Employment Update - September 2026

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AI wearables in the workplace

AI-enabled smart glasses and other wearable devices have been generating significant press coverage, with growing concern about their privacy implications. Some devices such as smart glasses allow wearers to record video and audio and, in some cases, run real-time facial recognition – often without the knowledge of those being recorded. While much of the debate has focused on public spaces, the technology equally raises questions for employers.

An employee wearing AI smart glasses could, for example, covertly record colleagues, giving rise to allegations of harassment or breach of privacy. There is also the risk of employees using wearables to capture confidential business information or client data, whether deliberately or inadvertently.

At the same time, AI wearables may offer genuine benefits to some disabled employees – for example, devices providing real-time transcription for employees with hearing impairments – and refusing to permit their use without proper consideration could amount to a breach of the duty to make reasonable adjustments for disabled staff.

Given these new challenges, employers may wish to review and update existing policies such as IT acceptable use policies, bring-your-own-device policies, dress codes, disciplinary policies and policies covering confidential information and reasonable adjustments. Employers will want to make sure their stance on AI wearables in the workplace is clear to avoid future disputes. As the technology develops, so will the need to adapt policies and practices alongside the evolving legal landscape.

New Law

Non-financial misconduct in financial services

On 1 September 2026, the FCA's new rules and guidance on non-financial misconduct came into force. Under the reforms, non-financial misconduct such as harassment, bullying and violence will potentially be an FCA conduct issue. Significantly, this includes where a manager fails to take reasonable steps to prevent such behaviour. Non-financial misconduct will also need to be considered as part of fit and proper assessments for senior managers and certified staff, such as material risk takers and heads of significant business units. This potentially includes behaviour in an individual's private life wherever in the world it occurs. We have been working with a number of firms on implementation, including reviewing policies to align with the new rules and providing training for managers and staff. Please speak to your usual Travers Smith contact for more information.

Employment Tribunal time limits

On 1 October 2026, the time limit for workers to bring claims in the Employment Tribunal will increase from three to six months. The change is being introduced under the Employment Rights Act 2025 and will apply where the relevant events complained of take place on or after 1 October 2026. For example, for dismissal cases, the six-month time limit will apply to dismissal taking effect on or after 1 October 2026. The change gives workers considerably longer to bring claims, particularly given the ACAS pre-claim conciliation period also increased from six to twelve weeks in December 2025. This means an employer may not know if a claim has been brought until some nine months or more after the relevant event. However, the change also gives parties more time to potentially resolve disputes before a claim is brought.

Harassment

The Government has confirmed that key changes to the law on harassment will come into force on 30 October 2026. The changes, being introduced under the Employment Rights Act 2025, are:

Third party harassment: From 30 October 2026, employers will become liable for harassment of staff by third parties (e.g. customers, clients, suppliers and contractors) unless the employer took all reasonable steps to prevent it. Employers will therefore need to have measures to prevent such third party harassment, such as communicating anti-harassment policies to customers, clients and other third parties, updating supplier codes of conduct, referencing anti-harassment policies in third party contracts, and providing training to managers and staff.
Preventing sexual harassment: All employers are under a duty to take "reasonable steps" to prevent workplace sexual harassment. From 30 October 2026, this duty will be strengthened to a duty to take "all reasonable steps". Regulations are expected in 2027 to set out what steps employers are required to take. In the meantime, employers should refresh their existing policies, training and risk assessments relating to sexual harassment.

We have been working with clients on harassment compliance projects and have a range of bespoke and more commoditised options. Please speak to your usual Employment department contact for more information.

Trade union rights

The Employment Rights Act 2025 is introducing various measures to strengthen the rights of trade unions and increase their presence. The Government has confirmed that two key changes come into force on 30 October 2026, potentially affecting all employers:

Duty to inform staff: All employers will have a new duty to inform workers of the right to join a trade union and the rights of trade union members. A written statement will need to be provided at the outset of employment and periodically after that. Unfortunately, the Government has not yet set out details of what information will need to be included in the statement, or the manner and frequency with which it will need to be provided. These details will be set out in regulations and guidance which are expected imminently.
Rights of access: From 30 October 2026, trade unions will also be given new rights to request access to workplaces for recruitment and organising purposes. The right could see employers who have not previously interacted with trade unions receive requests for access. The Government has published regulations and a draft code of practice on how the right will operate in practice, which set out how employers should respond to access requests. The regulations and code of practice are due to come into force on 30 October 2026.

