The Employment Rights Act 2025: Why Criminal Lawyers Should Be Paying Attention

The Employment Rights Act 2025 (“ERA”) received Royal Assent on 18 December 2025 and introduces sweeping reform to UK labour laws which are being phased in across 2026 and 2027.

Many of the changes introduced by the ERA have understandably been viewed primarily through an Employment Law lens.  Much of the discussion has centred on day-one employment rights, unfair dismissal reforms, restrictions on so-called "fire and rehire" practices and enhanced worker protections.  

However, there is another aspect of the legislation that deserves equal attention: the significant expansion of state enforcement powers and the increasing risk of criminal and regulatory intervention in the workplace. 

For employers, directors and senior managers, this marks a potentially profound cultural shift.  

Traditionally, many employment rights have been enforced by individual workers bringing claims in the Employment Tribunal.  Under the ERA, the new framework moves substantially towards a model of proactive state enforcement, investigation and sanction. 

A New Enforcement Landscape

At the heart of the reforms is the creation of the Fair Work Agency ("FWA"), a new body launched on 7 April 2026 and established to consolidate and expand labour market enforcement functions.  The FWA brings together powers previously exercised by a number of separate enforcement bodies and is tasked with enforcing a wide range of employment-related obligations. 

Importantly, the FWA is not intended merely to react to complaints.  Government policy documents make clear that it will take a proactive approach to identifying non-compliance, particularly within sectors regarded as high risk. 

For criminal and regulatory practitioners, that should immediately sound familiar.

The model resembles enforcement approaches already adopted by regulators such as HMRC, the Health and Safety Executive and the Environment Agency, where investigations can begin long before any prosecution is contemplated.

The Expansion of Investigatory Powers

The significance of the ERA lies not only in the rights it creates, but in the mechanisms designed to enforce those rights.

The legislation empowers the FWA to investigate alleged breaches of employment legislation, recover sums owed to workers, initiate enforcement action and, in appropriate circumstances, pursue prosecutions.  The Government has also indicated that the FWA’s remit may be expanded further through secondary legislation. 

This is a notable departure from the historic position where many workplace disputes remained private matters between employer and employee.

Instead, employers may increasingly find themselves engaging with state investigators possessing substantial information-gathering powers and the ability to escalate cases into formal enforcement proceedings. 

For example, in 2027 the FWA will be able to take action against employers who aren’t paying their staff correctly when they go on holiday which you can read more about here.

Criminal Exposure for Employers

While most employers will be familiar with Employment Tribunal litigation, fewer will have experience of criminal or quasi-criminal investigations.

The ERA sits alongside existing legislation, including the National Minimum Wage Act 1998, the Gangmasters (Licensing) Act 2004, the Fraud Act 2006 and the Modern Slavery Act 2015, all of which fall within the broader enforcement framework of the FWA. 

Consequently, failures which may initially appear to be administrative or employment law issues can rapidly develop into regulatory investigations carrying significant financial, reputational and, in some cases, criminal consequences.

Directors should be particularly alert to situations involving:

• Deliberate underpayment of statutory entitlements.
• Falsification of employment records.
• Obstruction of regulatory investigations.
• Exploitative labour practices.
• Repeated or systemic breaches of employment legislation.

For regulated businesses, the reputational impact of an investigation may be as significant as any eventual financial penalty.

Lessons From Other Regulatory Regimes

Those advising organisations in criminal and regulatory contexts will recognise a familiar pattern.

Over the last decade, Parliament has increasingly favoured a model based upon:

1. Expanded statutory rights.
2. Centralised enforcement bodies.
3. Proactive investigations.
4. Civil penalties backed by criminal sanctions.
5. Increased accountability for senior management.

The ERA follows that trajectory. 

Many businesses remain focussed on defending Employment Tribunal claims. The greater risk may lie elsewhere: regulatory investigations triggered by whistleblowing allegations, workforce complaints or sector-wide compliance exercises.

The Importance of Early Legal Advice

One of the most common mistakes organisations make is treating an initial regulatory enquiry as a routine administrative matter.

Experience across criminal and regulatory investigations demonstrates that decisions taken during the earliest stages of an investigation often determine the ultimate outcome.  Document preservation, internal fact-finding, witness management and cooperation strategies require careful consideration from the outset.

Employers should therefore ensure that employment, regulatory and criminal law teams work together when responding to serious allegations concerning worker rights and workplace compliance.

Looking Ahead

The ERA represents far more than an expansion of workplace rights.  It signals the emergence of a new enforcement culture in which compliance failures may attract scrutiny from an increasingly powerful state regulator rather than simply giving rise to private litigation.

For criminal and regulatory lawyers, the message is clear: employment law is no longer solely an HR issue.

As the FWA becomes operational and the Government continues its programme of labour market reform, businesses should expect increased investigation, enhanced enforcement and a regulatory environment in which workplace compliance receives the same level of scrutiny as health and safety, environmental and financial regulation. 

The prudent employer will prepare now, before enforcement activity begins in earnest.

You can find out more information about all the ERA changes here.