In the UK, there are three main categories of working status: employee, worker or self-employed. The distinction between each is significant because the applicable status determines the extent of:

• the legal protections and rights afforded to the relevant individual; and/or
• the responsibilities that the employer would be required to assume.

Although the government published non-statutory guidance on determining employment status on 26 July 2022, it is ultimately the courts who have the authority to determine employment status. The courts have developed a number of tests to determine the correct classification of workers and will look at a wide range of factors when assessing an individual’s true employment status. No one factor is determinative of the issue, and the courts will look at the substance rather than form in determining the true nature of such a relationship. The labels used by the parties to describe the arrangement will only be the starting point, and the matters taken into account (and the weight given to them) will vary depending on the circumstances.

Employees

Employee status is the highest form of employment status under UK law. A key test for determining whether someone is an employee is whether there is “mutuality of obligations” between the hirer and the individual. This means that the employer has an ongoing commitment to provide work and the employee has a reciprocal ongoing commitment to accept the work offered.

A range of other factors will subsequently be looked at by the courts, namely:

• control – whether an individual has control of how, what, when, where and on what terms services are to be provided;
• personal service – whether an individual is permitted to send along a substitute to perform services rather than being required to perform them personally;
• integration – the extent to which an individual is integrated within the organisation; and
• dependency – the extent to which an individual takes a business risk, such as by supplying their own capital or providing their own tools and equipment.

Consideration will also be given to factors including the nature and length of the engagement, the pay and benefits, and the facilities and the equipment provided to the individual, as well as any written contract in order to establish the weight that ought to be placed on the agreed terms.

Broadly, the greater the number of tests that are satisfied, the greater the likelihood that an individual will be considered an employee. Conversely, the fewer the number of tests that are satisfied, the more likely it is that an individual will be considered self-employed.

Workers

Even if an individual is deemed not to be an employee, they may still qualify as a worker. This definition has been subject to extensive scrutiny by the tribunals and courts to determine what types of working arrangements fall within its scope. Subject to certain exceptions, the same tests for deciding whether someone is an employee are typically used in deciding whether someone is a worker, but the “pass mark” is lower. The first enquiry for workers is to examine whether there is a contract of some kind between the individual and their putative employer – that is, either an employment contract or some other kind of contract to perform work or services.

Although workers are entitled to less statutory rights than employees, they are entitled to:

• the national minimum wage (NMW);
• rest periods and other limits on working time;
• paid holiday;
• the right to seek compulsory trade union recognition; and
• the right not to suffer detriment under the whistle-blowing provisions of the ERA.

Self-Employed – Independent Contractors

Under current UK employment law, a self-employed independent contractor is one of the three categories of individuals providing services in the job market (alongside an employee and a worker). There are statutory definitions for employees and workers, although these are not comprehensive and the current position has been substantially defined through case law. An individual who is neither an employee nor a worker will be self-employed for employment law purposes.

An employer seeking to use the independent contractor model will need to take steps to ensure that the reality of the relationship between the company and the contractor accurately reflects their roles as independent contractors in order to mitigate litigation and tax risks.

The basis of the employment or worker relationship in the UK is that of a contract between the parties.

Pursuant to Section 1 of the ERA, employers are required to give employees and workers a written statement of the principal terms of their employment or engagement in a single document. This is a “day one” right, which means that the worker is entitled to receive the statement on or before their start date. This requirement is often satisfied in practice by requiring the employee to sign a written employment contract that contains the required particulars.

The principal terms to be provided in writing in this Section 1 statement include:

• the names of each party;
• the date employment began;
• the date of continuous employment;
• remuneration and the intervals at which it is paid;
• hours;
• holiday entitlement;
• benefits;
• notice period on termination;
• job title;
• place of work;
• probationary period (if relevant); and
• any mandatory training provided by the employer or which must be funded by the employee.

Terms relating to collective agreements, pension arrangements and disciplinary rules and procedures can be provided at a later date and in a separate document provided that this is no later than two months after the beginning of employment.

After the fourth year of employment on a renewed fixed-term contract, employment will be deemed to be permanent/indefinite unless the further use of a fixed-term arrangement can be justified.

Fixed-term employees are entitled to equal treatment with comparable permanent employees, unless the difference in treatment is objectively justified. Employers should also be aware that the expiry and non-renewal of fixed-term employment will be a dismissal at law and the employee may be able to claim that this dismissal is unfair.

