What's new in employment law: June 2026

Every month we summarise the key employment law developments for HR professionals and in-house lawyers, in plain English. In this update we explore three recent employment cases and the key legislative and policy changes employers need to know about, including developments under the Employment Rights Act 2025.

Please note: this article is up-to-date as at 31 May 2026. Employment law changes rapidly and we'll look at more developments next month.

Case updates

This month we examine a Court of Session decision and two cases decided by the Employment Appeal Tribunal (EAT). In our first case, McMahon v AXA ICAS Ltd, the Court of Session considered whether an employee who had been dismissed for ill-health incapacity could bring an unauthorised deduction from wages claim for benefits payable under a PHI scheme post-dismissal. Was the employment tribunal (ET) right to find automatic unfair dismissal for making protected disclosures when an employee was dismissed without notice on the same day she raised safeguarding concerns? This was the issue for the EAT in The Laurels Family Assessment Ltd v Kay. Lastly, Kankanalapalli v Loesche Energy Systems Ltd decided whether an employer had breached an employee's contract by withdrawing a conditional job offer without notice before the employee started work, for reasons unrelated to the conditions.

McMahon v AXA ICAS Ltd

Ms McMahon joined AXA in 2000. Her contract entitled her to permanent health insurance (PHI) benefits of 75% of salary (increasing annually) less State benefits after 26 weeks’ ill health absence, payable until she recovered or reached age 65. Although the benefits were to be secured by an AXA‑funded insurance policy, no cover was put in place. Ms McMahon became eligible for PHI benefits in 2011 but received nothing and was dismissed in 2013 for incapacity. She brought an ET claim for unauthorised deduction from wages for the period up to dismissal, and later tried to add a claim for post‑dismissal PHI payments. She argued that an implied term prevented AXA from dismissing her in a way that deprived her of those benefits. The ET upheld her pre‑dismissal claim but refused the amendment, and the EAT agreed.

The Court of Session allowed Ms McMahon's appeal, confirming that PHI benefits can fall within the statutory definition of “wages” and that entitlement does not necessarily end on dismissal. It identified various ways entitlement might survive, including treating the PHI payments as a collateral contractual obligation or implying a term preventing dismissal for the purpose of avoiding payment. The EAT remitted the case to the ET and directed that the amendment (ie to claim PHI benefits from dismissal) should be allowed.

PHI benefits are typically insured, and employers must ensure employment contracts don't confer broader rights than the policy provides. Unfunded PHI liabilities can be substantial, given benefits are often payable at 75% of salary, with annual increases, until the employee recovers or retires. Case law recognises an implied term preventing dismissal without good reason where this would deprive an employee of PHI benefits. Employers should therefore consider including express wording in their contracts permitting dismissal during long‑term sickness without preserving PHI entitlement, particularly in light of the Employment Rights Act 2025 restrictions on contractual changes that will come into force in January next year.

The Laurels Family Assessment Ltd v Kay

Miss Kay raised safeguarding concerns about a colleague, including alleged drug use. She reported her concerns internally and then to an independent visitor linked to the regulator. On the same day as the second disclosure, she was dismissed without notice. The employer relied on misconduct issues for the dismissal (medication recording and leaving the workplace without permission), and later rejected Miss Kay's appeal on a technicality. She brought an ET claim for automatic unfair dismissal for whistleblowing. The ET held that both disclosures were protected disclosures and were the real reason for dismissal. The dismissal was therefore automatically unfair. The handling of the appeal also amounted to a detriment linked to the disclosures. The employer appealed.

The EAT rejected the appeal, holding that the ET's findings were not perverse. There was evidence available to support the ET's conclusions. It had examined each misconduct issue and was entitled to find that they weren't the genuine reason for Miss Kay's dismissal.

Employers should avoid “knee‑jerk” reactions, as immediate disciplinary action following a disclosure is highly risky. Dismissal on the same day as a disclosure is likely to be viewed as causally linked. They should follow their own procedures and handle appeals carefully - rejecting an appeal on a technicality often leads to problems. Lastly, employers need to assess disclosures properly; they should consider whether a disclosure might be protected, take it seriously and follow their processes.

Kankanalapalli v Loesche Energy Systems Ltd

Mr Kankanalapalli accepted a job offer that was subject to the receipt of satisfactory references, a right to work check and a successful six month probation period. Before he started work, Loesche withdrew the offer due to delays to the project. Mr Kankanalapalli brought an ET claim for breach of contract, alleging that he hadn't been given appropriate notice. The ET held that no binding contract was in existence because the conditions had not been fulfilled. Mr Kankanalapalli appealed.

