What's New In Employment Law: May 2026

Each month, we pull together the employment law updates that matter most to HR professionals and in‑house lawyers, in plain English. In this article, we look at two recent Employment Appeal Tribunal (EAT) decisions, followed by the latest legislative and policy developments, including updates on the Employment Rights Act and pay gap reporting.

Please note: this article is correct as at 30 April 2026. Employment law moves quickly and we’ll share further developments next month.

Case updates

This month, we look at two EAT decisions. The first, Kisheva v Secure Frontline Services Ltd, considers when an employee’s misconduct can properly be treated as gross misconduct and the impact this has on compensation. In KJ v British Council, the EAT looked at when it is appropriate to reduce discrimination compensation on the basis that the employee might have left their role anyway.

Kisheva v Secure Frontline Services Ltd

Ms Kisheva worked as a door supervisor. Following an argument with a colleague, she left work without finishing her shift. She told her team leader that she was leaving, arranged for a text message to be sent to central management, and later emailed to explain her actions. However, she did not call central management. Her employer’s code of conduct prohibited staff from leaving work without authorisation. While this could result in disciplinary action, leaving work early was not listed as gross misconduct. Frontline dismissed Ms Kisheva without notice for gross misconduct three days later, without inviting her to a disciplinary hearing or offering her a right of appeal. She brought employment tribunal (ET) claims for unfair dismissal and wrongful dismissal.

The ET found that the dismissal was procedurally unfair, particularly in view of Ms Kisheva’s 13 years of unblemished service. However, it went on to find that her conduct did amount to gross misconduct, meaning her wrongful dismissal claim failed. The ET applied a 100% reduction to both the basic and compensatory awards, on the basis that her conduct caused her dismissal and a fair process would have resulted in a fair dismissal.

The EAT allowed Ms Kisheva’s appeal, finding that the ET's conclusion that her conduct was gross misconduct was perverse. The requirement to call management was not set out in the code of conduct and had only been communicated verbally during training. The case was sent back to a different ET to consider compensation for unfair dismissal and notice pay, on the basis that the dismissal was unfair and Frontline was not entitled to treat Ms Kisheva's behaviour as gross misconduct.

Employers need to be clear in their codes of conduct and disciplinary policies what counts as gross misconduct. While lists may be described as non‑exhaustive, it can be difficult to argue that conduct is gross misconduct if it is not listed and is not obviously similar to the listed examples. Employers should always investigate an allegation of misconduct and follow a fair process, including hearing the employee's side, before making a decision. With the change to the unfair dismissal qualifying period and the abolition of the cap on compensation in January next year, getting disciplinary processes right will be more critical than ever.

KJ v British Council

KJ worked for the British Council in Morocco. She complained informally, and later formally, that a senior colleague had sexually harassed her. An internal investigation eventually upheld parts of her complaint but also criticised her conduct and rejected certain allegations that were later admitted by the colleague involved. KJ resigned shortly after the grievance report was published and brought ET claims including constructive dismissal, direct sex discrimination and sexual harassment. The ET upheld most of her claims. When assessing remedy, the ET applied a 35% reduction to the compensation for both unfair dismissal and discrimination. The reduction was intended to reflect the possibility that KJ might have left her role in any event due to factors such as an upcoming restructuring and her thoughts about returning to the UK. KJ appealed against the reduction. The British Council cross‑appealed, arguing that the sexual harassment claim was out of time.

The EAT allowed KJ’s appeal. It said that when considering a percentage reduction to compensation in a discrimination case to reflect the possibility that the employee would have left their employment in any event, an ET must construct a counterfactual and ask what would have happened had none of the discriminatory conduct occurred. Here, there had been a series of discriminatory wrongs, including harassment and a flawed grievance process. The ET had failed to consider whether KJ’s thinking about her future was influenced by that treatment. The fact that she did not resign until after the grievance report did not mean that the earlier harassment was irrelevant. While the EAT accepted that the restructuring was a potentially relevant, non‑discriminatory factor, it was unclear how the ET had arrived at the 35% figure. As a result, the reduction could not stand. The EAT also rejected the employer’s cross‑appeal, finding that the harassment formed part of a continuing discriminatory state of affairs, meaning the claim was in time. The case was remitted.

