Employment Update July 2025 (Podcast)

Listen to the audio version of this update:

1 In the News

EMPLOYMENT LAW REFORM - WHEN IS IT HAPPENING?

The UK Government has published a roadmap for implementing its package of employment law reforms under the Employment Rights Bill. The Government plans to take a staggered approach to implementation and will consult on the detail of many of its reforms, meaning some key changes – such as those relating to unfair dismissal – will come into effect later than expected.

The key changes will take effect as follows:

• Late 2025: changes to the strike ballot thresholds and notice requirements to make it easier for trade unions to call industrial action;
  
  
• April 2026: making statutory sick pay available to all, doubling the penalty for failing to consult about large scale redundancies, establishing the Fair Work Agency enforcement body, simplifying the trade union recognition process and making paternity and unpaid parental leave day one rights;
  
  
• October 2026: introducing restrictions on fire and rehire, extending Employment Tribunal time limits from 3 to 6 months, strengthening the duty to prevent sexual harassment, introducing third party harassment, and strengthening trade union rights of access to workplaces;
  
  
• 2027: removing the qualifying period for unfair dismissal, enhancing dismissal protection for pregnant women and new mothers, introducing gender pay gap and menopause actions plans, widening the threshold for collective redundancy consultation, introducing changes to flexible working and banning exploitative zero hours contracts.

Consultation on implementation of the reforms will begin this summer/autumn – including a consultation on the unfair dismissal reforms – and will continue until early 2026.

For further detail on the reforms and what employers can be doing to prepare, please see our briefing.

CONFIDENTIALITY PROVISIONS AND NDAS

The Government has proposed significant changes to confidentiality provisions and non-disclosure agreements (NDAs) in employment agreements. Under the proposals, which are contained in the Employment Rights Bill, confidentiality provisions and NDAs will be void to the extent that they prevent workers from making allegations or disclosures about harassment or discrimination, including about how the employer responded to such allegations or disclosures.

The proposal is likely to have a significant impact on settlement agreements. Often both employer and employee want to maintain confidentiality in a settlement involving harassment or discrimination, given the sensitivity of these types of situations. However, the proposed ban would mean that even if both parties were happy to agree mutual confidentiality provisions, these would not be enforceable. This could lead to fewer settlements because either or both sides may feel they have less to lose from litigation, if they cannot settle the matter in the knowledge that the details will stay private.

The detail of the proposal is to be fleshed out in regulations after the Bill passes, and may be subject to consultation in due course. The Government has not said when it plans to bring the ban into force but it is unlikely to be before 2026. Employment Update will report developments.

2 Immigration Radar

NEW STATEMENT OF CHANGES

The UKVI have published a major new statement of changes to the Immigration Rules, following the Government's White Paper in May this year. The changes will take effect on 22 July 2025 and include several key changes affecting employers such as:

• Increase to the Skilled Worker visa threshold - The minimum skill requirement for the Skilled Worker route is being raised from RQF level 3 (A level standard) to RQF level 6 (degree level), meaning around 180 occupations, unless already in the route or an approved list, will no longer be eligible for sponsorship.
  
  
• Immigration Salary List and Temporary Shortage List Changes - The Immigration Salary List is being replaced with a Temporary Shortage List, allowing limited access for RQF 3–5 occupations until 2026, with dependants only allowed for pre-existing entrants.
  
  
• Transitional Arrangements - Current applicants and those with certificates of sponsorship issued before set deadlines are temporarily exempt from the RQF level 6 requirement.
  
  
• New minimum Salary - Salary thresholds will also increase from the current £38,700 to £41,700 (or the minimum level for the occupation if higher). Unlike the skills threshold change, there is no transitional period for the new salary requirements, as these are expected to progress in tandem with the market.

ELECTRONIC VISAS

From 15 July 2025, as part of its transition to a digital immigration system, the Home Office will stop issuing physical entry visa stickers in passports for non-European nationals applying for a work visas and certain other routes. Instead, applicants will only receive an 'eVisa' and they must create a UKVI account to link their immigration status to their identity travel document. However, dependent partners and children will continue to receive an entry visa vignette in their passports which will be valid for 90 days.

