Cases to look out for

Religion and belief discrimination

Religion and belief discrimination remains a hot topic, and employers continue to grapple with how best to manage conflicts of belief and manifestations of belief in the workplace. Two cases to be aware of in the coming year:

In Higgs v Farmor’s School, a pastoral administrator was dismissed from the school where she worked following a parental complaint about her social media posts. She claimed that her dismissal amounted to discrimination based on her gender critical beliefs. While the employment tribunal initially rejected her claim, she was successful at the EAT (see our previous alert here). Although a person is free to believe what they wish, it may be justifiable to limit how they manifest that belief, if it infringes on the rights of others. The EAT in this case gave guidance on how to assess whether such limitation can be justified as both necessary for a legitimate aim, and proportionate. The EAT explained that the question of proportionality is context-specific and it will always be necessary to consider whether the employer could have achieved its aim in a less intrusive way. The school’s appeal was heard by the Court of Appeal in October 2024, and judgment is awaited.

In Bailey v Stonewall Equality Ltd, a barrister successfully claimed that her Chambers had discriminated against her on the basis of her gender critical beliefs in the way it investigated a complaint made against her by Stonewall relating to her social media posts. However, she failed in her claim against Stonewall that it had caused, induced or instructed that discrimination. The EAT dismissed Ms Bailey’s appeal (see our previous alert here). Although “but for” Stonewall’s complaint, the discrimination would not have occurred, it was not reasonable to hold Stonewall liable for the discriminatory conduct. The responsibility for determining this complaint in a discriminatory way lay with Ms Bailey's Chambers and its members. That won’t, however, be the last word on the matter as the case is due to be heard by the Court of Appeal before 1 December 2025.

In the meantime, employers should take care when managing employees with conflicting beliefs, making clear that any discussion about such issues should be carried out with dignity and respect, even when there is disagreement, and setting clear rules for workplace behaviours.

Whistleblowing

Another area of employment law that often troubles employers is whistleblowing, not least because the definition of ‘worker’ is broader for the purposes of whistleblowing protection than it is in other areas. Indeed, in February 2025, the Court of Appeal is due to hear the case of Sullivan v Isle of Wight Council, which will consider whether an external job applicant falls within the extended definition of worker and therefore can bring a whistleblowing claim. The EAT had rejected the claim, taking the view that the wording of the legislation made clear that parliament had intended to exclude external job applicants from whistleblower protection and any amendment must be for the government to make (see our previous alert here). Employers will be hoping that the Court of Appeal upholds that decision and maintains the status quo.

As compensation for whistleblowing detriment and dismissal is uncapped, successful whistleblowing claims can prove costly for employers. One example of this is the case of SPI Spirits (UK) Ltd v Zabelin, in which the EAT held that an employee's compensation for whistleblowing detriment and automatic unfair dismissal could not be limited to an amount specified in the termination provisions of their contract of employment. The EAT also held that the disciplinary provisions of the Acas Code on Disciplinary and Grievance Procedures applied to a whistleblowing dismissal, such that the employee’s award could be uplifted by up to 25% in the event of a failure to follow the Code (see our previous alert here). The employer’s appeal in this case is due to be heard by the Court of Appeal by April 2025. For now, however, employers that are considering taking disciplinary action against, or dismissing, an employee for conduct that could be considered in any way to relate to potential protected disclosures should take care to follow the Acas Code in order to avoid the risk of a substantial uplift on an already large potential award.

Employment status – and the “right of substitution”

The last case we’re touching on here is Lutz v Ryanair DAC and another, which concerns the employment status of a pilot who was supplied to Ryanair by a temporary work agency, MCG Aviation Ltd, for a five year fixed term. The contractual arrangements provided that Mr Lutz was supplied as a self-employed independent contractor, but the EAT upheld an employment tribunal’s decision that Mr Lutz was in fact an agency worker employed by MCG and could therefore bring claims for holiday pay and sick pay. One of the key factors that influenced the decision was the limited nature of Mr Lutz’s right of substitution, which really only amounted to a right to request to swap shifts with another pilot (and such requests were sometimes refused). The Court of Appeal is due to hear this case by 20 March 2025, and its decision will be significant not just for the aviation industry (as many pilots are engaged in this way), but also more broadly for employers who wish to be able to engage staff on an independent contractor basis but with some control over the contractor’s right of substitution.