Employers should think carefully before arguing that an employee would have left their job anyway in discrimination cases. In order to do so, they will need evidence of factors that are independent of the discriminatory treatment. The way an employer handles a grievance can itself form part of ongoing discriminatory conduct, which can extend time limits and increase liability. From October, employers will be required to take "all reasonable steps" to prevent sexual harassment of their employees – a higher test than at present – making it more difficult to defend claims like this.

Legislation updates

Employment Rights Act 2025

In our last article, we listed the many measures under the Employment Rights Act 2025 (the Act) that came into force in early April. We now have a breathing space until August, when electronic and workplace balloting for trade union ballots in respect of industrial action is due to be introduced. Following that, there is another major tranche of changes in October that we will report on in a later article.

Fair Work Agency

The Fair Work Agency was established on 7 April and is now operational. Based in Nottingham, it has taken over the enforcement functions of the Employment Agency Standards Inspectorate (in relation to agency workers) and the Gangmasters and Labour Abuse Authority (in relation to gangmaster licensing and serious labour abuse, including modern slavery). It is due to take over enforcement of the national minimum wage from HMRC in April 2027, with further responsibilities - such as the enforcement of holiday pay and statutory sick pay - expected to follow in time.

Non-disclosure agreements

The Government has launched a consultation on proposals to prevent the misuse of non-disclosure agreements (NDAs) in cases of workplace harassment and discrimination. In 2027, the Act will make any provision in an agreement between an employer and a worker that seeks to prevent the worker from alleging or disclosing harassment or discrimination void. The consultation is open until 8 July.

Trade union right of access

The Government has issued a response to its consultation on the trade union right of access and has confirmed that it will introduce a statutory right, supported by a draft Code of Practice setting out how the regime will work in practice. A draft Code has been published for consultation, with responses required by 20 May.

Transfer of Undertakings (Protection of Employment) Regulations 2006

There is a new call for evidence on these Regulations, signalling potential reform in this area. It does not set out any proposed changes to the law; instead, respondents are asked to comment on their experience of TUPE and how it can be improved. The call for evidence closes on 1 July.

Gender pay gap reporting

The Government has published step-by-step guidance on creating a gender equality action plan. It includes sections on understanding organisational issues, choosing actions, writing supporting narratives, submitting action plans, tracking outcomes and reviewing plans.

Ethnicity (Race and Disability) Bill

The Government has published its response to the consultation on mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees. It intends to go ahead and, as expected, the regime will broadly mirror gender pay gap reporting, including similar calculations, enforcement mechanisms and reporting processes.

Employers will also be required to publish ethnicity and disability action plans. While reporting will involve detailed data collection, the published pay gap figures are expected to use binary comparisons (eg white British vs non‑white British, and disabled vs non‑disabled), with minimum group sizes to reduce the risk of identifying individuals.

Primary legislation and regulations are still needed, and there is currently no confirmed timetable. The King's Speech, which will set out the Government's legislative programme for the next Parliament, will be given on 13 May and may provide more information.

Other developments

ET quarterly statistics

The Ministry of Justice has published tribunal quarterly statistics for October to December 2025. They show that, compared with the same quarter in 2024, new single claims increased by 54% (there were 13,000 single claim receipts) and the ET's open case load increased by 49% (58,000 single claims are outstanding, which is the highest number recorded). Three jurisdictions make up around 52% of total receipts over the last quarter: unfair dismissal, disability discrimination and unauthorised deductions. The ET backlog is likely to increase further as the Act comes into force, although additional judges are being recruited.

Whistleblowing

The DBT has published new whistleblowing guidance for employers, setting out an overview of whistleblowing law, what protection is available, what qualifies as whistleblowing, handling a whistleblowing disclosure, and best practice whistleblowing policy. It has also published advice for prescribed persons on how to deal with whistleblowing disclosures.

National minimum wage 2027

The Government has published its remit to the Low Pay Commission (LPC), seeking its recommendations on the rates for the national living wage and national minimum wage that should apply from 1 April 2027. The Government has asked the LPC to continue using two-thirds of median earnings as the principal benchmark for defining low pay and setting future rates, although the LPC should take the condition of the labour market (including the employment prospects of young workers) into account, among other things. The LPC has been asked to make recommendations by the end of October and it has already launched a consultation, which closes on 26 June.

Neurodiversity at work

A new Acas survey has found that 35% of workers think their employer is ineffective at training managers to support neurodiversity at work. YouGov surveyed 1,000 employees across Great Britain, 32% of whom think their organisation effectively trains managers to make reasonable adjustments for neurodiverse employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.