3 Case Watch

REDUNDANCIES - DUTY TO CONSIDER ALTERNATIVE WORK

The employee in this case worked as a trainer of sales staff in a car dealership company. He previously had some 30 years' experience in car sales and had also managed a distributorship. He was made redundant, largely due to the coronavirus pandemic. He accepted this was a genuine redundancy but claimed that his dismissal was unfair because the employer had not properly considered alternative employment.

The employee won his case. Both the Employment Tribunal and Employment Appeal Tribunal ruled that the employer had not done enough to explore alternative roles. Despite there being several sales vacancies at the company, HR had not suggested any roles to the employee or given him any help to apply, other than pointing him to a list of vacancies on the intranet. There was no discussion about where his interests might lie or encouragement to consider different roles, even if that meant demotion.

The employee had applied for several internal vacancies, but HR had not told hiring managers he was at risk of redundancy, and he was unsuccessful. During his notice period, the employer also sent an email to his work address (which he could no longer access) saying that further applications for sales positions were unlikely to succeed due to concerns about whether he was genuinely interested in sales. His redundancy dismissal was ruled unfair. The Tribunal also refused to reduce his compensation to reflect the fact that he might have been dismissed even if the employer had properly considered alternatives.

INCENTIVES AND AGE DISCRIMINATION

The employee in this case was employed by a company within a wider group of companies. He was awarded shares and options under a long-term incentive plan (LTIP) operated by the parent of his employer. The employee retired and his award was due to vest after retirement. However, it became clear that the relevant awards were not going to vest for anyone due to the performance of the parent company's shares. To incentivise retention, the parent company decided that 50% of the relevant awards would vest regardless of performance, but only for staff still employed at the date the awards were due to vest. This meant that the employee would not benefit from the change because he had already retired. The employee brought a claim arguing that his exclusion from the change amounted to indirect age discrimination.

The employee lost his claim. The employee had no claim against the parent company because he was not employed by it. Since the scheme was operated by the parent, he could only claim against his employer if the parent was acting as the employer's agent. However, the Court of Appeal ruled that this was not the case. The parent company was not acting on behalf of the employer when operating the scheme, and the employer had no control over the making or amending of the LTIP rules. In any case, the Court went on to say that any indirect age discrimination was justified. The company had a legitimate aim in seeking to retain staff by amending the rules to benefit only those staff who remained employed.

4 New Law

SEX DISCRIMINATION AND WORKPLACE FACILITIES

As previously reported in Employment Update, the Supreme Court has ruled that "sex" in the Equality Act means biological sex. Following the Supreme Court decision, the Equality and Human Rights Commission (EHRC) published an interim update on the practical implications for employers and service providers. The EHRC has now revised its interim update. The revised update refers to the obligation on employers under health and safety legislation to provide suitable and sufficient toilets and sometimes changing and showering facilities. The update advises that if single-sex facilities are provided these should be available only to those of the same biological sex, and where possible, employers should provide additional mixed-sex facilities. The revised update also clarifies that, under health and safety legislation, toilets, showers and changing facilities may be mixed-sex where they are in a separate room lockable from the inside.

The clarification is helpful up to a point, but many questions remain for employers in this area. The EHRC is updating its code of practice for services, public functions and associations to provide further guidance on the ruling. However, it has not confirmed whether it plans to provide further guidance for employers. For more details of the ruling and the practical considerations for employers, please see our briefing.

FAILURE TO PREVENT FRAUD

On 1 September 2025, the new failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act 2023 ("ECCTA") will come into effect. The offence will apply to large employers which satisfy two or more of the following conditions: (i) more than 250 employees; (ii) more than £36 million turnover; and/or (iii) assets of more than £18 million. Under the new law, employers will be liable for fraud committed by an employee, agent or other associated person, which is intended to benefit the organisation or its clients, where the employer did not have reasonable fraud prevention procedures in place. Ahead of the offence coming into force, employers should ensure they have appropriate prevention procedures in place, which may include updating template employment contracts to reflect the offence. For more details, please see our briefing.

