Employment Update - March 2025

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DEI rollback – what does it mean?

A number of US-based multinationals – such as Goldman Sachs, McDonald's and Disney – have reportedly rolled back on their diversity, equity and inclusion (DEI) programmes by abandoning diversity targets or reframing their policies more broadly around "inclusion" rather than diversity. This follows a series of executive orders in the US which reverse DEI programmes in federal government. Quite how far this will impact diversity programmes in the UK remains unclear.

The US has, in some areas, historically had a different approach to DEI than the UK – for example, affirmative action (addressing imbalances by favouring individuals from disadvantaged groups) is not only lawful in certain circumstances but a much more established part of corporate decision making. In the UK, it remains unlawful to positively select an individual for employment or promotion on the grounds of a protected characteristic, such as their sex or race (apart from a very narrow exception in "tie break" situations where two candidates are equally qualified, but this is rarely used). In contrast, positive action – taking proportionate measures to address underrepresentation – is lawful in the UK and many employers adopt targeted work experience or mentoring schemes for this purpose.

Whatever the case, there is undoubtedly potential litigation risk involved with rolling back on DEI statements and initiatives. An employee bringing a discrimination or harassment claim is likely to rely on this as evidence of the culture and approach of the organisation. Senior decision makers may face questioning on this point and any internal discussions about adjustments to DEI policies are likely to be disclosable in an Employment Tribunal. There are also wider cultural issues at play. Rolling back on DEI policies may have a detrimental impact on recruitment and staff morale. It may also send the wrong message and undermine the ability to police inappropriate behaviour more generally, such as discrimination, harassment and bullying by staff.

Employment Rights Bill – further changes announced

The Employment Rights Bill will introduce a number of significant changes to UK employment law with effect from 2026. Following recent consultations, the Government has announced a number of further amendments to the Bill, including:

Collective redundancy consultation: The Government plans to double the penalty for a failure to inform and consult about collective redundancies. The duty to inform and consult employee representatives arises where an employer is proposing 20 or more redundancies within a period of 90 days. Currently the maximum penalty for failure to inform and consult is 90-days' pay per affected employee. However, the Government plans to increase this to 180 days' pay per affected employee, meaning the costs of failing to inform and consult properly will increase significantly.
Agency workers: The Employment Rights Bill will introduce a new obligation on employers to offer zero and low hours workers a contract that reflects the hours they actually work. The Government has announced that this obligation will also apply to agency workers. After 12 weeks, the employer to which the agency worker is supplied will have an obligation to offer the agency worker a guaranteed hours contract reflecting their actual hours, meaning the agency worker may become the employer's employee. The Employment Rights Bill will also introduce rights for casual workers to reasonable notice of shifts and compensation for shift changes and cancellations. These rights will also be extended to agency workers. Reasonable notice of shifts will become the joint responsibility of both the end user employer and the agency, whereas the agency will be responsible for compensation for shift changes and cancellations (but may in some cases be able to pass these costs onto the employer).
Statutory sick pay: The Government plans to remove the current earnings threshold for statutory sick pay, so that it is available to all workers regardless of their earnings. Currently workers must earn above £123 per week to qualify for statutory sick pay. Statutory sick pay is currently paid at the rate of £116.75 per week (increasing to £118.75 per week from 6 April 2025). For workers who earn below this, statutory sick pay will be paid at 80% of their average weekly earnings.

The Government is also tabling a number of amendments to the Employment Rights Bill in relation to trade unions and industrial action, as well as measures to tackle non-compliance in the umbrella company market. The Bill continues to make its way through parliament, with the majority of its changes expected to come into force no earlier than 2026.

Immigration Radar

Right to work checks

As part of its transition to a digital immigration system, the Home Office now issues eVisas (electronic visas) rather than physical biometric residence permits (BRPs) to most visa applicants. The Home Office has updated its Employer's guide to right to work checks with effect from 12 February 2025 to confirm the following:

Individuals who apply overseas and are granted permission to enter the UK for more than six months are issued with a vignette in their passport which is valid for an initial 90-day period. This allows them to enter the UK and begin work. The individual must then create an online UKVI account to access their eVisa within ten calendar days of arriving or before their vignette expires (whichever is later).
If an individual needs to start work before accessing their eVisa, the employer can conduct a manual right to work check using the 90-day vignette. However, the employer must conduct a follow-up online right to work check before the vignette expires.

In the revised guidance, the Home Office has also updated the list of acceptable documents for British and Irish nationals to prove their right to work in the UK. Employers should update their right to work checking policies and practices in line with the revised guidance.