Employers should await the guidance on the new duty to inform staff and update contracts and induction processes accordingly. Employers should also ensure that managers and HR/People teams are aware of the new union access rights and how to respond to requests from unions.

Unfair dismissal and related reforms

As previously reported, key reforms under the Employment Rights Act 2025 will take effect in January 2027. On 1 January 2027, the unfair dismissal qualifying period will reduce to six months and the cap on unfair dismissal compensation will be removed. At the same time, changes to "fire and rehire" will make changing terms and conditions of employment much more difficult and open up additional unfair dismissal arguments in some circumstances. Employers should use the time ahead of January 2027 to prepare, including steps such as:

ensuring the organisation has robust probation processes in place and that managers are trained in such procedures;
ensuring managers are equipped to handle performance and conduct issues more generally, given the increased potential financial exposure of dismissals;
considering the organisation's approach to performance management and exits for senior employees (including updating contracts, job descriptions and incentive arrangements);
reviewing employment contract terms more generally to build in as much flexibility as possible to make changing terms easier once restrictions on fire and rehire come in.

Many employers are also using autumn 2026 to ensure they have the right teams in place. Please speak to your usual Employment department contact if you would like to discuss the impact of the changes on your business.

Case Watch

Repayment provisions – are they enforceable?

A recent Court of Appeal decision has considered the circumstances in which employers may be prevented from enforcing repayment provisions, such as a clawback of training costs.

The employee in this case was a trainee Quality Assurance Engineer at an IT services company on a salary of £18,000 per year. He signed a separate training contract which required him to repay a training debt of £8,108 (the estimated cost of mentoring him). The debt would reduce by one eighteenth for each month of service after the first 12 months, but he would have to repay any outstanding balance if he left for any reason other than redundancy before then. The employee resigned after eight months to take up a better-paid role elsewhere, and the employer brought proceedings to recover the training debt.

The Court of Appeal ruled that the repayment obligation was void as an unlawful restraint of trade. The Court said that the practical effect of the clawback was to hamper the employee's ability to work elsewhere. While the employer had a legitimate interest in maintaining a stable, trained workforce, the clawback went too far. It applied whatever the reason for the departure, whether the employee resigned or was dismissed and whether he went to a competitor or not. In addition, the overall effect was to require him to repay almost all of the salary he had earned in the eight months he had been there, retrospectively reducing him to the equivalent of an unpaid intern. The Court also noted the absence of legal advice and the inequality of bargaining power. The clawback was therefore void and the employee was not required to repay the training costs.

Employers frequently require employees to repay training costs, visa fees or sign-on bonuses if the employee leaves within a set period. This case confirms that such repayment obligations can potentially be void as an unlawful restraint of trade. To be enforceable, the employer would need to show the repayment obligation goes no further than necessary to protect a legitimate business interest. In many cases, the employer will have a legitimate interest in maintaining a stable, trained workforce. Repayment obligations are more likely to be reasonable where they are linked to the direct costs incurred by the employer (e.g. visa fees or the cost of a training course) and where the costs are proportionate relative to the employee's salary. In this case, the repayment obligation was unreasonable because it represented almost half of the employee's annual salary and almost all he had earned in the time he had been with the company. Repayment obligations are also less likely to be objectionable for higher earners, where there is a greater equality of bargaining power, particularly if the employee had legal advice when entering the agreement.

GEEKS LIMITED V WATTS

Immigration Radar

Right to work checks

From 1 October 2026, the UK government will significantly expand the scope of right to work ("RTW") checks for businesses. Currently businesses are only responsible for RTW checks for their own employees. However, under the changes, businesses that supply services using contractors, agency workers, gig economy workers, casual staff and outsourced service providers may be responsible for RTW compliance for such personnel even when they employed by third parties in the supply chain. Employers may therefore become liable for civil penalties in respect of illegal working for workers who are not their direct employees.

Importantly, these provisions do not apply if the organisation is simply purchasing services for its own use and is not supplying those services onwards as part of a chain of contracts. If an organisation or person is only acting as an end-user, client, or customer (such as commissioning cleaning, repairs, or consulting services for your own business), the new right to work responsibilities should not apply. Liability will likely arise only when a business is part of a supply chain or contractual arrangements where services are passed on to another party.

