The Employment Rights Act is now law: what this means for employers and employees

After a complex journey through Parliament, the Employment Rights Act has officially passed into law. While many of its provisions will require further detail through regulations following consultations scheduled for 2026, some key points are already clear. This new legislation heralds significant changes to employment rights and obligations, with important implications for both employers and employees.

Key changes to unfair dismissal rights

The most notable change concerns unfair dismissal rights, which will no longer be a ‘day one’ right contrary to the Government’s initial proposal. Employees must now complete six months of service before being eligible to bring a claim for unfair dismissal. This new service requirement will take effect from 1 January 2027 and will therefore apply to employees who start work on or before 1 June 2026, provided they are still employed on 1 January 2027.

In a surprising twist, the current statutory cap on compensation for successful unfair dismissal claims has been abolished. Currently, compensation is capped at the lower of one year’s pay or £118,223, effectively limiting pay outs for higher earners. With the removal of both caps, claim values could increase significantly, particularly for higher-paid employees, unless new limits are introduced through future regulations. This unexpected development has raised concerns among employers and could dramatically alter settlement negotiations and tribunal outcomes.

These changes come at a time when the Employment Tribunal system is already experiencing chronic delays, with many cases taking more than a year to reach a hearing. The removal of compensation caps may further exacerbate these delays, as higher-value claims could crowd out lower-value cases. Employers are advised to address any performance or conduct issues promptly, ensuring any necessary terminations occur well before January 2027 to avoid potentially higher claim costs.

Family and leave rights: a day one entitlement

The Act also introduces day one rights for family and other types of leave, expected to come into effect sometime in 2027. These rights include:

  • Bereavement leave: Employees will be entitled to at least one week of bereavement leave, which will apply to early pregnancy loss as well as all other types of bereavement.
  • Parental leave: Employees will have the right to 18 weeks of unpaid parental leave from day one of employment, to be taken any time between the birth of a child and their 18th birthday. Currently, low uptake of this leave is attributed to the fact that it is unpaid.
  • Maternity and paternity leave: These rights will also apply from day one, with no obligation for employees to disclose pregnancy or impending parenthood during recruitment.
  • Statutory sick pay: Employers will be required to pay statutory sick pay from the first day of illness, ending the current three-day waiting period. However, the statutory sick pay rate remains low, capped at £123 per week, with no indication of significant increases.

Trade Union rights: A shift in the balance of power

The Act introduces major changes to trade union rights, which will take effect from February 2026, with some immediate repeals for public sector workers. Key changes include:

  • The removal of restrictions on the number of employees allowed to picket their employer’s premises.
  • A reduction in the notice period for strike action from 14 days to 10 days.
  • An obligation on employers to provide all employees with written information about their right to join a trade union.

Other reforms

The Act also introduces a range of other significant reforms including:

  • Zero-hours contracts: Employees on zero-hours contracts will, in certain circumstances, have the right to guaranteed hours, and employers will be required to give reasonable advance notice of working hours.
  • Pay gap reporting: Employers with more than 250 staff will face extended paygap reporting obligations, aimed at addressing inequalities.
  • Menopause policies: Employers with over 250 employees will also be required to adopt and publish formal policies to support employees going through menopause.
  • Fair work agency: A newly created fair work agency will enforce rights related to minimum wage, sick pay, holiday pay, and modern slavery. However, further details are awaited regarding the extent to which this agency will replace employment tribunals for claims in these areas.

What’s next?

While the passing of the Employment Rights Act into law provides some clarity, much remains uncertain. Several consultations are underway, with more expected, and the start dates for many provisions have yet to be confirmed.

What is clear, however, is that the Act represents a significant shift in the balance of rights and obligations in employment relationships. Employers should take proactive steps to prepare for these changes, including reviewing policies, addressing current employee issues, and planning for the impact of these reforms on their business operations.

As more details emerge, employers will need to stay informed and adapt to ensure compliance with this transformative piece of legislation.

Early conciliation: a process in crisis

Partner and head of the firm’s employment group, Yvonne Gallagher, has written an article published in The Times on the challenges facing early conciliation – a mandatory pre-tribunal step aimed at resolving employment disputes within six weeks.

In the article, Yvonne explores how rising demand and systemic delays are impacting the effectiveness of this process, to the detriment of employers and employees alike, and highlights potential solutions to alleviate pressure on both Acas and the wider tribunal system.

Read the full article here.

Yvonne Gallagher featured in Law360’s expert analysis series

Partner and head of our employment practice, Yvonne Gallagher, has been featured in Law360‘s UK Expert Analysis series, where practice group leaders share their perspectives on the current market landscape and insights from their professional experience.

Yvonne discusses the challenges of dealing with clients’ emotions, the significance of the widening scope for discrimination disputes, and why junior lawyers should focus on learning the basic contractual and statutory principles of employment law.