SETTLEMENT AGREEMENTS

From 1 October 2025, new rules on confidentiality provisions and non-disclosure agreements (NDAs) come into force under the Victims and Prisoners Act 2024. Under the Act, any confidentiality provision or NDA will be unenforceable to the extent that it prevents a victim of crime from reporting the crime to the police or seeking confidential advice and support. The new provisions will apply to agreements signed or on after 1 October 2025.

Confidentiality provisions are common in settlement agreements, and these typically include carveouts which allow the employee to blow the whistle or report an offence to the police. However, employers may wish to update template settlement agreements to reflect the provisions of the Victims and Prisoners Act 2024, which also allow victims of crime to disclose criminal conduct to:

• the police or other bodies which investigate or prosecute crime, for investigating or prosecuting the crime;
• qualified lawyers, for seeking legal advice about the crime;
• regulated professionals (including regulated healthcare professionals), for obtaining professional support in relation to the crime;
• victim support services, for obtaining support in relation to the crime;
• regulators, for cooperating with the regulator in relation to the crime (where this has already been reported to the regulator);
• a person authorised to receive information on behalf of any of the above (such as a receptionist or translator) for the purposes listed above;
• a victim's close family (i.e. child, parent or partner) for obtaining support in relation to the crime.

In this context, victims of crime include those who reasonably believe they are victims, and those who suffer harm as a result of seeing, hearing or otherwise directly experiencing the effects of crime.

Separately, the Government has proposed an outright ban on confidentiality provisions and NDAs relating to harassment and discrimination, but there is no date yet for implementation (see "In the News" above).

EU PAY TRANSPARENCY RULES

A new EU pay transparency directive comes into force on 7 June 2026 which will introduce gender pay gap reporting obligations across Europe. It also introduces pay assessments, as well as other measures to increase pay transparency in recruitment and in the workplace. The directive applies to people working in the EU, irrespective of where their organisation is headquartered.

The Directive will initially require annual pay gap reporting for businesses with 250+ employees and reporting every three years for businesses with 150+ employees (dropping to businesses with 100+ employees after four years). Some EU countries are introducing lower thresholds for reporting (e.g. Ireland, Sweden).

Employers with EU operations should use the time ahead of implementation to prepare and address any anomalies in their pay structures. We have developed a number of resources to assist with preparation – please speak to your usual Employment department contact for more information.

5 Consultations

REVIEW OF PARENTAL LEAVE

The Government has launched a review of the system of parental leave and pay in the UK (including maternity, paternity, adoption and shared parental leave). This reflects an earlier commitment to review how the system could better support working families as well as economic growth through labour market participation. At this stage, the Government is seeking views and evidence from all interested parties through a call for evidence which remains open until 26 August 2025. The broader review is expected to run for 18 months and will conclude with a set of findings and a roadmap for implementing any reforms identified.

CULTURE IN FINANCIAL SERVICES

The FCA has announced a new rule on non-financial misconduct for financial services firms. The new rule will make it clear that misconduct such as bullying, harassment and violence will breach the FCA's Conduct Rules. At the same time, the FCA has published a consultation on draft guidance on the new rule and how firms should consider non-financial misconduct when assessing whether someone is fit and proper to work in financial services. The consultation on the draft guidance is open until 10 September 2025 and the new rule comes into force on 1 September 2026.

The change is evolution rather than revolution. The FCA has not gone as far as some were expecting but has clearly taken on board industry feedback. The FCA has also given firms longer than it might have to implement. However, the devil will be in the detail – much will depend on what ultimately ends up in the FCA's proposed guidance. Please see our briefing for more detail.

6 Community Engagement

In recent weeks, our team has been involved in a variety of pro bono work for organisations such as GiveOut, Chatterbox, Future Dreams, Cyanoskin and Refugees at Home.

7 Our Work

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

• advising a global asset management client on the employment law and regulatory issues arising in connection with a complex grievance containing discrimination and harassment allegations
• advising a financial services client on the divestment of an investment team taking place by way of a TUPE transfer
• supporting a manufacturing client with a collective consultation exercise in relation to a proposed site closure
• advising on the employment aspects of a business and asset sale and supporting the client through a TUPE process and subsequent redundancies
• advising on TUPE and related provisions in the context of a second-generation outsourcing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.