Ahead of October, employers should audit their labour supply arrangements to understand any risk areas. Please see our briefing or speak to your usual Employment contact for more details.

Sponsorship multifactor authentication

The Home Office has announced the introduction of mandatory Multi-Factor Authentication (MFA) for all Sponsorship Management System (SMS) users. MFA adds an extra layer of security by requiring users to enter a one-time passcode (sent by text message or email) in addition to their usual username and password each time they access the SMS. Updated sponsor guidance will be published in due course. MFA is being rolled out on a phased basis from 3 September 2026, with all sponsors expected to be using MFA by November 2026.

Employers are advised to take the following steps (if they have not already done so) to ensure a smooth transition:

Log in to the SMS and check that all user details are correct, including email addresses, mobile telephone numbers (Level 1 Users only), and dates of birth (Level 1 Users only); and
Read the Home Office's MFA user guide, available here.

It will also no longer be possible to add new Level 2 Users to a sponsor licence. New users can continue to be added as Level 1 Users.

Consultations

Equal Pay

The Government has launched a consultation on proposed reforms to the law on pay equality. The consultation proposes a number of measures to increase pay transparency and improve enforcement, including:

requiring employers to publish pay information in job adverts or in writing to candidates before interview;
widening the circumstances in which Employment Tribunals must order employers to carry out equal pay audits;
reintroducing the statutory questionnaire procedure that allows employees to ask questions about pay discrimination before or after bringing a claim;
establishing an Equal Pay Regulatory and Enforcement Unit, with powers to require employers to disclose evidence or conduct a job evaluation or pay audit;
removing inconsistencies between equal pay and pay discrimination laws relating to sex, race and disability to 'broadly level-up' the protection on all three grounds; and
introducing a duty on parties to an outsourcing to take all reasonable steps to uphold pay equality.

The consultation is open until 27 October 2026. However, there is no timeframe for implementation of any of the proposals.

Tips and gratuities

Employers whose workers regularly receive tips and other gratuities are required to have a written policy on how such tips are allocated and distributed to workers. The Employment Rights Act 2025 will strengthen this by requiring such employers to consult with trade union or other worker representatives on the tipping policy and to review it at least every three years. The Government has launched a consultation on a revised statutory Code of Practice on Fair and Transparent Distribution of Tips, which reflects the changes being introduced by the Employment Rights Act 2025. The consultation closes on 29 September 2026. While there is no confirmed date, the changes are due to come into force sometime before the end of 2026.

Our news

We are thrilled to announce that Andrew Howard will be joining our Employment team as Partner at the end of September. We can't wait to welcome Andrew to the team.

Andrew arrives with a fantastic track record, having been instrumental in building out the employment practice at Deloitte LLP, where he was a Partner and Head of People Law and Employee Relations. He is widely recognised for his entrepreneurial spirit, innovative thinking, and strong leadership — qualities that make him an excellent addition to the team. Andrew has broad industry and sector experience, with a particular focus on the financial service sector, and also shares our commitment to excellence and innovation.

It is fair to say that Andrew is joining us at an exciting – and busy – time, as we help clients navigate the Employment Rights Act and other regulatory reform, as well as the challenges and opportunities of AI and other new technologies. We are delighted that Andrew will be part of navigating that landscape with us and our clients.

In other news, on the theme of innovation, a group of our Associates recently participated in a team 'hackathon' where they spent dedicated time developing AI prompts and processes to achieve efficiencies in our work and associated cost savings for clients. Please speak to your usual Employment contact if you would like to know more.

Community Engagement

In recent weeks, our team has been involved in a variety of pro bono work for organisations such as Refugees at Home, Ukrainian Action, Foundervine and the Impact Investing Institute.

Our Work

Since the last edition of Employment Update, our work has included:

advising on the enforceability of existing post termination restrictions in relation to a new hire
advising on TUPE provisions in an outsourcing agreement for an incoming service provider
advising on the termination of employment of the CEO of a listed business
advising a technology business on the implementation of new contracts and bonus schemes across multiple jurisdictions
advising on the recovery of confidential information taken by former employees