The Working Time Regulations 1998 limit working hours as follows:

• Working week: a 48-hour maximum working week calculated as an average over a 17-week period (the maximum working week is reduced for under-18s). An individual may opt out of the maximum working week by written agreement, unless they are under 18.
• Weekly rest break: 24 hours' uninterrupted rest in each week or 48 hours' uninterrupted rest in each fortnight (exemptions may apply, in which case compensatory rest must be provided).
• Daily rest break: 11 hours' uninterrupted rest (exemptions may apply, in which case compensatory rest must be provided) and a 20-minute rest break when the working time exceeds six hours (limited to eight hours per day on average).
• Night work: reasonable steps should be taken to ensure that normal hours do not exceed eight hours per day on average, and night workers are entitled to a free health assessment when starting night work and thereafter at regular intervals and can transfer to day work if their night work is causing health issues.

An employer must keep adequate records to demonstrate compliance with working time obligations, including daily working time.

The Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 apply to part-time workers and provide that part-time workers must not be treated less favourably in their contractual terms and conditions than comparable full-timers, unless different treatment is justified on objective grounds. A part-time worker’s salary and holiday entitlement must be calculated on a pro rata basis.

Subject to compliance with the applicable national living wage or NMW, the law does not require employees to be paid for overtime. However, when employees are paid hourly, it would be uncommon for overtime not to be paid.

In terms of flexible arrangements, employees with at least 26 weeks' continuous employment can make a request for flexible working under the statutory scheme for any reason. Only one request can be made in any 12-month period. On 23 September 2021, a consultation document was published on this topic that proposed various reforms, including a number of measures to broaden the scope of the right to request flexible working while retaining the current basic system. The government published its response to the consultation on 5 December 2022, confirming that it would make a number of changes to the Employment Rights Act 1996 to achieve this. As at the date of writing, the Bill which, when enacted, will implement some of the necessary amendments (including providing for employees to make up to two applications in any 12-month period, and for the employer to consult with the employee before refusing their request for flexible working) was at the stage of its third reading in the House of Lords. The Bill does not provide for employees to have the right to request flexible working from the first day of their employment, but the government has indicated that it intends to introduce this change through secondary legislation after the Bill has been enacted.

On 1 April 2023, the hourly NMW rates were increased as follows:

• the national living wage increased to GBP10.42;
• the 21–22-year-old rate increased to GBP10.18;
• the 18–20-year-old rate increased to GBP7.49;
• the 16–17-year-old rate increased to GBP5.28;
• the apprentice rate increased to GBP5.28; and
• the accommodation offset increased to GBP9.10.

The national living wage applies to all workers who are aged 23 or over, and is expected to apply to all workers aged 21 or over from April 2024.

Other current rates and payments applicable at the time of writing include the following:

• statutory sick pay – GBP109.40 (weekly rate);
• redundancy pay – GBP19,290 (maximum statutory redundancy payment) and GBP643 (weekly cap);
• statutory shared parental pay (ShPP) – GBP172.48 (prescribed weekly rate); 
• statutory maternity pay (SMP) – GBP172.48 (prescribed weekly rate);
• statutory adoption pay (SAP) – GBP172.48 (prescribed weekly rate);     
• statutory paternity pay (SPP) – GBP172.48 (prescribed weekly rate);
• minimum auto-enrolment contributions – minimum pension contribution (8%) between employer and employee;
• voluntary living wage (non-statutory; set by the Living Wage Foundation) – GBP11.95 (London) and GBP10.90 (UK); and
• tribunal compensation limits:

1. weekly pay limit for calculating unfair dismissal basic award – GBP643;
2. maximum unfair dismissal basic award – GBP19,290;
3. maximum compensatory award for unfair dismissal – GBP105,707 (or one year's pay if less);
4. minimum basic award for dismissal on trade union, health and safety, pension, employee representative or working time grounds – GBP7,836;
5. weekly pay limit for failure to reinstate or re-engage (between 26–52 weeks’ pay) – GBP643;
6. weekly pay limit for breach of the right to be accompanied (up to two weeks’ pay) – GBP643;
7. weekly pay limit for breach of flexible working regulations (up to one week's pay) – GBP643;
8. weekly pay limit for failure to give written particulars of employment (two to four weeks’ pay) – GBP643; and
9. payment for breach of contract claim in Employment Tribunal (eg, wrongful dismissal) – capped at GBP25,000.

From 6 April 2023, the Vento bands for calculating injury to feelings awards in discrimination claims for England, Wales and Scotland also increased.

Bonuses can be awarded by an employer on a contractual or discretionary basis.

Unlike other jurisdictions, it is not customary or required by law to pay bonuses in the UK – such as “13-month salaries”. Employers should exercise their discretion to award bonuses fairly and in good faith.

UK law provides for the following types of leave: maternity, paternity, adoption, shared parental, parental and parental bereavement.