Electronic Travel Authorisation (ETA) expands to EU passport holders

The UK Government is slowly rolling out a new Electronic Travel Authorisation (ETA) system, which will grant travellers advance digital permission to travel to the UK and operate in a similar way to the ESTA system in the US. As part of the final phase of its introduction, the ETA will extend to EU passport holders (excluding Irish nationals) from 2 April 2025, meaning they must either hold an ETA or a UK visa ahead of their travel to the UK. The ETA will not be required by European passport holders who hold residency status in the UK, for example those with visas issued under the sponsored work visa routes or under the EU settlement scheme. European passport holders who require an ETA for visits to the UK will be able to apply from 5 March 2025 onwards and applications should be processed normally within three working days. See ETA Application Portal for further details.

Case Watch

Discriminatory dismissal for social media posts

The Court of Appeal has handed down an important decision on the balance between protecting an employee's right of freedom of expression against the rights of others and the need to protect the employer's reputation.

The employee in this case was a Christian and worked at a school as a pastoral administrator and work experience manager. She was dismissed for gross misconduct, following posts on Facebook in which she criticised teaching in schools about same-sex marriage and gender fluidity. The school concluded that her posts might be perceived as homophobic and transphobic, and there was therefore a risk to the school's reputation. The employee claimed that her dismissal amounted to discrimination and harassment because of her beliefs.

The Court of Appeal ruled that the employee's dismissal was discriminatory. The Court ruled that dismissal went too far here because the language in the posts, while objectionable, was not itself transphobic or homophobic and was largely contained in material reposted by the employee (rather than her own words). There was no evidence that the employee would let her views influence her work, nor evidence that she had ever behaved in a discriminatory way towards pupils. There was also no evidence that the school's reputation had been (or would be) damaged – the posts had been made on the employee's personal account in her maidan name, with no reference to the school. Only one parent had recognised the employee and raised a concern. Accordingly, the dismissal constituted discrimination on the grounds of the employee's religious and other beliefs.

The case highlights the challenges employers face when balancing competing rights. Taking action against an employee for expressing protected beliefs, even those that are objectionable, is likely to amount to discrimination or harassment. In contrast, employers are generally on stronger ground where the employee has expressed their beliefs in a particularly forceful or offensive way. Employers are also on stronger ground where the beliefs are expressed in a work setting as opposed to outside work on a personal social media account. However, employers must always weigh up the employee's right to freedom of expression against the extent of offence caused to others, the impact on the employee's work and the potential damage to the employer's reputation. Where the risk of reputational harm is relied upon, this must be more than mere speculation, and the employer must have evidence of real actual or potential harm.

Employers can help reduce the risk of issues arising in the first place through clear policies on social media and diversity and inclusion, as well as training which emphasises the need for respectful conduct and tolerance of others' views.

HIGGS V FARMOR'S SCHOOL

Gross misconduct – importance of investigation

The employee in this case worked for the British Council in Italy. A complaint was made that he sexually assaulted a colleague from the British Embassy when kissing her goodbye at a social gathering. Following a disciplinary investigation and hearing, he was dismissed for gross misconduct. His internal appeal was unsuccessful. The British Council also refused to reopen the matter when the employee later presented evidence in his favour, which was not previously available. He brought an unfair dismissal claim and won. The Employment Tribunal ruled that the dismissal was unfair because the employer had not conducted a reasonable investigation and failed to consider all available evidence. The employee sought an order for re-engagement.

Before the re-engagement hearing, the British Council instructed an external investigator to conduct an independent investigation. The external investigator also concluded that the employee had been guilty of gross misconduct. Despite this, the Employment Tribunal ordered re-engagement because it said the external investigation was also flawed. However, on appeal, the Employment Appeal Tribunal (EAT) ruled that re-engagement was not appropriate. The EAT said that the employer had lost trust and confidence in the employee, as it believed he was guilty of sexual harassment. This was a genuine and rational belief based on the second, independent investigation. Re-engagement was therefore not practicable.

In practice, it is rare for employees to seek re-engagement and even rarer for Tribunals to order it. The case is also unusual because one of the key witnesses provided evidence only after the employee's internal appeal and then was unavailable during the external investigation. However, the case highlights the importance of a careful and thorough investigation where there have been allegations of serious misconduct such as sexual harassment. It also suggests that in some cases it might be appropriate to reopen an investigation where new evidence comes to light. Had the employer conducted a proper internal investigation, or perhaps considered an external investigation earlier, some of these issues may have been avoided. In any case, the independent external investigation was ultimately vital in avoiding an order for re-engagement.

