Employment Law update - December 2025

This month’s bulletin takes a look back at the key themes of case-law we have seen this year, the most important legislation of the year (i.e. the Employment Rights Bill) and looks forward to potential future developments.

• Case Law - the Year of the Individual (respondent) 
• Case Law – clashing protected characteristics
• The Employment Rights Bill – a year of roadmaps and U-turns
• The future – statutory governance of contractual provisions

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Case Law - the Year of the Individual (respondent) 

We have reported this year on a number of cases revolving around the fact that claims for discrimination or whistleblowing detriment can be made not only against an employer, but against colleagues or managers as individual respondents.

Rice v Wicked Vision Ltd: Whistleblowing Claimants who are dismissed can bring claims against their employer for unfair dismissal and (by bringing claims against the dismissing managers) for unlawful detriment.

This makes whistleblowing claims:

• Harder for employers to defend
• More expensive for employers

Henderson v GCRM Ltd: a dismissing officer will not be personally liable for dismissing a whistleblower if they did not know of the whistleblowing.

Prahl and others v Lapinski: Employment Tribunals can hear claims for discrimination made against individual respondents based overseas.

Campbell v Sheffield Teaching North Hospitals NHS Foundation Trust and Wesley Hammond: what constitutes “all reasonable steps” to prevent harassment in the workplace.

Case Law – clashing protected characteristics

The two “biggest cases” of the year revolved around the complexity of clashing protected characteristics

In Higgs v Farmor's School, the Court of Appeal considered a case arising from the dismissal of a school worker for Facebook re-posts of critical comments which related to the teaching in schools about same-sex relationships, same-sex marriage and gender being a matter of choice. The worker argued that her treatment was discrimination based on her Christian beliefs. The conclusion of the Court of Appeal was that where an employer wanted to take disciplinary action, not for the fact of religious or philosophical beliefs, but because of the way those beliefs had been expressed, it could only do so where it was a proportionate response to the objectionable feature of the expression of the beliefs.

For Women Scotland Ltd v The Scottish Parliament: the Supreme Court decision which found that the definition of “woman” in the Equality Act 2010 refers to “biological woman”. This decision was of significance for employers and service providers and considerable uncertainty as to its practical impact remains.  Shortly following the judgement, and conscious that its guidance would need to change, the EHRC provided an Interim Update and resolved to amend its Code of Practice. A draft Code of Practice for services, public functions and associations was provided to the government on 4 September 2025 but has not yet been put before parliament for approval. Whilst this Code will not deal explicitly with the toilet and changing facilities that employers provide for employees, it is hoped that it will provide by implication some indication to employers of the recommended approach.

The high profile first instance decision in Peggie v Fife Health Board and Dr Upton was released at the end of the year. The judgement emphasises that it is dealing with the facts of this case and “does not purport to decide all of the matters that were raised during the evidence in the case, some of which in the Tribunal’s opinion strayed beyond the scope of any of the issues before it and into the arguments in the public domain”.  

The judgement suggests that there is no simple answer in relation to access to toilet and changing facilities for trans individuals. The decision indicates that a balancing act needed to apply where there were two competing protected characteristics,  the judge commenting that “whether to permit a trans woman to use a particular single sex space such as a changing room which meets the balance test depends on all the circumstances and includes factors such as the views of other staff as expressed to the employer, how many do so and in what terms, the stage of transition that the trans person has reached including what if any changes to the physiological attributes of sex the person have been made and which the trans person chooses to inform the employer of, the trans person’s appearance as can be observed by others, the wishes of the trans person, the options where other facilities exist and what the employer knows or ought reasonably to know.”

In contrast to this judgement, there are reports that the updated EHRC Code of Practice will, when released, state that single-sex spaces should only be open to people of the same biological sex. The Code has not yet been published and is awaiting parliamentary approval. 

The Employment Rights Bill – a year of roadmaps and U-turns

Part-way through the year, the Government produced its timeline for implementation of its reforms under the Employment Rights Bill. We provided details here.