• Maternity – up to 52 weeks (no qualifying conditions) with six weeks’ pay at 90% of pay and 33 weeks at statutory maternity pay (currently GBP172.48 per week), subject to qualifying conditions in length of service and earnings.
• Paternity – two weeks to be taken on or within 56 days of the birth or adoption of the child (subject to qualifying length of service) at statutory paternity pay (currently GBP172.48 per week).
• Adoption – up to 52 weeks (no qualifying conditions) with six weeks’ pay at 90% of pay and 33 weeks at statutory maternity pay (currently GBP172.48 per week), subject to qualifying conditions in length of service and earnings.
• Parental – up to 18 weeks' unpaid leave in total per child under the age of 18; limited to four weeks per year unless otherwise agreed (subject to qualifying length of service).
• Shared parental – up to 50 weeks of the mother's maternity leave and 37 weeks of pay (currently GBP172.48 per week) can be shared with her partner.
• Parental bereavement – up to two weeks to be taken at any time within 56 weeks of the death of a child under 18 (includes a stillbirth after 24 weeks of pregnancy) (no qualifying conditions).

All UK workers are legally entitled to 5.6 weeks’ paid holiday per year (including bank holidays).

During the course of their employment, employees owe an implied duty of fidelity to their employer, which includes an obligation not to compete. After employment is terminated, the ability of employers to prevent competition is more restricted, as this implied duty falls away and the employer must rely on restrictive covenants.

Restrictions that limit the activities of the employee post-termination will be void and unenforceable unless specific conditions are met. A post-termination restriction will be enforceable only when it:

• protects the legitimate business interests of the employer (eg, trade connections, goodwill or employees);
• is the minimum required to protect that legitimate business interest; and
• is reasonable in scope.

To determine reasonableness, the court will balance the interests of the employer and former employee. Issues to consider will include the duration of the restriction, geographical scope, the seniority of the former employee, the nature of their role, and the nature of the industry (including whether it will be possible for the employee to obtain a new job if the restrictions were to be enforceable).

There is no maximum period for a post-termination covenant. However, restrictions lasting more than 12 months are unlikely to be enforceable in the UK, except for in exceptional circumstances.

Employers should avoid using a “one-size-fits-all” approach to the covenant provisions within their employment contracts, as covenants should be based on the individual’s seniority and tenure. Furthermore, the court expects the duration of restrictive covenants to be shorter if the employee’s notice period is short. If the term of the covenants is disproportionate, especially for more junior employees, then the court may deem them unenforceable as a restraint of trade.

The UK government opened a consultation on measures to reform post-termination non-compete clauses in contracts of employment. The consultation closed in February 2021 and proposed to:

• allow workers greater freedom to find new or additional work;
• discourage the widespread use of non-compete clauses; and
• introduce a mandatory requirement for compensation to be paid for the duration of a non-compete restriction.

The consultation also included an extreme proposal to ban non-compete clauses altogether.

The government published its response to the consultation on 12 May 2023 and has announced a proposal to introduce legislation to limit the maximum duration of non-compete clauses in worker and employment contracts to three months. The proposal will not limit the duration of other types of post-termination restriction (such as non-solicitation clauses), nor does the government intend to ban non-competes entirely or require employers to compensate former staff for the duration of their non-competes. At the time of writing, detailed legislative proposals have not yet been brought forward, and it is not yet clear when the proposed three-month limit may be introduce or how exactly it would operate in practice (for example, whether it would only apply to non-competes entered into after it becomes law, or also to existing non-competes which exceed three months).

A non-solicitation clause is a restriction that prevents an employee from poaching other employees or customers for a specified period. A non-dealing clause similarly prevents an employee from doing business with other employees or customers. The above-mentioned principles apply – ie, employers must be prepared to justify any post-termination restriction with a legitimate business interest and not go any further than necessary in order to achieve this interest.

Although the UK government’s recent consultation document referred to non-compete post-termination restrictions throughout, it similarly sought views on whether the proposals should apply to non-solicitation clauses and non-dealing clauses. In its response to the consultation (see above), the government did not propose that the three-month cap it intends to introduce in respect of non-competes should also apply to other types of restrictive covenant. However, it remains to be seen whether the legislation introducing that cap would be capable of bringing other restrictions within its scope, to the extent that they limit competition.

The Data Protection Act 2018 (the DPA) and the retained EU General Data Protection Regulation (Regulation (EU) 2016/679) (UK GDPR) are the primary legal instruments that protect employees’ personal data. The government has consulted on proposals to reform the UK’s data protection laws including by amending the DPA and UK GDPR. For this purpose, following a consultation, it introduced the Data Protection and Digital Information Bill in July 2022. The Bill was subsequently withdrawn and replaced by the Data Protection and Digital Information (No. 2) Bill, which was introduced in March 2023 and, at the time of writing, is at the report stage in the House of Commons. The proposals represent certain departures from the data protection regime in the EU, though the government considers such divergence not to be fundamental and unlikely to affect the EU’s adequacy decision in respect of the UK data protection regime.