BRITISH COUNCIL V SELLERS

New Law

Neonatal care leave

On 6 April 2025, a new right to neonatal care leave comes into force for parents of premature babies. Draft regulations have been laid which set out how the entitlement will work in practice – these are expected to be finalised imminently and come into force on 6 April 2025.

Key features of the new right include:

it is available where a baby starts neonatal care (lasting at least seven days) within 28 days of birth;
the leave is available to biological and adoptive parents, as well as the mother or adopter's partner, and intended parents in a surrogacy arrangement;
there is no service requirement for the leave;
employees are entitled to one week of leave for each full week the child receives neonatal care, up to a maximum of 12 weeks' leave;
the leave must be taken within 68 weeks of the child's birth;
the leave can be taken in conjunction with other statutory family leave and will typically be taken after maternity, paternity, adoption or shared parental leave;
employees who have at least six months' service and earn at least the lower earnings limit will be entitled to statutory neonatal care pay at the statutory flat rate (from 7 April 2025, £187.18 per week or 90% of average weekly earnings if lower).

Employers should ensure that staff handbooks and any relevant family friendly policies are updated to refer to the new right. Employers may also wish to consider how the right will interact with existing enhanced family leave and pay arrangements.

Statutory family leave pay

From 7 April 2025, the weekly rates of statutory maternity, paternity, adoption and shared parental pay will increase from £184.03 to £187.18 (or 90% of average weekly earnings if lower).

Statutory sick pay

From 6 April 2025, the rate of statutory sick pay will increase from £116.75 to £118.75 per week.

National minimum wage

On 1 April 2025, the hourly rates of the national minimum wage will increase as follows:

from £11.44 to £12.21 for workers aged 21 and over (also known as the national living wage);
from £8.60 to £10 for workers aged 18-20 years; and
from £6.40 to £7.55 for workers aged 16-17 years; and
from £6.40 to £7.55 for apprentices under 19 or in the first year of apprenticeship.

Engaging contractors – off payroll rules widened

From 6 April 2025, the scope of businesses covered by the off-payroll working rules is being widened. The off-payroll working rules affect the way businesses tax payments to contractors who are engaged through a personal services company (PSC). The business to which the contractor is supplied must ask whether, without the PSC, the individual would be regarded as an employee for tax purposes. If so, the business (or body responsible for paying the contractor's company) must deduct income tax and national insurance contributions from payments as if the contractor were an employee.

Small businesses are exempt from the rules but the threshold for qualifying as a small business is changing. For financial years beginning on or after 6 April 2025, a private company will be considered small, and therefore outside the scope of the off-payroll rules, if two of the three following conditions are met:

its turnover is not more than £15 million (increased from £10.2 million);
its balance sheet totals no more than £7.5 million (increased from £5.1 million);
its monthly average number of employees is not more than 50 (unchanged).

For the purposes of the off-payroll working rules, a company's size is determined by reference to its previous financial year end and for the duration of a tax year, which means the practical impact will be felt from 6 April 2026 onwards. Certain companies (such as public companies) cannot come within the small company exemption and a parent company can only qualify if the group as a whole is small (when aggregating turnover, balance sheet total and employees of the group).

Given the changes, employers should reassess whether they fall within scope of the off-payroll working rules and, if so, review their contractor arrangements.

Watch this Space

Culture in financial services

On 5 February 2025, the Financial Conduct Authority (FCA) published a speech on culture within financial services firms by its Chief Operating Officer Emily Shepperd. In the speech, Ms Shepperd reiterated that the FCA sees culture as a regulatory issue and flagged that the FCA will be setting out more detail on its approach to non-financial misconduct (such as bullying, discrimination and harassment) "soon". Late last year, the FCA announced that final rules on non-financial misconduct would be published in "early 2025", following a consultation in 2023 on proposals for a new regulatory framework relating to diversity and inclusion in the sector. The rules are expected imminently and Employment Update will report developments.

Community Engagement

In recent weeks, our team has been involved in a variety of pro bono work for organisations such as Refugees at Home, Just Like Us, GiveOut, Evotrack, Centre for Social Finance Law and Future Dreams.

Our Work

Since the last edition of Employment Update, our work has included:

advising on and drafting TUPE provisions for a client engaged in a second generation outsourcing
advising a global insurance broker on a team move and an injunction application
advising a multinational financial services business on the secondment of a senior executive
advising a client on a multi jurisdiction redundancy project
advising a client on an investigation into a data breach
supporting a client take defensive action following a team move
successfully defending an international financial institution in an interim relief hearing
advising on a senior executive disciplinary and dismissal arising out of sexual harassment allegations.