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Imminent employment legislative changes

The following changes are due to take effect during 2025:

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Longer term employment legislative changes

The Employment Rights Bill (the Bill), which the government describes as representing "the biggest upgrade in employment rights for a generation", was published to great fanfare on 10 October 2024. Since then, the government has produced a raft of further documents that demonstrate its commitment to pushing the Bill forward at speed, including ten factsheets, four consultation papers, 23 individual impact assessments on various of the Bill's proposals, and 53 pages of proposed amendments to the Bill itself!

Key proposals set out in the Bill include:

• Unfair dismissal: Making protection from unfair dismissal a "day one" right by repealing the current requirement for an employee to have two years' service to claim ordinary unfair dismissal, and introducing the concept of an "initial period of employment" (of between three and nine months), during which a lower level of protection will apply, and compensation will be subject to a lower cap. The intention is that, during the initial period of employment, employers will be able to follow a lighter touch process to dismiss an employee for conduct, capability, illegality, or some other substantial reason (although not redundancy).
• Fire and re-hire: Making it automatically unfair to dismiss an employee for refusing to agree to a change to their terms and conditions of employment (fire and rehire), albeit that there will be a very narrow exception if the employer can demonstrate that the change in terms was necessary to alleviate serious financial difficulties and could not reasonably have been avoided.
• Zero and low hour contracts: Requiring employers to offer contracts for a guaranteed number of hours to zero-hours workers and low-hours workers. The number of hours to be offered will have to reflect the number of hours that the worker regularly works during a reference period (to be specified in regulations, but expected to be 12 weeks). Employers will also be required to provide workers with reasonable notice of shifts, and of cancellations or changes to scheduled shifts, as well as compensation for cancelling or changing shifts at short notice.
• Collective redundancy: Removing the words "at one establishment" from the legislation that sets the collective redundancy consultation threshold, so that employers will have to consult collectively whenever they are proposing to dismiss 20 or more employees for redundancy in a 90 day period anywhere across their organisation. It may be difficult for employers, particularly large organisations that operate across a number of sites, to keep sufficient track of proposed dismissals to identify when collective consultation is triggered. An employer that fails to comply with collective consultation requirements is liable for a protective award – the maximum amount of which the Bill is also proposing to increase.
• Dismissal of pregnant / new mother employees: Prohibiting the dismissal of an employee who is pregnant, is on maternity leave, or has returned from maternity leave within the past six months, except in certain specified circumstances. The Bill does not indicate what those circumstances will be, but they are likely to include gross misconduct, and possibly genuine redundancy.
• Sexual harassment: Strengthening the duty on employers to prevent sexual harassment at work by requiring them to take “all reasonable steps” to do so (as opposed to simply “reasonable steps”, as has been the case since the duty came into force on 26 October 2024).
• Sexual harassment / whistleblowing: Providing expressly that disclosure of a concern about sexual harassment will amount to a protected disclosure for the purposes of whistleblowing protection.
• Third party harassment: Introducing a requirement for employers to prevent harassment of their workers by third parties (covering not just sexual harassment, but all types of harassment under the Equality Act 2010).
• Gender pay gap and menopause action plans: Requiring large employers to produce gender equality action plans setting out what they are doing to address the gender pay gap and what support they offer for employees going through the menopause.
• Bereavement leave: Creating a statutory right to a week of unpaid bereavement leave.
• Family leave: Making paternity leave and unpaid parental leave day one rights.
• Flexible working: Making flexible working the default from day one of employment by providing that employers will only be able to refuse a request if they can show that the refusal is reasonable.
• SSP: Broadening rights to SSP by making it payable from the first day of sickness absence and removing the lower earnings limit for eligibility.
• Trade Union law changes:
• Repealing key provisions of the Trade Union Act 2016, such as industrial action ballot thresholds, the requirement to provide 14 days' notice of industrial action, and union supervision of picketing.
• Strengthening the role of trade unions by giving them a right of access to workplaces to meet, represent, recruit or organise workers and to facilitate collective bargaining, and making it easier for unions to obtain statutory recognition.
• Increasing legal protections from detriment and dismissal for workers who participate in protected industrial action.
• Tribunal procedure: Increasing employment tribunal limitation periods from three months to six months. (This proposal was not included in the initial draft of the Bill, but the government is intending to introduce it by way of an amendment.)

