Employment Law Digest March 2025 – Unfair Dismissal Protection: A day one right

This policy aligns with other employment rights they propose to be available from the first day of employment (such as family leave and statutory sick pay). The goal is to create more stable and fair workplaces, which they believe will, in turn, benefit the economy.

However, this proposal has raised concerns among some employers, who fear that it will limit flexibility in managing short-term employees, as well as increasing employment tribunal claims. Below, we outline what is currently known about the proposed changes to unfair dismissal laws and the potential impact on businesses.

Current law

At present, in order to commence an ordinary unfair dismissal claim an employee must have attained at least 2 years’ continuous service with the employer. This means a dismissal need not meet the legal threshold of a fair dismissal (in both reason and procedure) if the employee has been employed for less than two years. Employers must still be mindful of complicating factors, such as protected characteristics or whistleblowing, but generally the rules permit a wider degree of flexibility to terminate employment of short servers.

Change coming

Over the years, governments have adjusted the two-year continuous service requirement to align with their objectives. This has meant it has fluctuated over a period a time. However, the Employment Rights Bill 2024 (ERB) takes a more significant step by abolishing this requirement entirely, granting employees the right to commence an unfair dismissal claim from their first day of employment.

Notwithstanding this, the Government has recognised that some flexibility is beneficial in the early stages of employment while suitability for the role is still being established. On that basis, the ERB intends to introduce a modified procedure during an “Initial Period” of employment whereby a shorter form termination process can be used. There are a number of conditions which must be satisfied in order to rely on this exception:

1. The termination of employment must occur on or before the last day of the Initial Period (thought currently likely to be 9 months) or notice must be given during the Initial Period and the employment must terminate within 3 months of that period;
2. The employer must show that the reason for the dismissal was one of the following:
   a. Capability;
   b. Conduct;
   c. A statutory bar; or
   d. Some other substantial reason relating to the employee.
3. The dismissal will only be fair if the employer follows the steps set out in the regulations – essentially the modified procedure.

At this stage we do not have the full details of what the modified procedure will involve but it is likely to include a meeting (with a right of accompaniment) and sufficient evidence to establish that the reason has been met.

Employers will still be free to choose and operate their own probationary periods. However, if dismissals occur during the Initial Period then the modified procedure will still need to be followed.
The Government is still looking at what level of compensation would be appropriate for claims within the Initial Period, but have indicated that it would not be reasonable for employers to face the full potential liabilities of unfair dismissal and so it is anticipated that potential compensation will be lower.

Comment

Further regulations will be required to provide the meat on the bones of the Initial Period procedure and the related compensation scheme. At the moment changes are expected no sooner than Autumn 2026 therefore there will be some lead in time to get ready for the change. There will need to be some thought as to how the modified procedure in the Initial Period interplays with the ACAS Code of Practice.

Given that this is a new legal concept there will undoubtedly be increased litigation as the legislative framework is put to the test. Especially when this is coupled with the proposed increase to time limits to bring a claim from 3 months to 6 months. Additionally, more employees will be entitled to claim unfair dismissal. On a more positive note, we may see fewer claims being shoe horned into discrimination or whistleblowing allegations when these claims have previously been the only options for short severs.

A significant point of concern is how the already overrun tribunal system will cope with any increase in claims, given that the backlog for tribunals is currently at a record high.

It will remain feasible to dismiss employees with short service quicker than those gaining ordinary unfair dismissal rights but there will now be a standard of fairness for those dismissals. Employers should note that in redundancy situations all employees will have unfair dismissal rights and should be treated the same. This is due to the view that redundancy is not a reason specific to an employee and therefore all employees regardless of length of service should be treated the same.

In due course employers would be advised to consider the effectiveness of their recruitment procedures, the management of the probationary period to assess suitability quickly and their disciplinary policies and procedures.

With further changes to the proposed changes being announced on a regular basis, there will no doubt be further updates to follow and our employment team will continue to provide updates as more information comes to light. Those clients on our HR Protect package will benefit from our amended policies and guidance documents linked as we update these to reflect changes. We will also be on hand to upskill managers ahead of the changes being implemented with our range of training options.

For further information, please contact one of our expert employment lawyers.