Processing personal data must be carried out in accordance with the data protection principles. The first of these is that data should be processed in a lawful, fair and transparent manner and thereby must satisfy one of the specific conditions in Article 6(1) of the UK GDPR. The most relevant conditions for employment purposes are:

• data subject (employee) consent;
• the processing is necessary for the performance of a contract to which the data subject is a party; or
• the processing is necessary for the purposes of the legitimate interests of the data controller.

The second two conditions will typically apply in an employment context; therefore employee consent will not always be required. If consent is required, it needs to be specific, informed and freely given.

Sensitive Data

Under Article 9 of the UK GDPR, additional safeguards apply in relation to the processing of personal data that is classified as a “special category of personal data” (or sensitive personal data).

The special categories of personal data are:

• race or ethnic origin;
• political opinions;
• religious or philosophical beliefs;
• trade union membership;
• genetic and biometric data;
• health; and
• sex life or sexual orientation.

Special category data may be processed if explicit consent is given or in cases where processing is necessary for limited specified grounds, including:

• protecting the vital interests of the data subject;
• reasons of public interest in the area of public health; or
• carrying out rights and obligations under employment law.

Background Checks

Background checks are permissible provided that they are conducted in compliance with the UK GDPR. The employer should conduct a data privacy impact assessment to ensure that the information is legitimately required and that there is compliance with the data protection principles.

Data Subject Access Requests

Under Article 15 of the UK GDPR, current and former employees can make a DSAR to obtain all their personal data held by their employer. As personal data is information that relates to an identifiable individual, employers often hold significant amounts of personal data about their staff. An employer has one month to respond to an employee’s DSAR, although it is possible to extend this deadline for a further two months in the case of complex requests. 

Employee Monitoring

Guidance provided by the ICO has confirmed that covert monitoring will only be justified in exceptional cases. Employers will still need to carry out an impact assessment before undertaking the monitoring, not only to determine whether it is necessary but also to ensure the monitoring is conducted in a way that is the least intrusive. From a cultural perspective, employee monitoring can also erode trust between employee and employer.

Data Breaches

In WM Morrison Supermarkets plc (Appellant) v Various Claimants (Respondents), the Supreme Court overturned judgments by the Court of Appeal and High Court and found that Morrison Supermarkets was not vicariously liable for an unauthorised and deliberate breach of the DPA committed by a disgruntled employee. Although this decision confirmed that employers will not always be liable for data breaches committed by rogue employees, the Supreme Court held that employers may still be vicariously liable in other circumstances for a data breach committed by an employee who controls data in the course of their employment.

All foreign workers who do not have an underlying right to work in the UK must have the necessary visa or work permit. Employers are obliged to check that workers have the right to work and should keep a record of these checks and the evidence provided. Other than the relevant immigration requirements, there are no limitations on using foreign workers.

Whether a foreign worker is subject to UK employment taxes and national insurance contributions will depend on a number of factors, including the duration of the assignment to or employment in the UK and whether there is a tax treaty between the host country and the UK.

The government has created a new immigration system following the cessation of EU freedom of movement on 31 December 2020. The deadline for EEA or Swiss citizens to apply for pre-settled status in the UK expired on 30 June 2021.

Skilled Workers

Anyone an employer recruits from outside the UK for the skilled worker route needs to demonstrate that:

• they have a genuine job offer from a Home Office-licensed sponsor;
• they speak English at the required level;
• the job offer is at the required skill level of RQF3 or above (equivalent to A level); and
• they will be paid at least GBP26,200 or the “going rate” for the job offer, whichever is higher.

There are different salary rules for workers in some health or education jobs, and for “new entrants” at the start of their careers.

Global Business Mobility ‒ Senior or Specialist Worker

From 11 April 2022, five new immigration routes opened to overseas businesses that either wish to establish a presence in the UK or transfer staff for specific business reasons. The Global Business Mobility (GBM) ‒ Senior or Specialist Worker route replaced the Intra-Company Transfer route, and allows senior managers and specialist employees to come to the UK to perform temporary work assignments. Applicants will need to be existing employees of the sponsor group, who will undertake roles that meet the skills and salary thresholds. In addition, applicants must also:

• have a Certificate of Sponsorship (CoS) from an A-rated sponsor, which must be issued by their employer no more than three months before the date of their application;
• pay the Immigration Health Surcharge;
• have 12 months’ experience working for the sponsor group outside the UK, unless they are a “high earner” (ie, gross annual salary of at least GBP73,900 or more);
• be undertaking a role at the required skill level of NQF level 6 or above (graduate-level equivalent); and

• be paid at least GBP45,800 or the “going rate” for the job, whichever is higher.