The Bill’s progress through parliament is likely to take some time, and the government has confirmed that none of the above measures is expected to take effect before 2026. One of the reasons for this long lead-time is the need for extensive consultation and further implementing regulations to set out the detail of many of the proposed measures. The first four consultations on the Bill’s proposals (covering trade unions, collective redundancies and fire and rehire, strengthening SSP, and applying the zero hours related proposals to agency workers) concluded in December 2024. However, we can expect many more consultations to follow in 2025.

Perhaps the one area where we may see some of the Bill’s provisions taking effect during 2025 is in relation to trade unions, as the measures that involve simply repealing existing legislation rather than creating any new rights are scheduled to come into force two months after the Bill receives Royal Assent.

We will keep clients updated on the Bill’s progress through parliament, including any significant proposed amendments, throughout 2025. In the meantime, for a detailed discussion of the Bill’s main proposals, and their likely implications for employers, you can listen to all four episodes of our Employment Rights Bill Podcast Series here.

The Bill does not contain all of the employment-related proposals from the government’s Plan to Make Work Pay, as some are to be dealt with in separate legislation. One further significant proposal that we expect to see taken forward in 2025 is a draft Equality (Race and Disability) Bill, which would introduce the right to bring equal pay claims on the basis of race and disability, and require large employers (presumably those with 250+ employees, to align with gender pay gap reporting requirements) to publish ethnicity and disability pay gap reports. Implementing these measures in a way that is practicable and effective will require some complex drafting, so it is encouraging that the government has indicated that a draft Bill will be published for pre-legislative scrutiny and consultation before it goes to parliament. The draft is anticipated during the current parliamentary session, so we expect it to be published in the coming year.

Another of the proposals from the Plan to Make Work Pay, that is not included in the Employment Rights Bill, is the introduction of a right for employees to “disconnect” outside of normal working hours. The government plans to introduce the right to disconnect via a statutory Code of Practice, and is expected to begin consulting on a draft in 2025.

Also on the horizon in 2025 are proposed changes to apprenticeship funding, with the apprenticeship levy due to be replaced by a new growth and skills levy, under which funding will be available for new foundation level apprenticeships and for apprenticeships that are shorter than the current 12 month minimum. However, in an attempt to rebalance the system to encourage greater investment in younger workers, the government has said that it plans to require employers to fund more of their level 7 apprenticeships – equivalent to a master’s degree and often accessed by workers who are older or already well qualified – outside the levy. A new body, Skills England, will be responsible for taking forward these plans.

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Forthcoming immigration changes

Immigration and controlling the number of people who relocate to the UK for work is likely to remain high on the government’s agenda in 2025. At the end of 2024, following news reports that net migration to the UK was higher than an initially thought (reaching a peak of 906,000 in 2023), the Labour government reasserted its intention to reduce the dependence of the UK’s labour market on foreign workers.

