The passing into law of the Employment Rights Act (ERA) 2025 at the end of last year means that 2026 is set to be a seismic year for employment law.

Although many of the changes to be introduced by the act will not come into force until 2027 or later, the coming year will see a significant number of developments, starting with the repeal in February of parts of the Trade Union Act 2016, including those imposing certain limitations on strike action, restrictions on picketing, and the expiry of industrial action mandates after six months.

During the course of the year, the employment team will be taking a deeper dive into the modifications brought about by the act – keep an eye out for a series of articles which will begin this month.

In addition to the legislative amendments that will come into force this year, there will be a number of consultations on the provisions of the act with at least another 26 anticipated. These will include consultations on zero-hours contracts, worker status, flexible working, and collective redundancy consultation, to name but a few. A summary of the changes expected in 2026 is below.

Employment Rights Act – April

• Enhanced whistleblowing protection: disclosing concerns relating to sexual harassment will amount to a protected disclosure under the whistleblowing legislation.
• Fair Work Agency (FWA): the FWA will be established and granted powers to investigate and take action against businesses that do not comply with employment law. Guidance is expected before April.
• Changes to statutory sick pay (SSP): SSP will be payable from the first day of sickness absence and the lower earnings limit for eligibility will be removed. For employees earning below the lower earnings limit, SSP will be payable at the lower of the weekly rate or at 80% of their average weekly earnings.
• Day one right to paternity leave and unpaid parental leave.
• An increase in protective awards for failing to comply with collective redundancy consultation requirements: from 90 days’ pay to 180 days’ pay per employee.
• Trade unions: simpler recognition processes and the introduction of electronic balloting.

Employment Rights Act – October

• Enhanced protection against harassment: the act increases the existing duty on employers to take ‘reasonable steps’ to prevent sexual harassment at work to a duty to take ‘all reasonable steps’. Failure to comply with this duty can lead to a 25% uplift in compensation if an employee succeeds in a sexual harassment claim. There will be an express requirement for employers to prevent harassment of their employees by third parties (note that this covers all types of harassment under the Equality Act 2010, not just sexual harassment).
• Fire and rehire: it will be automatically unfair to dismiss an employee for refusing to agree to a change in their terms and conditions of employment where the change falls within the definition of ‘restricted variations’. Restricted variations relate to pay, hours and holidays. They do not, however, cover changes to an employee’s duties or place of work or, significantly, restrictive covenants.
• Trade union rights: unions will have greater rights of access to workplaces, and union representatives will have enhanced rights to time off and facilities. From October workers will have the right not to be subjected to a detriment by their employer where the sole/main purpose is to prevent or deter the worker from taking protected industrial action or to penalise them for doing so. Employers will have to provide workers with a written statement informing them that they have the right to join a trade union. This must be provided with the written statement under section 1 of the Employment Rights Act 1996.
• Limitation period for Employment Tribunal claims: the limitation period for most claims will be extended from three to six months.
• Tighter tipping laws: employers will be required to consult with workers or their representatives before creating a tipping policy, and update their tipping policy every three
• Establishment of an ‘Adult Social Care Negotiating Body’: the government will have the power to establish an ‘Adult Social Care Negotiating Body’ for England (with similar bodies to be established in Scotland and Wales). These will be public bodies, but operate independently of government, with representation from both trade unions and employers in the adult social care (ASC) sector.

Other changes

A restriction on non-compete clauses

Among the myriad consultations launched in 2025 to meet the government’s manifesto commitments was a working paper in November on the reform of post-termination non-compete clauses. While recognising that businesses have a need to protect their confidential information to remain competitive, maintain recruitment, and continue to grow, the consultation seeks views on a range of options: from banning non-competition clauses altogether to restricting their length, applying them only to more senior employees, or limiting them to small companies only. For more on the detail of the consultation, which closes on 18 February, see here.