Permission for workers transferred to the UK on the GBM – Senior or Specialist Worker route is temporary. Workers can be assigned to the UK multiple times, but they cannot stay in the UK for more than five years in any six-year period (or nine years in any ten-year period if they are a high earner). The Intra-Company Transfer – Graduate Trainee route has also been replaced by the new GBM – Graduate Trainee route.

Other Routes

An employer does not need a licence to hire via an unsponsored route such as the global talent visa. An individual can apply to the global talent scheme if they are an endorsed leader or potential leader in:

• academia or research;
• arts and culture; and
• digital technology.

Employers that require or permit staff to work remotely should not assume that this reduces the legal requirements applicable to them and their personnel. Remote, hybrid and mobile work are not regulated by any single piece of legislation in the UK, but engage considerations arising from a number of distinct bodies of law. These include:

• Health and safety (for example, discharging the employer’s duties in respect of a safe place of work, and safe equipment, where employees work from home).
• Data protection and data security (including in relation to the security of confidential information and personal data).
• Tax (including as to the tax treatment of equipment provided by the employer and the individual).
• Employment status (for both tax and employment law purposes, individuals who routinely work away from a traditional office environment may be more likely to give rise to questions as to whether they are employees or another category of worker).

Employers in regulated industries such as financial services also need to be aware that staff who temporarily or periodically perform their work from other countries and/or for other members of the employer’s corporate group may be subject to multiple regulatory regimes (not just that of the UK). Such individuals may be prohibited or restricted by the applicable regulations from performing certain activities in certain locations. It is good practice to have in place robust policies, contractual arrangements and management practices to ensure appropriate compliance.

Remote working from outside the UK, whether on a temporary or permanent basis, may also expose the individual and the employer to requirements, liabilities and obligations arising under the law of another jurisdiction, including in respect of immigration law (including questions of whether the individual has the right to work in the relevant location); the acquisition of statutory employment rights and protections; obligations to pay and withhold tax; and the transfer of personal data between jurisdictions with different data protection regimes.

There is no statutory right to sabbatical leave in the UK. Employers that permit such leave typically do so as a matter of discretion. The terms applicable to any sabbatical leave (including as to eligibility, purpose, duration and return-to-work, and as to whether the leave will be paid or unpaid) will typically be set out in a policy and/or contract. Employers should ensure any decisions made in respect of sabbaticals (for example, whether to grant a request for a sabbatical) are made in accordance with any applicable policies and contractual arrangements, and in a way that mitigates the risk of any legal claim arising from the decision (such as a claim for direct or indirect discrimination). It is also good practice to ensure that employees who take such leave are made aware that the employment relationship continues throughout the period of leave, such that the individual retains certain benefits (eg, continuity of employment is preserved) and remains subject to the express and implied obligations of their contract of employment (including as to confidentiality and fidelity).

The last year has seen further calibration of the post-Covid “new normal”, with some evidence of a continuing trend towards new ways of working (including remote and hybrid arrangements) balanced with a renewed insistence by some employers on traditional ways of working, including increased office attendance. This has likely been driven in part by a shift in the economic climate which has reduced the bargaining power of employees and candidates relative to employers and hirers.

Less than one quarter of the employee workforce in the UK is unionised. Union membership is much higher in the public sector than the private sector. Trade union membership is voluntary, and there is no obligation on an employer to recognise a trade union or set up an employee representative body unless a specific and valid request has been made by the workforce. The trade union’s right to take industrial action is governed by complex rules.

Under Section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992, a worker must not be subject to any detriment for their involvement in trade union activity. Employers should therefore exercise caution when considering disciplinary action if the employee's actions could fall within the realms of trade union activity. It is important to ensure that, if disciplinary action is taken, records are kept in order to demonstrate the reason was other than carrying out a trade union activity (University College London v Brown).

Unlike in other EU countries, there is no formal legal mechanism that provides for ongoing workplace representation in the UK.

However, the law requires information and consultation with employee representatives in certain circumstances, including in a collective redundancy situation or the transfer of an undertaking. If no trade union is recognised and there is no standing employee representative body, ad hoc employee representatives must be elected. The conditions for this type of election are set out in Section 188A of the Trade Union and Labour Relations (Consolidation) Act 1992 with regard to collective redundancies, and in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) in relation to a business transfer or service provision change (ie, an outsourcing arrangement).

Collective bargaining agreements are commonly used across the world to regulate employee terms and conditions, and often enhance them beyond minimum legal standards. However, there is considerable variation between jurisdictions when it comes to the ways in which trade unions work, their level of influence and how employers can work with them most productively.

