Employment Law Bulletin: January 2026

Employment Rights Act 2025: The key employment law changes employers need on their radar

After months of parliamentary debate, the Employment Rights Bill has finally cleared the House of Lords and gained Royal Assent on 18^th December 2025. It has now become the Employment Rights Act 2025 (ERA 2025) - a landmark reform that will reshape UK employment law over the coming years.

While many of the changes will not take effect immediately, employers should now be clear on the direction of travel. The focus should shift from what might happen to how and when to prepare.

The two changes employers are watching closely

Two late amendments made during the Bill’s final passage are particularly significant.

First, the qualifying period for ordinary unfair dismissal will reduce from two years to six months, rather than being removed entirely. This change is expected to take effect from January 2027.

Second, and potentially more impactful, the compensation cap for unfair dismissal — currently the lower of one year’s salary or £118,223 — is expected to be abolished, subject to the Government completing and publishing an Impact Assessment. If confirmed, this will substantially increase litigation risk and exposure for employers.

A phased introduction

ERA 2025 will be implemented gradually under a government roadmap.

The only immediate change following Royal Assent has been the repeal of the Strikes (Minimum Service Levels) Act 2023.
Further industrial relations reforms will follow two months later, including simplified industrial action ballots and notices, stronger protection against dismissal during strikes, and the repeal of much of the Trade Union Act 2016.

From April 2026, employers will start to see more practical, day-to-day changes, such as:

• Day-one rights to paternity leave and unpaid parental leave
• Reformed Statutory Sick Pay (no waiting days or lower earnings limit)
• Expanded whistleblowing protection, including sexual harassment complaints
• Higher penalties for collective redundancy failures

Additional reforms are planned for October 2026, including tighter controls on fire-and-rehire practices, stronger rules on tips, expanded trade union rights, and a new duty to take “all reasonable steps” to prevent sexual harassment.

Beyond that, 2027 is expected to bring the aforementioned unfair dismissal changes, reforms covering flexible working, bereavement leave, protections for pregnant workers, restrictions on zero-hours arrangements, and regulation of umbrella companies.

What should employers be doing now?

For unionised employers, the priority is understanding the imminent changes to industrial action rules and reassessing risk and response planning.

For non-unionised workplaces, preparation should focus on:

• Reviewing contracts, variation clauses and probationary provisions
• Strengthening probationary processes ahead of the six-month unfair dismissal threshold
• Training managers on upcoming rights and obligations
• Planning policy updates for family leave, sickness absence and harassment
• Auditing payroll and benefits systems in light of SSP reform

The takeaway

ERA 2025 is not a single moment of change but a rolling programme of reform. Employers that start planning early - rather than waiting for implementation dates - will be best placed to manage risk, cost and disruption as the new framework takes shape.

New rates for sick pay, family leave and national minimum wage from April 2026

The Government has set out its proposed new statutory rates for statutory sick pay and family leave pay to apply from 6^th April 2026. 
 

 
The average gross weekly earnings required to qualify for the various forms of family leave pay is proposed to increase from £125.00 or more per week, to £129.00 or more per week from 6^th April 2026. 

These changes sit alongside the proposed changes to national minimum wage which, if approved, will take effect from 1^st April 2026:
 

The Court of Appeal holds that Stonewall did not instruct, cause, or induce Garden Court Chambers to discriminate against a barrister because of her gender critical beliefs

Section 111 Equality Act 2010 makes it unlawful for a person to instruct, cause or induce someone to discriminate against, harass or victimise another person, or to attempt to do so. 

In Bailey v Stonewall, the Claimant was a tenant of Garden Court Chambers (GCC). GCC signed up to the Diversity Partners programme run by Stonewall.  The Claimant held gender critical views. She made tweets about her objection to what she saw as Stonewall’s ‘trans-extremism’ and supporting the LGB Alliance, which promoted gender crucial principles. GCC received a number of complaints as a result, specifically about a viewed incompatibility of her views with trans rights. Stonewall also made a complaint. GCC made a public statement that it would investigate. As a result of the investigation, GCC held that two of the tweets should be deleted.

The tribunal found that the announcement of the investigation and its outcome were both detriments suffered by the Claimant because of her protected gender critical beliefs. 

The point at issue was whether Stonewall was liable for inducing the discrimination. The Court of Appeal held it was not. For ‘causing or inducing’ claims under s111 EqA:

1. a claimant must show that, but for the intervention of person A (here, Stonewall), the act of discrimination by B (GCC) would not have occurred; and

2. having regard to all the facts, making person A (Stonewall) liable for that discrimination would be ‘fair or reasonable or just’, those adjectives being interchangeable. 

The EAT held that responsibility for determining the complaint in a discriminatory way lay only with GCC. For that reason, although Stonewall’s complaint was the ‘occasion’ for it happening (and so could be regarded as causing it in a ‘but for’ sense), it would not be reasonable to hold Stonewall liable for that discriminatory outcome. Protest or complaint alone is insufficient to establish liability without a fair and reasonable basis to attribute responsibility.