The EAT held that a binding contract had been formed when the offer was accepted, as the conditions were conditions subsequent, not conditions precedent. This meant that the contract could be terminated if the conditions weren't fulfilled. Because no express notice term had been agreed, the ET implied a reasonable notice period of three months. This took into account factors such as the seniority of the role, the requirement to relocate and the level of remuneration.

Employers need to be careful about the wording they use in job offers. Labelling an offer as being subject to conditions doesn't prevent acceptance of the offer from creating a binding contract. If an employer intends any conditions to operate as conditions precedent – so that a binding contract isn't formed until all of the conditions are satisfied - they need to state this expressly. It's also sensible to include an express notice provision in the offer letter (which can be shorter pre-employment and during probation), otherwise an ET may imply a longer “reasonable” notice period.

Legislation updates

Employment Rights Act 2025

Commencement Regulations have been made that will bring into force changes to the right not to be unfairly dismissed on 1 January 2027. The main changes are:

• The reduction in the qualifying period of employment to bring an ordinary unfair dismissal claim from two years to six months, and
• The removal of the cap on compensatory awards.

These changes will apply where the effective date of termination is on or after 1 January. The Department for Business and Trade (DBT) has stated that it will provide guidance for employers, to help them understand the implications.

Three statutory instruments have been laid before Parliament to extend the time limit for various ET claims from three months to six months. They are due to come into force on 1 October. They deal with various miscellaneous claims that were omitted from Schedule 12 of the Act such as claims by part-time workers and fixed-term employees, and claims for breach of contract and the right to request time off for study or training. The six month time limit will apply where the "relevant date" (i.e. the date of the detriment, less favourable treatment or the effective date of termination) is on or after 1 October. The existing rules relating to Acas early conciliation are not affected.

The King's Speech

This was given on 13 May and sets out the Government's legislative agenda for the current Parliamentary session. A quick review of the background briefing notes shows there are two Bills that may be relevant to employers:

• Energy Independence Bill – this will extend employment rights and protections for offshore workers in renewables, bringing them into line with those working in oil and gas
• Immigration and Asylum Bill – this appears to deal mainly with asylum.

The Equality (Race and Disability) Bill – which will introduce mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees, together with action plans to address and reduce these pay gaps - was not mentioned so we may need to wait until next year for this.

Intentional harassment, alarm or distress

A new criminal offence was created on 1 April, when Section 4B of the Public Order Act 1986 came into effect. It criminalises intentional harassment, alarm or distress directed at a person because of their sex or presumed sex. It applies in public or private places, which can include workplaces. This means that an offence could be committed at work or at an event such as a conference. The maximum sentence is two years in prison.

Corporate criminal liability

On 29 June, section 250 of the Crime and Policing Act 2026 comes into force. It extends the scope of the statutory identification doctrine to all criminal offences. Where a senior manager commits a criminal offence while acting within their actual or apparent authority, their employer will also be criminally liable: read more.

Other developments

EHRC's updated draft Code of Practice for services, public functions and associations

The Equality and Human Rights Commission's draft updated Code was laid before Parliament on 21 May. It provides guidance on the Equality Act 2010 to those providing services, exercising public functions and running associations. It aims to reflect changes in the law since the Code was first published in 2011 and to address the Supreme Court judgment in For Women Scotland Ltd v The Scottish Ministers in 2025, where the Court held that sex means biological sex for the purposes of the Equality Act 2010. Parliament has 40 days to consider the updated Code, which will come into force when a commencement order has been made.

Fit note reform

The Government has published a report summarising the key findings from the responses received to the call for evidence on fit note reform, which ran in 2024. Employers generally found the fit note system ineffective in meeting their needs, and the Government has launched four pilots intended to overhaul the system. Around 11 million fit notes are issued every year, with more than 90% stating that the individual is not fit for work.

Trade union statistics

The DBT has published a statistical bulletin on UK trade union membership. The proportion of UK employees who were trade union members rose slightly last year to 22.4% and there are now 6.6 million trade union members. Trade union numbers are expected to increase when the relevant changes under the Employment Rights Act 2025 come into force in October. They include a new duty on employers to inform workers of their right to join a trade union, and the strengthening of trade unions' right of access to the workplace. For more information, join our Employment Club webinar on 17 June (see below under "Future events").

Statutory recognition forms

The Central Arbitration Committee has announced that, as part of the changes to the statutory recognition scheme, it has updated its application form and response form. They must be used for all new applications submitted on or after 6 April.

Future events

Our next free Employment Club webinar will take place on 17 June 2026 at 10am. We will be exploring work-related stress and the practical steps organisations should be taking to manage it effectively. We will also give an update on the Employment Rights Act 2025, focussing on some of the major changes to employment law that will take effect in October (such as the trade union changes mentioned above). Our Employment Club webinars are always very popular, so we recommend you register early to secure your place here.

If you'd like to discuss any aspect of this article, please speak to the author or your usual WBD contact.