In the UK, there are no national, sector-specific or employer-association negotiated collective bargaining agreements of general application. Locally negotiated collective bargaining agreements may apply within particular unionised UK employers – for example, collective bargaining agreements are commonplace in the automotive sector.

A key advantage of collective bargaining agreements is the ability to agree binding terms across all employees. Whenever an employer is implementing or amending one of its policies, it should check whether the respective policy is subject to the terms of a collective bargaining agreement. However, pursuant to recent case law, terms that are truly collective in nature cannot generate enforceable individual rights (Hamilton v Fife Council). In another recent case (Nexus v National Union of Rail, Maritime and Transport Workers and Unite), the Court of Appeal, reversing an earlier ruling of the High Court, has ruled that the courts have no power to order the equitable remedy of rectification in respect of a collective agreement which is not legally enforceable, though rectification proceedings can be brought in respect of individual contracts of employment incorporating the terms of such an agreement. The practical and employee relations considerations of such an approach (ie, proceedings between the employer and individual employees in respect of their contracts of employment, rather than between the employer and union(s) in respect of a collective agreement) would clearly be significant.

At common law, an employer can contractually dismiss an employee for any reason, provided appropriate notice is given. In effect, a dismissal without cause is not prohibited by law, but it is likely to be an unfair dismissal.

If the employee acquires the relevant qualifying length of service (two years) they may be dismissed only for a potentially “fair reason” under statute, on the basis of:

• capability;
• conduct;
• redundancy;
• breach of a statutory enactment; or
• some other substantial reason that justifies dismissal.

The dismissal of an employee for certain reasons (eg, pregnancy, maternity or whistle-blowing) will be automatically unfair.

In addition to having a fair reason, the employer must also follow a fair and full procedure. This will be informed by the employer’s compliance with the Advisory, Conciliation and Arbitration Service (ACAS) Code of Practice on disciplinary and grievance procedures (the minimum standard) ‒ or, more likely, the employer’s own code or policies.

There is no requirement to notify any government authority of a dismissal unless in a collective redundancy situation, or in relation to payroll obligations. For collective redundancy situations, if the proposed redundancy will affect 20 or more employees within a period of 90 days or less, it must notify the government’s Redundancy Payment Service (RPS) and consult with employee representatives under Section 188 of The Trade Union and Labour Relations (Consolidation) Act 1992. The financial consequences for employers that do not comply with collective consultation provisions can be very high, as a protective award is available to each affected employee.

The rights under an employment contract will include prior notice of termination. However, the statutory minimum notice is one week for service of more than one month and less than two years, and thereafter one week per complete year of service up to a maximum of 12 weeks. These statutory notice periods override any provisions in an employee’s contract that stipulate a notice period shorter than the statutory minimum.

Employers may only dismiss an employee without notice if a payment in lieu of notice provision (PILON) is contained in the contract. Otherwise, the employee may have a claim for wrongful dismissal.

In terms of the procedural requirements for dismissing an employee, there is a duty for an employer to act “reasonably” pursuant to the ERA if it is dismissing an employee with at least two years’ continuous service.

Employers carrying out dismissals (except for dismissals on the grounds of redundancy or the non-renewal of a fixed-term contract) should also follow the principles set out in the ACAS Code of Practice. A failure to follow the ACAS Code does not in itself make an employer liable to a claim, but Employment Tribunals will take the ACAS Code into account when considering relevant cases and can adjust any awards they make upwards by up to 25% for unreasonable failure by an employer to follow the ACAS Code.

In a redundancy scenario, a statutory redundancy payment is payable to employees with two or more years’ service. The exact amount is linked to the length of service, the age of the employee, the employee’s salary and the statutory cap on “weekly pay”. Redundancy pay may be enhanced by the employer at its discretion.

Summary dismissal is immediate dismissal of an employee without notice. This will be a wrongful dismissal, unless the dismissal is in response to the employee’s repudiatory breach of contract. One such example would be gross misconduct, which can include dishonesty, intentional disobedience or negligence. 

An employer should follow its disciplinary procedure when determining whether it is appropriate to dismiss an employee summarily. An investigation should be held prior to instigating a disciplinary hearing, and the employee should be given the opportunity to make representations. Once the decision-maker has issued their decision, the employee should be offered the right to appeal the finding.

An employee who considers they have been unfairly dismissed for cause may seek to bring an unfair dismissal claim in the Employment Tribunal.

It is possible for the employee to waive any employment claims arising on termination, including unfair dismissal, by way of a settlement agreement. However, for this to be effective and enforceable it must comply with the statutory formalities.