Passage of the Bill through the House of Lords has not proved simple, resulting in a slippage of the timetable for the first wave of reforms (initially expected to be Autumn 2025) and a quite radical change to one of the flagship reforms – “Day One” unfair dismissal rights.

The Government announced this month that the Employment Rights Bill would no longer provide for “Day One” unfair dismissal rights. The proposals are now for

• New rules to come into force on 1 January 2027.
  From that date:
  • All employees with more than six months’ service will be protected against unfair dismissal
  • There will no longer be a cap on unfair dismissal awards (the current cap on compensatory awards being the lower of a year’s pay and £118,223)

Compensation will still be based on lost earnings and it should be remembered that the average unfair dismissal award is currently around £14,000, so well below the current cap. Removal of the cap on compensation could, however, have a significant impact on:

• Employees in the public sector, or in private sector defined benefit pension schemes, who suffer substantial pension loss as a result of unfair dismissal
• Those very high earners who are unfairly dismissed
• Employees who suffer career-long loss as result of dismissal

It could also have an impact on the ability to settle claims if claimants with unrealistic initial expectations can no longer be told that there is a clear limit to their claim.

The Employment Rights Bill received Royal Assent on 18 December 2025 and the debate over its content is therefore at an end. Debate and consultation about the detail of regulations that will implement some of the changes will continue into 2026.

The future – statutory governance of contractual provisions

There has never been complete freedom of contract in employment contracts. An employer and employee cannot, for example, agree to pay less than the National Minimum Wage, or agree to a notice period shorter than the statutory minimum.

There have been two announcements this year that could have further impact on what can be agreed in an employment contract or a settlement agreement:

NDAs

Whilst NDAs were not mentioned in the initial draft Employment Rights Bill, in July this year, the Government announced that they would add laws to make void any provision in an agreement insofar as it seeks to prevent the worker from making an allegation of, or disclosure of information relating to, harassment or discrimination or the employer’s response to harassment or discrimination. This is similar to new laws that came into force in the Higher Education sector in August 2025.

There is reference in the proposal to “excepted agreements”, but no indication of what these will be. The impression given by the Government’s announcement is that the traditional settlement agreement entered into with a departing employee will not be able to prevent a worker speaking about allegations of harassment or discrimination.

It remains to be seen whether there will be any watering down of these provisions or a wide category of “excepted agreements”, but if not, then these reforms could have a significant impact on the way in which employers approach discrimination complaints and reaching settlements with employees.

Post-termination restrictions

There has been discussion for a number of years around the law on post-termination restrictions. The current law arises out of the concept of “restraint of trade” and has largely developed through case law. A broad summary is that restrictions are only enforceable insofar as they go no further than reasonably necessary to protect the employer’s legitimate business interests. Parliament has not, to date, intervened in this area of employment law.

However, in November, the Government issued a Working paper on options for reform of non-compete clauses in employment contracts.  

The paper, on the one hand, expresses concern that post-termination restrictions:

• Can act as a brake on entrepreneurial activity
• Can restrict job mobility and decrease wages
• Can restrict competition by making it harder for smaller businesses to scale up

On the other hand, it notes that restrictions can also provide employers with the confidence to invest in training and skills.

It comments on the variety of approaches in different jurisdictions around the world, some of whom require mandatory payment for any such restrictions, and others where post-termination restrictions have been banned.

It mentions potential reforms as:

• A statutory limit on the length of non-compete clauses
• A statutory limit on the length of non-compete clauses according to company size
• A ban on non-compete clauses
• A ban on non-compete clauses below a salary threshold
• Combining a ban below a salary threshold and a statutory limit of 3 months

No decision has been made as to what, if any, reform there will be, nor the timescale of any reform. It is, however, a topic of debate of which employers should be aware and on which they may want to send a response to the consultation before the deadline of 18 February 2026