As such, we are anticipating a Government white paper imminently which should set out further reforms of the sponsorship visa route. The expectation is that this will include the following;

• Rules which will require employers who use the sponsorship system to help train resident workers.
• A crack down on rogue employers including bans on hiring overseas workers.
• Increasing the cooling off period for employers who lose their sponsor licence to prevent them applying for a new licence for two years instead of the current limit of 12 months.
• Strengthening the ability of the Home Office to downgrade a sponsor licence where a sponsor fails to meet their sponsorship duties. Sponsors who are put on action plans will have to remain on them for 12 months rather than the current 3 months.

New guidance came into force on 1 January 2025 stating that employers have to cover the associated costs of sponsorship themselves, including the immigration skills charge, certificate of sponsorship fee and costs to obtain the licence. Visa applicants must not cover these costs, nor can employers seek to claw these back from employees.

Last year saw a significant increase in compliance action by the Home Office. They carried out 6,600 visits between January and October 2024, a 22% increase on year before. In the third quarter of 2024, the Home Office suspended 509 licences and revoked 513, up from 91 licences suspended and 65 revoked in 2023. We expect this pattern to continue into 2025. Employers should ensure they are up to speed on their sponsorship duties and compliance obligations so they are ready in case the Home Office pays a visit.

Digitalisation of immigration system

The Home Office’s journey to creating a digital immigration status will continue in 2025. The deadline for biometric residence permit holders to obtain an eVisa has been pushed back. BRP card holders will continue to be able to use their expired BRP cards to travel into the UK until the end of March 2025. We are likely to see further developments in this area as the months progress and this deadline could be extended again.

Roll out of Electronic Travel Authorisation Scheme (ETA)

The UK’s ETA is an entry requirement for visitors from certain countries to pre-authorise travel to the UK. It forms part of the UK's new digital immigration policy aimed at strengthening border security and improving travel efficiency.

The ETA applies to those travellers from non-visa national countries who currently do not need to apply for a visit visa before they travel to the UK.

From 8^th January 2025 all travellers coming to the UK from beyond the EU will require an ETA. This will be extended to countries within the EU from 2^nd April 2025.

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Pensions Outlook for 2025

The King’s speech

We reported in July 2024 on a Pension Schemes Bill to be laid before Parliament in 2025 (read our report here).

Alongside the changes outlined in the King’s speech, the Government announced a landmark Pensions Review as part of its mission to “boost growth and make every part of Britian better off”. The first phase of the Pensions Review was to focus on investments. The second phase was intended to consider further steps to improve pension outcomes (such as changes to automatic enrolment, which would be of particular significance to employers).

As part of the first phase of the Pensions Review there was a call for evidence during September 2024 focusing on defined contribution (DC) workplace pension schemes and the Local Government Pension Scheme (LGPS). The first phase aims being:

• To boost investment.
• Increase pension pots.
• And tackle waste in the pensions systems.

Following the call for evidence the government announced two consultations.

The first consultation, which ends on 16^th January 2025, is about ‘Unlocking the UK Pensions Market for Growth’. The consultation sets out proposals to legislate for a minimum size and maximum number of DC pension scheme default funds. These measures are intended to enable the DC market to move to fewer, larger funds which are better placed to invest in productive assets and more able to deliver greater returns for members.

The second consultation, which also ends on 16^th January 2025, seeks views on proposals designed to strengthen the management of LGPS investments. The proposals relate to the topics of asset pooling, local and regional investment, and scheme governance.

A decision on whether to include the measures under both of these consultations in the upcoming Pension Schemes Bill will be made in light of and following the outcome of the consultations.

The second phase of the Pension Review on steps to improve pension outcomes, has now reportedly been put on hold with no new date for when it might be launched. The Chancellor reportedly wants to avoid putting any further pressure on business after the Autumn Budget hit employers with a bill for extra national insurance contributions. Whilst the Government has insisted the second phase of the Pension Review is not being ‘long-grassed’, the delay gives employers further breathing space with no imminent changes to pensions automatic enrolment.