Increase in rates and limits

April will see the usual annual increases in the national minimum wage and national living wage, plus an increase in statutory leave payments such as statutory sick pay and statutory maternity pay, and the amount of a week’s pay for redundancy purposes.

Equality (Race and Discrimination) Bill

A draft Equality (Race and Disability) Bill, which would enshrine the right to equal pay for ethnic minorities and disabled people, and mandatory ethnicity and disability pay gap reporting for employers with over 250 employees, was announced back in 2024. Last year, a consultation was launched on pay gap reporting in addition to a call for evidence on issues including the prevalence of race and disability pay discrimination, strengthening protections against combined discrimination, and the socio-economic duty in England (found in section 1 of the Equality Act 2010 and applicable to public bodies). Both the consultation and the call for evidence have now closed, and the draft bill is expected to be published some time in 2026.

Paternity Leave (Bereavement) Act 2024

This act, which makes paternity leave a day one right for bereaved fathers/partners, came into force on 29 December 2025. Its impact will be limited (given the extended rights to be granted in April 2026 under the Employment Rights Act) but employers should be aware that this particular right is already in effect. In time, the introduction of regulations providing further protections and extra statutory leave for bereaved fathers is expected, but further regulations will be needed for that. The draft regulations may appear in 2026.

Hybrid working and the right to ‘switch off’

Although the plan to introduce a statutory right to switch off in the Employment Rights Act was dropped, the government‑commissioned report on home working published in November 2025 (Is working from home working?) set out a number of recommendations to support hybrid working, including promoting management training to support hybrid working, and improving national data collection. The emphasis will be on employer guidance rather than heavy regulations, and we may see a code of practice on the right to disconnect from work outside of contractual working hours.

Cases to watch

Even without the added workload to be introduced by the Employment Rights Act, 2026 will be another busy year for the already overstretched courts and tribunals. A key case to watch out for is the University of Bristol’s appeal against the Employment Tribunal’s decision that an academic’s anti-Zionist beliefs amounted to a protected philosophical belief, and that his dismissal by the university was both unfair and an act of direct discrimination. The appeal in Miller v University of Bristol was heard by the Employment Appeal Tribunal in November last year, and the ruling is expected to be handed down in early 2026. It will have direct implications for employers trying to balance the rights of their employees to freedom of expression on one hand, and protecting others in the workforce from harassment in relation to that expression on the other.

Augustine v Data Cars Ltd concerns the question of whether part-time worker status (in the context of a taxi driver challenging a flat weekly fee charged by his operator) must be the sole cause of unfavourable treatment under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations, or if the part-time status must merely be an effective cause. The Supreme Court’s ruling on this issue is awaited.

In the latest case considering trans rights, Sandi Peggie v Fife Health Board, an employment tribunal dismissed the majority of a nurse’s claims that she was harassed when her employer permitted a trans doctor to use the female changing rooms, and victimised her for complaining about it. Ms Peggie has confirmed her intention to appeal. Given the landmark Supreme Court decision last year in For Women Scotland that the definition of ‘sex’ in the Equality Act is based on biology, we can expect many similar claims over the coming months.

It is clear that 2026 will be another blockbuster year in the field of employment law. We will continue to keep you up to date on all developments, including the Employment Rights Act 2025. In the meantime, for any queries, please get in touch with Paul Mander or your usual contact in the Penningtons Manches Cooper employment team.

Employment Rights Act

This week, news arrived that the protracted ping pong had ended, and the Employment Rights Act 2025 was finally passed into law. With the House of Lords and the House of Commons at loggerheads, it had looked increasingly unlikely that the bill would be passed this year, placing the government’s implementation roadmap in jeopardy. However, on Tuesday, shortly before the parliamentary Christmas recess, the House of Lords finally agreed to the government’s proposals, paving the way for the legislation to receive royal assent.

Of course, the story is far from over, and the coming year will be busy with consultations, as we see aspects of the act take further shape. One of the major sticking points over the last couple of weeks has been the government’s eleventh-hour proposal that the cap on unfair dismissal confirmation be lifted – not simply, as was initially suspected, a lifting of the 52-week cap – but rather the removal of the cap altogether, which as at April 2025 stands at £118,223.

