Workers’ Rights Bill Remains Stuck After New Defeat in the House of Lords

The UK government’s efforts to push through its flagship workers’ rights legislation have hit another roadblock after the House of Lords voted against a key element of the Employment Rights Bill. The setback deepens the ongoing standoff between ministers and peers, despite recent attempts to strike a compromise between business groups and trade unions.

Only two weeks ago, ministers announced what they described as a balanced agreement on reforms to unfair dismissal rules. They argued that the compromise would smooth the bill’s passage through Parliament and help deliver long awaited protections for workers while addressing concerns from employers. The deal was intended to end months of political wrangling and finally clear the path for the legislation to become law.

However, the Lords have now backed a Conservative amendment that challenges Labour’s plan to remove the cap on compensation for unfair dismissal claims. The approved amendment would require the government to conduct a formal review before lifting the cap, delaying one of the bill’s most significant and controversial changes.

Supporters of the amendment say a review is necessary to understand the potential financial impact on businesses, particularly small firms that worry uncapped payouts could make it harder to manage workplace disputes. Critics, however, argue that the cap currently limits justice for workers who have suffered serious wrongdoing, and that the amendment risks weakening the core purpose of the bill.

The defeat in the Lords leaves the legislation in a state of uncertainty. Ministers insist the Employment Rights Bill remains a priority and that they will continue negotiating to resolve the impasse. Labour had hoped the bill would form a cornerstone of its pledge to strengthen workplace protections and modernise employment law, but further delays now appear likely.

Union leaders expressed frustration after the vote, saying workers should not have to wait any longer for fair settlements and stronger safeguards. Business groups, meanwhile, welcomed the call for a review, saying it reflects the need for balanced reforms that do not expose employers to unpredictable liabilities.

The bill will now return to the House of Commons, setting the stage for another round of political debate as the government decides whether to accept the Lords’ changes or attempt to overturn them. With neither side showing signs of retreating, the future of the workers’ rights package remains unsettled.