Job applicants and the question of health

A prospective employer’s obligations under Equality Act 2010 kick in before they are even an employer. This is because job applicants are protected from discrimination under Equality Act 2010. It is important that employers are aware of this and that recruitment practices are not in any way discriminatory. 

One key area in this regard is the question of health. All employers, if given the option, would want to recruit a healthy employee. But asking questions about health can give rise to the risk of a disability discrimination claim.

The general position under the Equality Act 2010 is clear: prospective employers are not allowed to ask questions about an applicant’s health prior to making a job offer.

There are exceptions to this general rule. Employers are permitted to ask questions:

1. to enable adjustments to be made to the interview and selection process itself; or

2. to find out if the applicant can carry out an intrinsic part of the job. For example, if the role would involve working at height, you would be able to ask health questions which allowed you to ascertain whether the employee had any medical issues which might impact on their ability to work at height.

The best way to find out whether an applicant needs any adjustments to the interview process itself is to ask them. The Equality and Human Rights Commission suggests that the following wording should be included in recruitment materials: ‘Please contact us if you need the application form in a different format or if you need any adjustments for the interview’. A failure to do this, or to give due consideration to the issue if the employee raises one, risks a claim for failure to make reasonable adjustments. 

This was illustrated in the case of Mallon v AECOM. Mr Mallon had dyspraxia. He applied for a role with AECOM for which he was required to fill out a paper application. He asked if he could complete the form orally owing to his condition. AECOM, on notice of his dyspraxia, told him to put his difficulties in an email. It said that it could assist Mr Mallon, but that completion of the form was required. The employment tribunal concluded that a reasonable employer, when faced with an individual with a dyspraxia diagnosis asking for an adjustment to avoid filling in an online form, would have telephoned that individual to ask for more details about his difficulties. The employment tribunal gave the opinion that, given the applicant’s difficulties with written communication, it was not reasonable to expect him to explain these matters in an email. 

Once you have made a job offer, you are able to ask health questions. You are even able to make the job offer conditional on completion of a health assessment. However, you need to be very careful if, on receipt of medical information, you decide to withdraw the job offer. If a health issue comes to light at this stage, before making any knee-jerk decision, you should consider whether the health issue impacts on the person’s ability to do their role. You should also explore and document any adjustments which might be able to be made to the role to enable them to do it. The duty to make reasonable adjustments is in play and, if you withdraw the offer without first investigating whether any adjustments are available, you are at high risk of a claim being made against you.

Biometric monitoring in the workplace: A high-risk area for employers

Biometric monitoring - tools that identify individuals through fingerprints, facial recognition, voice patterns or other biological traits - is becoming increasingly common in workplaces seeking efficient access control, timekeeping, or security. But the legal and ethical risks associated with biometrics are substantial. These technologies collect special category data, meaning they trigger the highest level of protection under the UK GDPR.

Employers considering biometrics need to understand both the benefits and the pitfalls before rolling out any system.

Why Biometrics are high-risk

Biometric data is inherently sensitive. It can reveal personal attributes, is unique to the individual, and cannot easily be changed if compromised. That’s why the GDPR treats biometrics as special category data, requiring employers to meet:

• a lawful basis for processing, and
• a separate special category condition, such as health and safety, substantial public interest, or explicit consent.

Because biometrics are generally not essential for most roles, it is often difficult to rely on any basis other than explicit consent — and consent is notoriously problematic in employment due to the imbalance of power.

The Serco case: A cautionary tale

The ICO’s enforcement action against Serco earlier this year is a stark warning. Serco implemented facial recognition and fingerprint scanning to monitor staff attendance without:

• properly assessing privacy risks;
• demonstrating that biometrics were necessary; or
• considering alternatives, such as ID cards.

The ICO ordered Serco to stop using the technology, delete most of the biometric data, and comply within three months — a strong signal that biometric monitoring will face serious scrutiny.

Justifying biometric monitoring

Where biometric data is genuinely necessary - such as in high-security environments - employers must:

• conduct a Data Protection Impact Assessment (DPIA)
• assess whether a less intrusive option exists
• explain clearly why biometrics are required
• ensure staff have a genuine alternative option (e.g. a key card)
• restrict access to data and store it securely
• keep retention periods short and well-defined

Transparency and choice are essential

Because biometrics are deeply personal, employees must understand what is being collected and why. If employers cannot offer staff a meaningful choice over whether to participate - without detriment - biometrics will rarely be lawful.

Proceed with caution

Biometric monitoring is an area where technological convenience often clashes with legal risk. Employers should proceed carefully, documenting every decision, prioritising alternatives, and remembering that “high-tech” doesn’t automatically equal “lawful”.

