissal award was £13,749 for the 12 month period reported on. This is also expected to take effect from 1 January 2027.
What are the other amendments the Lords are still insisting upon?
When the Bill does return to the House of Commons, the other amendments being insisted on by the House of Lords will be considered.
As Lord Fox pointed out during the debate, there may be a sense of déjà vu as the issues discussed on 17 November were the same as those discussed on the Bill's previous visit to the Lords on 28 October. Following the announcement on unfair dismissal, the areas of disagreement between the Houses remain:
- Workers being able to opt out of being offered guaranteed hours.
- A provision requiring the Secretary of State to have regard to the specific characteristics and requirements of seasonal work when making regulations relating to guaranteed hours.
- Rejection of the proposal that trade union members should automatically be opted in to a union's political fund.
- Retaining the requirement of a 50% turnout of those eligible to vote for industrial action ballots to be valid.
What now?
Unless all the Lords' amendments are accepted by the House of Commons, which seems unlikely, the Bill will need to return to the House of Lords again. If there is going to be any chance of the Bill receiving Royal Assent before the Christmas recess begins on 18 December, that will need organising very quickly.
Can the House of Commons force the Bill through?
It is likely the UK Government will be hoping the concession on unfair dismissal will be enough to placate the Lords, and agreement on the final text of the Bill will be achieved. However, given how the Lords have stood their ground to this point, that is far from guaranteed.
There is a rarely used mechanism available whereby a Bill can receive Royal Assent without the consent of the House of Lords. However, it is not a procedure that the House of Commons could rely on to resolve the current parliamentary ping pong. So, if the back track on unfair dismissal qualifying service doesn't resolve the impasse, we may still see some further concessions being made before Royal Assent is achieved.
