House of Lords Blocks Employment Rights Bill, Extending Parliamentary Stalemate
The House of Lords has once again defeated the government on the Employment Rights Bill, resulting in a continued stalemate over the legislation. This follows a recent development where ministers claimed a compromise had been reached between employers and unions concerning the right to claim unfair dismissal in an effort to unblock the bill's progress.
Peers supported a Conservative proposal that calls for a government review before removing the cap on compensation for ordinary unfair dismissal claims. This cap-abolition provision was a late addition to the bill and was not part of Labour's manifesto. The proposal passed by 244 votes to 220.
The bill, which includes the compensation clause, is expected to return to the Commons and continue through the parliamentary “ping-pong” toward a possible finish before Christmas. This legislation, applicable to England, Scotland, and Wales—but not Northern Ireland—is described by the government as the biggest improvement to workers' rights in a generation. It aims to introduce measures such as sick pay and day-one parental leave, a ban on exploitative zero-hour contracts, and stronger flexible-working rights.
Despite these ambitious reforms, some businesses have expressed concerns that the changes would increase costs. The government has altered its earlier proposal for unfair dismissal rights by changing from day-one access to a six-month qualifying period starting in 2027. Alongside this, the limits on compensation for financial loss in ordinary unfair dismissal cases have been removed, with compensation now uncapped in automatic cases.
Critics argue that uncapped compensation primarily benefits higher-paid employees and could negatively impact entrepreneurship and job creation. However, government ministers defend the plan, asserting that it simplifies tribunal processes and reduces the burden on the system.