Virgin Media case update

We reported last year on the Virgin Media case, in which the Court of Appeal held that the absence of actuarial confirmation in accordance with contracting-out legislation rendered rule amendments in a contracted-out defined benefits pension scheme void (see our previous alert here).

An update regarding the case has been issued to members of the Association of Consulting Actuaries, the Association of Pension Lawyers and the Society of Pension Professionals.

A working group of representatives from all three organisations have been engaging with the Department for Work and Pensions to see if a regulatory solution can be reached. The update provided by the group confirmed that:

“The working group continues to believe that the Secretary for State should make regulations that would, subject to appropriate safeguards, enable the validation retrospectively of any amendment that is held to be void solely because either a written actuarial confirmation was not received before the amendment was made, or where such a confirmation cannot now be located. Quite what form such regulations could take, if a regulatory approach is agreed, is a matter that the working group is discussing with the Department, with the working group refining its thinking as a result.”

The working group hopes to provide a further update in the early part of this year. Sponsoring employers and scheme trustees who are not currently concerned about limitation periods, buy-outs or challenges from scheme auditors may, therefore, decide to await further developments before investing time and resource in carrying out a review of historic pension scheme documentation.

Inheritance tax and death benefits

It was announced in the Autumn Budget 2024 that from 6 April 2027 most unused pension funds and death benefits paid from a registered pension scheme (whether defined benefit or defined contribution, and whether public sector or private sector) will form part of a deceased member’s estate for inheritance tax purposes (IHT).

The Government has launched a technical consultation, which closes on 22 January 2025, on the processes required to implement these changes:

The process being proposed is that pension scheme administrators will become liable for reporting and paying any IHT due on unused pension funds and death benefits. If implemented, this is likely to lead to increased complexity for pension scheme administrators, and probably increased costs. It will also delay the distribution of death benefits until after the deceased’s personal representatives have provided the pension scheme administrator with all the information required to assess whether an IHT charge arises.

While these changes will not come into force until April 2027, in the intervening years, employers may wish to consider whether there are more tax-efficient ways of providing death-in-service benefits than under a registered pension scheme.

The latest from the Pensions Ombudsman

In the latest blog from the Pensions Ombudsman, Dominic Harris reflects on the organisation's progress over 2024 and provides an update on the latest developments on its Operating Model Review which are being taken forward in 2025.

With a sharp rise in demand for the Pensions Ombudsman’s services in 2024 (complaints up by 53%), the Pensions Ombudsman has implemented improvements to deal with this and improve efficiencies.

The Pensions Ombudsman is urging all employers and administrators who manage pension schemes to ensure that pension scheme members can access information and documentation about the scheme’s internal dispute resolution procedures (IDRP). This is because the Pensions Ombudsman will now require all complainants to first try to resolve their complaint through the pension scheme’s own IDRP, before bringing their complaint before the Pensions Ombudsman.

The Pensions Ombudsman has also recently launched an expedited decision-making process in cases which have been assessed as having a clear outcome. Issuing expedited decisions, and expedited determinations (where required), will allow the Pensions Ombudsman to resolve disputes more quickly, which should benefit all parties. Shorter-form expedited determinations will not be published in the normal way, which could be of particular benefit to employers who are often concerned about reputational risk when Pension Ombudsman determinations are published.

The Pensions Ombudsman is also taking a ‘lead-case’ approach, where an industry wide or scheme specific issue is affecting multiple members. This is where the Pensions Ombudsman will select a ‘lead-case’ to accelerate through its determination process. This allows the Pensions Ombudsman to set out a clear and comprehensive determination in relation to one case, which can then be used to resolve the other complaints relating to the same matter.

The highlights of these efficiencies for those managing a pension scheme are:

• You will need to ensure your IDRP or complaint process is robust and well-communicated.
• Your signposting to TPO should be clear and up-to-date.
• If you have an issue affecting multiple members, let TPO know at an early stage so that they can explore whether a lead case approach is appropriate.

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