Employment Law & HR Update – May 2026: Key Cases, Risks and Employer Guidance

May's bulletin covers a wide range of issues. There is also a timely reminder about dress codes and a case that proves the employment tribunal has a sense of humour, even if the outcome is no joke.

Here are the key employment law and HR developments for May.

Collective redundancy: when does the duty to consult actually arise?

The Employment Appeal Tribunal has provided important clarification on the trigger point for collective redundancy consultation in Ellard & Ors v Alliance Transport Technologies Ltd.

The case arose out of an insolvency. A manufacturer with around 51 staff entered administration on 2 May 2023. On the same day, 15 employees were dismissed as redundant. Three days later, when the last prospective buyer withdrew, most of the remaining workforce was also dismissed. The tribunal awarded a protective award to those dismissed on 5 May but not to those dismissed on 2 May, reasoning that only 15 dismissals were proposed on that date so the collective consultation threshold had not been reached.

The EAT disagreed. A "proposal" to dismiss does not require finalised plans. Even where alternative options are still under consideration, what matters is the reality of the situation and the genuine viability of those alternatives. By 2 May, the prospect of a business sale was no longer realistically achievable. The administrators had formed a firm, if provisional, intention to close the business. That was enough to trigger the collective consultation obligation.

The financial stakes here are significant. From April 2026, the maximum protective award for failure to comply with collective consultation obligations doubled from 90 days' to 180 days' gross pay per affected employee. This decision, combined with that increase in exposure, sends a clear message: do not wait for certainty before starting the clock.

The practical takeaway: monitor when large-scale redundancy becomes a realistic outcome, not just a confirmed one. Critically evaluate the likelihood of any alternatives. Where there is any real possibility that 20 or more dismissals at one establishment within a 90-day period may follow, take advice and initiate consultation early.

Discrimination compensation: the "non-discriminatory world" test

The Employment Appeal Tribunal revisited a tricky but important principle in KJ v British Council: how to assess compensation where the employee's own conduct after the discrimination has occurred appears to reduce their loss.

The Claimant succeeded in claims of sex discrimination, harassment and constructive dismissal following a poorly handled grievance. The tribunal reduced her compensation by 35%, relying on evidence that she had been exploring other roles, including engaging with a headhunter.

The EAT overturned that reduction. The correct approach, drawn from Chagger v Abbey National, requires the tribunal to construct a "non-discriminatory world". To assess what would have happened absent all discriminatory acts. Where an employee's post-discrimination behaviour, such as looking for other work, may itself have been influenced or caused by the discriminatory treatment, it cannot simply be used to reduce their compensation.

For HR: causation in discrimination cases is rarely straightforward. If an employer wants to argue that compensation should be reduced because the employee would have left anyway, it must be able to show that their actions were genuinely independent of the discrimination. Job searching alone will not be enough. Careful documentation of any such argument is essential.

Implied terms: the hidden rules in employment contracts

Employment lawyers tend to be asked about what is in the contract. But the contract is never the whole story. Implied terms can carry equal legal force. Breach them, and the liability is just as real.

Implied terms arise in three main ways. Terms implied by fact fill gaps the parties would obviously have intended to fill, even if they did not say so — the courts apply the "business efficacy" and "officious bystander" tests to decide whether a term should be implied. For example, a requirement for an employee to hold a valid driving licence may be implied where it is essential to the role, even if not expressly stated.

Terms implied by law are automatically part of every employment contract: most notably, the duty of mutual trust and confidence, the employee's duty of fidelity, and statutory rights such as the National Minimum Wage. These cannot be excluded by agreement.

Terms implied through custom and practice arise where a consistent and well-established workplace behaviour becomes contractually binding over time, but only where the practice is reasonable, notorious and certain.

The particular risk for HR lies in the dynamic nature of implied terms. Unlike the written contract, they can evolve through conduct and management decisions over time. Informal practices that become routine can create binding rights without anyone intending them to. A pattern of paying discretionary bonuses, for example, can harden into a contractual entitlement.

The key message: the written contract is the starting point, not the finish line. Legal obligations can exist beyond it, and failing to recognise an implied term can lead to breach of contract claims or constructive dismissal risk.

Offer letters and conditional employment: the risk is bigger than you think

You may end up owing a new hire three months' notice before they have spent a single day in the office. That is the practical consequence of the Employment Appeal Tribunal's decision in Kankanalapalli v Loesche Energy Systems, and it should prompt every HR professional to review their offer letter templates now.

The employer made an offer conditional on satisfactory references and a right-to-work check. The candidate accepted by email and took preparatory steps ahead of the start date. Before that date arrived, the employer withdrew the offer for reasons entirely unrelated to those conditions. The employment tribunal found no contract had been formed. The EAT disagreed.