The full piece can be accessed here or via Law360.

Equity vs Spotlight: ruling in landmark case exposes a gap in legal protection

After this week’s ruling in the landmark case between Equity and Spotlight, partner and head of our employment practice, Yvonne Gallagher, has shared her insights in an article published by The Stage in which she provides an overview of the dispute and comments on its likely impact on the performing arts industry.

One key feature of the case was the High Court ruling that Spotlight is not an employment agency under the legislation and there is therefore no restriction on the fees it charges. This serves to highlight a gap in protection when it comes to businesses operating platforms of this nature.

The full article can be accessed here.*

Founded in 1880, The Stage is a weekly newspaper and online publication with the latest news, reviews, interviews, in-depth features and advice on working within the performing arts industry.

*Please note that a subscription is needed to view this content.

Harbottle & Lewis advises Amdax on its acquisition of a strategic stake in Custodiex

We have advised Amdax, a Netherlands-based digital asset service provider, on its acquisition of a strategic stake in UK-based Custodiex, a specialist in quantum-safe cold storage solutions for digital assets.

Founded to provide cutting-edge custody infrastructure for financial institutions, Custodiex has established itself as a key innovator in the digital asset custody sector. The Manchester-based company’s quantum-safe solutions are designed to be scalable and future-proof, and meet the stringent international ISO 27001 security standard. The transaction enables Amdax to enhance its comprehensive digital asset platform.

Our team was led by partner Tom Macleod and managing associate Rosie Marston, with support from managing associate Katerina Capras and associates Elizabeth Compton and Matthew Shannon. Partner Yvonne Gallagher and associate Elisabeth Davies advised on employment aspects, partner Shireen Peermohamed and associate Samuel Flack advised on IP matters and senior associate Matthew Stephenson advised on property law matters.

On working with Harbottle & Lewis, Martin Cernohorsky, Amdax Head of Legal, commented:

Working with the Harbottle & Lewis team was a great pleasure. Their broad range of expertise and professionalism proved invaluable in navigating throughout the twists and turns of this deal. From the start we were in good hands. We look forward to continuing our collaboration with Harbottle & Lewis.”

Tom Macleod added:

We are delighted to have supported Amdax on this strategically significant acquisition. The combination of Amdax’s regulated platform with Custodiex’s innovative custody technology creates a compelling proposition for institutional clients across Europe. We look forward to seeing the continued success of this partnership as the digital asset custody market matures.”

Harbottle & Lewis advises on the sale of performance-io to private equity firm Apiary Capital

We have advised the sellers of performance-io, a leading life sciences performance marketing, SEO and GEO agency, on its sale to private equity firm, Apiary Capital.

Founded to deliver cutting-edge performance marketing solutions, performance-io has established itself as a key player in the industry, working with clients to enhance their marketing strategies through data-driven insights and expertise. Headquartered in London, the business now operates globally with teams in the UK, US, India, Japan and South Africa. 

Founder and CEO Matt Lowe and his senior management team will remain with the business, focusing on driving performance-io’s further growth and development.

Our team was led by partner Ed Lane, with support from senior associate Alex Gays, and associates Elizabeth Compton and David Jones. Co-managing partner Tony Littner provided strategic support throughout, with partner David Scott advising on corporate tax matters. Partner Yvonne Gallagher and associate Harry Wade also advised on employment matters.

On working with Harbottle & Lewis, Matt Lowe commented: “I’d not worked with lawyers on a PE backed deal before, and frankly the mood music about the experience wasn’t great. However, the experience with Harbottle and Lewis was. From the first meeting with Tony and Ed, through to working with the broader team through some complex curve balls, we had a superb experience; working in a collaborative manner, learning loads and always with a calming, assured temperament. I can’t recommend H&L enough.”

Ed Lane added: “We are delighted to have supported Matt and his team on this milestone, and we look forward to seeing performance-io’s continued success in its partnership with Apiary Capital.”

Agree to disagree: what the Higgs v Farmor’s School judgment could mean for employers and employees

The Court of Appeal gave judgment last week in another of what has been a series of cases dealing with conflicts between beliefs expressed by employees, and the categories of protected characteristics under the Equality Act 2010. 

In this case, an employee of a school, Mrs Higgs, had expressed concerns  via her private social media about teaching in schools relating to same-sex marriage and gender identity. Another parent saw the comments, which had been posted in a manner which did not identify the school and used the employee’s maiden name (which was different from the name she used at school), and had complained to the school about the views expressed, which were described as offensive. Following an investigation and disciplinary process, the employee was dismissed and brought, amongst other claims, a claim that she had been subjected to detriment because of her protected beliefs.

The case takes a robust approach, supporting the freedom of employees to express and manifest protected beliefs, though it recognises that some limitation is likely to be appropriate in the manner of expression of belief and related conduct.