In order to be legally binding, a settlement agreement must comply with six statutory requirements. These are as follows:

• it must be in writing;
• it must relate to particular proceedings – ie, it is insufficient to draft that the agreement covers “all employment claims”;
• each of the potential employment claims must be listed in order to be valid and provide maximum protection for the employer;
• it must confirm that the statutory conditions relating to settlement agreements have been satisfied;
• the departing employee must have received legal advice on the settlement agreement from an independent legal adviser;
• the adviser must be professionally insured; and
• the agreement must specifically identify the adviser.

Employees must be fully informed in order to make the agreement fair, which is why it is essential that an employee obtain independent legal advice. Significantly, “full and final settlement” can be precluded where a settlement includes a general release and one party was aware that the other party settled in ignorance of a potential claim, as the Court of Appeal observed in BCCI v Ali (20201).

A settlement sum will vary depending on the claim and facts of the case. Compensation for loss of employment is usually tax free up to GBP30,000.

Employees with two years’ service are protected from being unfairly dismissed under statute.

The following categories have automatic unfair dismissal protection (but require two years’ service):

• dismissal owing to a “spent” conviction;
• dismissal in the context of a transfer under TUPE; and
• dismissal connected with exercise of certain rights by temporary agency workers.

Dismissals in the following contexts have automatic unfair dismissal protection and do not require any qualifying length of service:

• jury service;
• leave for family reasons and related leave for time off for dependants;
• health and safety activities;
• Sunday working;
• asserting certain statutory rights;
• asserting rights under the Working Time Regulations (1998);
• employee trustees of occupational pension schemes;
• employee consultation representatives or candidates (including European and domestic works councils), who are also not entitled to be subjected to a detriment on the grounds of their status;
• whistle-blowers;
• flexible working requests;
• certain discrimination-related dismissals;
• exercising the right to be accompanied at disciplinary or grievance hearings;
• the rights of part-time workers;
• the rights of fixed-term employees;
• in connection with entitlement to a national minimum wage;
• in connection with entitlement to working tax credits;
• in connection with the right to request study and training; and
• trade union membership or activities or official industrial action.

Protected Disclosures

Workers who blow the whistle in relation to some form of perceived malpractice or wrongdoing are protected against detriment and dismissal in response for having done so. The Public Interest Disclosure Act (PIDA) 1998 aims to protect individuals who make “protected disclosures” in connection with their work.

A worker has to make a “protected disclosure” to the correct person in a prescribed way in order to be protected under the legislation set out in the PIDA. A qualifying disclosure will be any disclosure of information that the worker reasonably believes is in the public interest and tends to reveal one or more of the following types of wrongdoing or failure:

• a criminal offence;
• a breach of a legal obligation;
• a miscarriage of justice;
• danger to the health and safety of any individual;
• damage to the environment; or
• a deliberate attempt to conceal the above.

The event can be a past, present or future event that is likely to take place.

The complaint must be made to a prescribed person, whether within the organisation or in another organisation such as a public body. Furthermore, the complaint must be in the public interest in order to be protected.

There is no minimum period of qualifying service for a worker who wishes to bring a claim for whistle-blowing detriment or dismissal, and the damages that can be awarded by an Employment Tribunal in the event of a successful claim are uncapped. 

An employee who believes they are being unfairly dismissed as a result of making a protected disclosure can bring a claim for “interim relief” within seven days of the date of termination. This is a remedy by which an employee can seek continuation of their employment until the full unfair dismissal case is heard.

Wrongful dismissal is a claim for a breach of contract that arises most commonly from a failure to provide any notice (or payment in lieu of notice) to the employee or providing an inadequate amount of notice (or payment in lieu of notice) when the employee has not committed misconduct. However, a wrongful dismissal claim typically coincides with an actual or constructive dismissal claim.

A notice period may be:

• express;
• implied; or
• incorporated by statute.

Where there is an express notice period in the contract, it will operate subject to the statutory minimum notice periods contained in Section 86 of the ERA, which implies a minimum notice period into all employment contracts. Where there is no express notice period, common law provides that “reasonable” notice should be given.

The remedy for wrongful dismissal in the Employment Tribunal is damages (determined by the salary and other contractual benefits due under the notice period, which may include a bonus) to put the employee back in the position they would have been if the contract had been performed properly. As it is a contractual claim, factors such as mitigation are relevant to the employee’s award.

The Equality Act 2010 is concerned with direct and indirect discrimination and other prohibited conduct, such as victimisation and harassment, in relation to the following protected characteristics:

• age;
• disability;
• sex;
• gender reassignment;
• marriage and civil partnership;
• pregnancy and maternity;
• race;
• religion or belief; or
• sexual orientation.