Many were expecting the government to concede that there should be a consultation over the cap. However, after the last-minute climbdown by the House of Lords, no consultation will now take place, although an impact assessment on the whole of the act, including the unfair dismissal cap, will be published shortly.

Time will tell whether pressure from employers’ organisations, plus the further strain that unlimited unfair dismissal compensation will place on an already creaking tribunal system, will lead to a watering-down of this change; however, for now, the position is clear – there will be no cap on unfair dismissal compensation. What is not clear is when this change will take place. Some commentators have suggested it may come into force on 1 January 2027, along with the reduction in the qualifying period from two years to six months.

Consultation on non-compete clauses

Away from the Employment Rights Act, we have a blast from the past – a resurfacing of the previous government’s review of post-termination non-compete clauses. The 2023 review recommended that non-compete clauses should be limited to three months’ duration. Then came the election and the proposals went no further… until now.

On 26 November, the Labour government published a consultation paper setting out options for restricting these clauses by:

• limiting their length;
• limiting them by company size – permitted for smaller companies only;
• banning them altogether (as is the case in California);
• allowing them only for higher paid employees, ie those who are more likely to hold highly sensitive confidential information; and
• combining a ban below a salary threshold with a statutory limit of three months’ duration.

The government is eager for growth and is looking to the science/tech sector in particular. It promised to pull the UK ahead by growing the economy but has had an uncomfortable first year. Its argument for limiting covenants is that doing so will boost labour market dynamism by allowing workers to move jobs or build their own start-up businesses. Companies at critical stages of growth must be able to access the talent they need. Enabling that will promote competition and innovation from entrepreneurs.

The consultation paper recognises that against these arguments is a company’s need to protect its confidential information so that it is able to recruit and grow. For this reason, limiting the use of restrictive covenants to smaller companies would allow for protection at the early stages of growth but, once well established, a company would be expected to weather the disruption naturally caused by staff moves.

The consultation is at an early stage, and only time will tell how these proposals will play out. What seems likely, however, is that:

• the fact that the current government has picked up on this issue (left over from the previous government) means there is some will to make a change;
•  there will be a restriction on the length of non-compete provisions, to three or six months, and they will be permitted for senior staff only;
•  this change will not take place any time soon – the government has enough on its plate;
• any change will affect only ‘non-competes’: the restriction will not extend to non-solicitation or non-dealing clauses. However, as the consultation paper recognises, an extensive prohibition on client solicitation and client dealing, could, in certain industries, amount to the same thing;
• even where permitted, restrictive covenants will only be enforceable to the extent they are reasonable and protect a legitimate business interest of the employer.

Interestingly, the government does not appear to be considering the option of an employer paying the employee for the length of the non-compete, which was one of the proposals made by the previous government.

As always, the strongest protection for a company will be garden leave, where the departing senior employee remains employed and subject to a duty of fidelity, but unable to interact with clients. Solid confidentiality clauses will also be key, ideally ones written in clear English that identify the confidential information, as opposed to a ten-line sentence cobbled together from various precedents, that does not relate to the company’s business.

The consultation hints that restrictions on equity vesting might not fall under the prohibition. If a company can restrict the vesting of equity based on competition, that will still fall under the normal rules of reasonableness/legitimate interest. It may be worth considering an element of vesting that does not cease on termination but is subject to non-competition. This is very common in the USA.

Employers who have strong views on any of these options may wish to participate in the consultation, which closes on 18 February 2026. The consultation paper can be found here.

It is clear that 2026 will be a massive year in the field of employment law. We will continue to keep you up to date on all developments, including in relation to the consultation on non-competes, and the progress of the new Employment Rights Act. In the meantime, for any queries, please contact Paul Mander, Tom Walker or your usual contact in the Penningtons Manches Cooper employment team.