Where does all of this leave employers in practice? They will be keen to ensure that they are complying with their Equality Act obligations in providing a safe workplace for all employees. However, they will surely also wish to avoid being drawn into personal disputes between employees arising out of conflicting views on contentious topics, or getting caught up in social media storms as part of wider campaigns on contentious topics, whether covered by the Equality Act or not.

Fundamentally,  it is useful to recognise that there is a level of conflict built into the Equality Act. Protected characteristics include gender re-assignment and sexual orientation, but protection of religion and belief  includes protection of a belief that sex is immutable and cannot be changed. Most of the major world religions do not recognise same sex marriage as the equivalent of marriage between a man and a woman. The Courts have also made clear that it is an error on the part of an employer to engage in stereotypes, which includes making an assumption about an individual’s personal beliefs by reference to their race or religion. Not all individuals who adhere to a religion believe in every rule or dogma of that religion, and religious beliefs are not always aligned with ethnic or national origin. Non-belief is protected in the same way as belief. Employers can therefore find themselves managing staff who hold deeply opposing views, each of which gives rise to a right to be protected from detriment because of their belief or other protected characteristics.

Employers will clearly  not want to find themselves refereeing disputes between employees or being pressured to take sides where conflict arises. There is a clear risk to employers of being on the receiving end of Employment Tribunal claims if they are seen to punish an individual because of a protected characteristic. Such cases will often be very popular in the media and can therefore do reputational harm as well as cost a lot of time and money.

The Court of Appeal judgment also expressly deals with the impact of rights to free speech under the European Convention on Human Rights in addition to the Equality Act rights. Under the Human Rights Act 1998, UK courts are obliged to interpret legislation in line with the European Convention as far as  is reasonably possible, so that the provisions of the convention are effectively indirectly introduced into UK statutory employment provisions. Such rights go beyond those relating to protected characteristics and will therefore include rights to speak about political issues of the day.

The right to free speech is not absolute. It is, however,  wide-ranging, and  in the Higgs v Farmor case, the Court of Appeal expressly cited the principle that the freedom to speak only inoffensively  is a freedom not worth having. There is no right to be protected from hearing things with which you disagree and employees could usefully be reminded of this.

Some limits on freedom of speech are permitted, to the extent that such speech would infringe on the rights and liberties of others, but no one has a right not to hear an opposing or, to them, disagreeable view. 

It will not be appropriate, therefore, for employers simply to seek to forbid employees from expressing views in the workplace or sharing the fact of any protected characteristic they may hold. In the Higgs v Farmor’s case, one of Mrs Higgs’ beliefs was that as a Christian she was required to bear witness to her beliefs, which would involve speaking about them. This is itself a protected belief, although the protection afforded to manifestation of belief does not extend to or permit continued proselytising or hectoring of those with different views.  Clear guidance that employees should not persist in conversations with others who  have made it known that they disagree, or are simply not interested, should be acceptable.

It is therefore useful for employers to now give thought to providing clear guidance to employees, whether in an overarching stand-alone policy detailing an expectation of respectful disagreement in relation to engagement on contentious topics, both in the workplace and beyond, or by adding to individual existing policies. The guidance can remind employees that they should not conduct themselves in a manner likely to amount to bullying or harassment, or to create a degrading or hostile environment for any employee. That does not preclude them from being open about their protected characteristics or beliefs, but they must not do so in a hostile or intimidating fashion. Employers can also helpfully remind staff that the workplace is not the right forum for discussion of contentious topics where feelings run high and disagreement is evident. 

Such guidance can remind staff that whilst they may enjoy the protections under the Equality Act, in relation to protection of belief non-believers are protected in the same way as believers, and so are free to make known their non- belief.  No employee is entitled to impose their views on a colleague or to subject a colleague to detriment on the basis of what they do or do not believe, and an Employer is entitled to say that disputes on  such issues are ultimately not for the workplace. 

Reminding employees that where differences arise, they should “agree to disagree”, or seek to disagree agreeably and respectfully, will be useful guidance both generally and as part of anti-harassment and bullying and equality polices published by employers. Such an approach can manage expectations and also provide employers with a  basis on which to intervene, if necessary, where conflict has arisen, without being seen to take sides.

Employers will already typically include provisions in social media policies, reminding employees not to identify their employer in personal posts and to avoid any suggestion that personal views expressed in any way represent the views of the employer.  A reminder that employees are entitled to have social media accounts and to post on subjects of interest, and that the employer does not take responsibility for such material, will also be helpful. This might usefully also remind employees that employers will not generally seek to intervene in disputes relating to such material.

We can hope that the pragmatic approach taken by the Court of Appeal might serve, in time, to discourage any practice of seeking to pressure employers to disassociate themselves from employees who have expressed views which are not palatable to all, provided that those views are not expressed in a manner which goes beyond the limits of freedom of speech.