Government publishes working paper on options to reform non-compete clauses

Non-competition clauses in employment contracts are a contentious issue. They are clauses which survive the end of the employment relationship and restrict the ex-employee, for a period of time, from working for a competitive business or setting up in competition with their ex-employer. These clauses will only be enforced by the Courts if they are narrowly drafted and go no further than is reasonably necessary to protect legitimate business interests. Legitimate business interests include factors such as protecting confidential information and client relationships.

Non-competition clauses are a form of restrictive covenants. Other restrictive covenants, which are less controversial, include clauses which prevent solicitation or dealing with clients, or those which prevent solicitation or dealing with suppliers. 

There is a good argument that, if the identified legitimate business interest can be sufficiently protected via these other forms of covenant, then these should be used – there should be no place for a non-competition provision at all.

The Government remains concerned that non-compete clauses may be impacting their ‘growth mission’ by hindering free movement of labour. It has recently published a working paper asking for opinions on options to reform non-compete clauses.

The Government’s working paper outlines possible options including:

• a statutory limit on the length of non-compete provisions – perhaps to three months
• a statutory limit linked to business size
• restricting the use of non-compete provisions to high earners only
• an outright ban on any form of non-compete clause.  

The closing date for responses and views is 18^th February 2026.

In light of the Government’s clear direction of travel on this: a move towards a more restrictive role for non-competition clauses, employers should take the time now to review their contractual documentation and check that it is fit for purpose. If non-compete clauses are going to become less reliable, then businesses with high risk from departing employees should consider the following:

• Reviewing express confidentiality clauses to make sure that employees are absolutely clear what information is covered and that it remains confidential after the end of employment.

• Reviewing other restrictions to see if they can adequately ‘fill the gap’ if non-competition clauses can no longer be freely used. Look at non-solicitation and non-dealing clauses in particular and check that they are tightly drafted.

• Consider including garden leave provisions alongside lengthy notice periods for key staff members. This combination will give them a period of time away from the business (and away from sensitive business information) before they are able to move to a competitor. 

When is a dismissal not an actual dismissal: when it’s a constructive dismissal

Constructive unfair dismissal is a strange beast. It is an unfair dismissal but there is no actual dismissal involved at all. It occurs when an employee resigns in response to their employer's conduct. The employer’s conduct must be such that it amounts to a repudiatory breach – a breach going to the root of the contract. If it does, then the resignation is treated, in law, as a dismissal, and the employee can claim unfair dismissal.

One of the key requirements for constructive dismissal is that the employee must not have affirmed the employment contract and accepted the breach before resigning. This is not something which is easy to assess, but tribunals look at factors such as the amount of time which elapses between the breach and the resignation and whether, in the intervening period, the employee conducted themselves in a way which indicated that they had accepted the breach.

The issue of affirmation was front and centre in the recent Employment Appeal Tribunal case of Barry v Upper Thames Medical Group. Dr Barry was told by the Trust that she would not be paid sick pay. This was a breach of her employment contract. Six months later, she resigned. She claimed constructive dismissal, relying on this breach. The Trust argued that by delaying for six months between becoming aware of the breach and resigning, Dr Barry had affirmed the employment contract and accepted the breach. The Employment Appeal Tribunal did not agree. Even though there had been a six-month delay, there had been no affirmation. The EAT pointed to the fact that Dr Barry didn’t work at all following the breach and actively disputed the breach throughout the six-month period. All of this pointed against her affirming her employment contract.

This case is a useful reminder to employers that a delay in resigning, in and of itself, does not mean that a breach of contract has been affirmed. If the employee continues to work ‘under protest’, then the breach may well continue. If an employer is faced with a similar situation, then simply sitting on the issue and hoping it will go away through the passage of time is unlikely to work. Employers should engage with the employee, acknowledge mistakes, and attempt to reach a mediated agreement to move forward. Document all such discussions - especially if you might want to rely upon them as evidence of affirmation by the employee. 

And Finally...

Harassment is a serious offence. If it is related to one of the protected characteristics under the Equality Act 2010, then it can give rise to an employment tribunal claim and substantial financial awards. It can also be a criminal offence. Sometimes, conduct taking place at work satisfies not only the employment law definition of harassment but also the criminal standard. 

Against this backdrop, the Telegraph has reported that a Metropolitan Police call centre manager was found guilty of harassment in the criminal courts after targeting a colleague with unwanted gifts and messages. This is a rare case where workplace harassment strayed into criminal conduct. The manager was handed an 18-month community order and a two-year restraining order. Some of his harassing acts were eyebrow raising to say the least, including gifting a signed photo of the rock band Queen and expensive perfume, claiming to be Ronan Keating’s cousin, and posing as Ronan himself in messages sent to his victim.

Being given gifts and being contacted by a pop star may not look like classic examples of harassment as they are all, on the face of it, ‘positive’ actions. This does not mean that they cannot also be harassment, either in the criminal sense (as in this case) or in an employment context. This case is a reminder to employers that harassment can take many forms. If conduct is ‘unwanted’ by the victim then, provided it is reasonable for them to feel that way, it can and will be harassment in the eyes of the law.