Employment Rights Act 2025 Imposes New Duty to Prevent Third-Party Harassment

Q: Beyond third-party harassment, which new rule in the Employment Rights Act 2025 poses the greatest financial risk to UK employers?

The biggest financial risk beyond third-party harassment is the overhaul of unfair dismissal: from 1 January 2027, the qualifying period falls from two years to six months and compensatory awards become uncapped. That combination matters more than most other ERA 2025 changes because it increases both the number of potential claims and the value of each claim. Many more employees will gain protection much earlier in their employment, while employers will lose the current ceiling that limits compensation. For higher-paid staff, awards could now extend to full loss calculations, including salary, bonuses, and in some cases longer-term incentive losses. Employment lawyers have highlighted this as the most serious direct liability risk because procedural mistakes in dismissals will become far more expensive. A dismissal that might previously have been financially containable could now produce a very large tribunal award, especially where the employee struggles to find comparable work. Existing uplifts, including up to 25% for failures linked to the ACAS Code, will also bite harder when applied to uncapped sums. Other reforms, including stronger sexual-harassment prevention duties, longer tribunal time limits, and Fair Work Agency enforcement, are also significant. But in pure exposure terms, the uncapped unfair dismissal regime is widely seen as the most dangerous for employers because it combines broader eligibility with potentially unlimited compensation.

1 articles · Updated · localgovernmentlawyer.co.uk · Jul 21

Employers face a new legal duty under the Employment Rights Act 2025 to prevent harassment by third parties, extending liability beyond misconduct by their own staff.
Max Gordon and Lucas Nacif said employers should prepare now by updating workplace policies and other practical safeguards aimed at reducing exposure to claims.
Their discussion focused on how public sector employers can adapt to the 2025 changes, with compliance planning likely to shape training, reporting and risk-management processes.