There must be a causal link between any less favourable treatment and a protected characteristic. In discrimination claims, a two-stage approach to the burden of proof applies.

• Stage 1 – can the claimant show a prima facie case? If no, the claim fails. If yes, the burden shifts to the respondent.
• Stage 2 – is the respondent’s explanation sufficient to show that it did not discriminate? (It should be noted that this stage does not apply in instances of direct discrimination.)

Notably, unlike many other employment claims, there is no cap on the compensation that can be awarded by the Employment Tribunal. However, in cases of unintentional indirect discrimination, the Employment Tribunal must first consider whether making a declaration or recommendation (or both) would suffice before it makes an order (if any) awarding compensation on a just and equitable basis.

Compensation can be awarded for financial losses (including loss of earnings, pension, any benefits in kind and out-of-pocket expenses) and non-financial losses (including injury to feelings in accordance with the Vento bands, personal injury and aggravated damages). Damages are calculated to put the claimant in the position they would have been in had the unlawful discrimination not taken place (Ministry of Defence v Wheeler), although claimants are also expected to mitigate their loss.

Employment Tribunals in the UK have a broad discretion to permit hearings to be conducted remotely, in whole or in part. Technology is also used to facilitate the hearing of evidence from witnesses located abroad.

The use of technology (phone and video platforms) to conduct hearings remotely increased significantly during the COVID-19 pandemic. This appears to have had a lasting impact, with remote hearings now more common than they were prior to the pandemic. The Presidents of the Employment Tribunals in England and Wales and Scotland introduced Presidential Guidance and Practice Directions on remote and in-person hearings and open justice as a result of issues arising from the pandemic. The Employment Tribunal regions in England and Wales now also include a “virtual region”, established in April 2021, allowing additional flexibility for the hearing of cases from the existing geographical regions.

Remote hearings typically entail the use of electronic documentation and bundles rather than paper files, prepared in accordance with the Presidential Guidance and the directions of the relevant Tribunal.

The “road map” issued by the Presidents of the Employment Tribunals for the period 2022-2023 seeks deduced reliance on video hearings while acknowledging their value, particularly in respect of addressing the existing caseload. The road map also sets out the “default” format for different types of hearing, though this is subject in each case to the decision of the relevant judge and the parties’ ability to apply to request an alternative format. With some exceptions, remote hearings are the default for preliminary hearings (except for open preliminary hearings on complex matters such as disability) and final hearings for more simple “short track claims”, with in-person hearings being the default for more complex types of claim such as discrimination and whistle-blowing. The default position also varies to some extent by region, with video hearings preferred for more types of final hearing in regions where the existing caseload is greatest.

Judicial Procedures

There is no direct equivalent to the US class action regime in the UK.

However, the following are procedural means of dealing with group actions of multiparty claims, which allow groups of claimants to link the claims to proceed against a single defendant.

• Where more than one person has the “same interest” in a claim, the court may order that one or more claimants (or one or more defendants) may bring or defend a representative action representing others who have the same interest in the claim. Any judgment will be binding on all individuals represented unless the court directs otherwise. Whether participants have the “same interest” is construed narrowly by courts (see Lloyd v Google LLC (2021) UKSC 50).
• Where claims by a number of individuals give rise to common or related issues of fact or law, a court may make a group litigation order to manage the claims. Judgments, orders and directions of the court will be binding on all claims within the group litigation order.

In the UK, the specialised employment forum is the Employment Tribunal. Claims must generally be brought within three months of a relevant event. Before commencing litigation, employees must inform ACAS and should exhaust the ACAS early conciliation procedure. It is possible to appeal a decision made by the Employment Tribunal to the EAT, but appeals can only be made on a point of law and the EAT will not normally re-examine issues of fact.

Provided that the arbitration does not involve statutory employment protection rights, arbitration is possible in contractual disputes.

Where statutory employment protection rights are affected, an employee cannot validly agree in advance to give up their right to litigate those rights. By way of example, an employee cannot agree in their employment contract ‒ entered into before the dispute arose – not to sue their employer for unfair dismissal.

Once a dispute has arisen, private mediation agreed to between the parties is relatively common. Any settlement of a dispute about statutory employment protection rights (including one agreed to during mediation) must satisfy the statutory contracting-out requirements if the relevant statutory right is to be validly compromised.

Contrary to the usual rule in UK courts, costs (including legal fees) are not usually paid by the losing party in Employment Tribunal cases. Notwithstanding this, costs can be awarded by a tribunal if one of the parties has behaved vexatiously, disruptively, abusively or otherwise unreasonably in bringing proceedings or in the way they have conducted themselves during those proceedings.

A costs order or deposit order may also be made if a claim is pursued (or defended) despite the claim/defence having no reasonable prospect of success.