The EAT drew a critical distinction between a condition precedent — a condition that must be satisfied before any contract comes into existence — and a condition subsequent — a condition that operates within an already-formed contract and could bring it to an end if triggered. The EAT found that the conditions in the offer letter were the latter. A binding contract had formed on acceptance. The conditions could have terminated it, but they had not been triggered. The employer withdrew for an unrelated reason without notice, breaching an implied term requiring reasonable notice. Given the seniority of the role, three months was appropriate.

Dress codes: inclusion, flexibility and the law

Dress codes are evolving, and HR policies need to keep pace with both legal developments and workplace expectations. A policy that was defensible five years ago may not be now.

The starting point is equivalence. The law permits different standards for men and women, but they must be broadly equivalent in their overall effect. Highly prescriptive or gender-specific rules carry increasing risk. Requiring women to wear make-up, skirts or high heels is likely to amount to direct sex discrimination. Differential rules on jewellery or hairstyles can create similar exposure.

On gender identity, employers should allow transgender employees to dress in accordance with their gender identity, regardless of whether they have undergone any formal process. Many organisations have responded by introducing gender-neutral uniform options.

Disability and race also require attention. Dress codes may need to be adjusted for employees with medical conditions. For example, different fabrics, footwear or fastenings. Hairstyles associated with Afro-textured hair must not be treated as unprofessional; doing so is likely to constitute race discrimination.

Tattoos sit in a different category as they are not a protected characteristic in most cases but attitudes are changing. A blanket ban may limit recruitment unnecessarily, while a thoughtful approach that permits non-offensive tattoos but restricts those that are prominent or client-facing is generally more proportionate.

Practical steps for HR: review existing policies against current working practices, including hybrid arrangements. Favour broad principles — "smart" or "appropriate" attire — over highly prescriptive rules. Consult employees before making changes. The most effective dress codes balance clarity with flexibility.

The "vanishing dismissal": what happens when an appeal succeeds

When an employer overturns a dismissal on appeal, the instinct is to view that as a straightforward resolution. Legally, it is more complicated than that.

Where an appeal results in reinstatement, whether or not a lesser sanction is imposed instead, the original dismissal is treated in law as if it never happened. This is the "vanishing dismissal" principle. The employment contract is treated as having continued uninterrupted throughout, which means the employee is entitled to back pay and all contractual benefits for the entire period between dismissal and reinstatement. Where there has been a lengthy gap, that can be a substantial sum.

The principle was confirmed by the EAT in Marangakis v Iceland Foods Ltd, which also established an important trap for employees. An employee who pursues an appeal, perhaps simply to comply with the Acas Code and protect their tribunal compensation, but then sees it succeed may find they have lost their ability to bring an unfair dismissal claim at all. The dismissal has vanished. Unless the appeal is clearly and unequivocally withdrawn before the outcome is given, a successful reinstatement removes the claim.

For HR: approach appeal decisions carefully. Upholding an appeal is not a costless administrative step and it carries real financial and legal consequences. Before confirming a reinstatement outcome, make sure this is genuinely the intended result and that those handling the appeal understand what it means. The outcome letter should clearly explain the decision and confirm it is final.

Automated recruitment tools: what the ICO expects from you

Algorithms may already be shortlisting or rejecting candidates at your organisation. The ICO's Recruitment Rewired initiative, which gathered evidence from over 30 employers across multiple sectors, has placed automated decision-making in recruitment firmly under the regulatory spotlight.

The legal landscape has changed recently. The Data (Use and Access) Act 2025 removed the previous general prohibition on automated decision-making under Article 22 UK GDPR. Since secondary legislation took effect in February 2026, organisations can conduct automated decision-making on any lawful basis, including legitimate interests, provided mandatory safeguards are met. Those safeguards require notifying candidates that automated decision-making is used, giving them the opportunity to make representations, ensuring meaningful human intervention is available, and allowing decisions to be contested.

The ICO's investigation found widespread failure on the human involvement requirement. A recruiter scanning an algorithm's output without genuinely interrogating it does not meet the legal threshold. Human review must be consistent across all candidates at the same stage and must be genuinely capable of changing the outcome, not simply rubber-stamping it.

Bias is also a live issue. Algorithms trained on historical hiring data risk replicating and amplifying embedded biases, particularly around age, gender and socioeconomic background. Regular bias testing and outcome monitoring are legal obligations. Equality Act protections apply from the application stage.

What to do now: audit every stage of your recruitment pipeline for automated decision-making and document your lawful basis. Update privacy notices and Data Protection Impact Assessments to reflect the new framework. Train hiring managers to genuinely interrogate algorithmic outputs. Ensure candidates have a clear, accessible route to contest automated decisions.

And finally… the cost of not listening

A gentle but pointed reminder from the employment tribunal in Esteves v West London NHS Trust that even well-intentioned workplace behaviour can become a legal problem if a colleague has made their objection clear.

A 61-year-old healthcare assistant successfully brought a harassment claim after a colleague repeatedly referred to her as "auntie" despite being asked to stop. The colleague's explanation, that the term, rooted in his Ghanaian heritage, was intended as a mark of respect was accepted by the tribunal. It found harassment nonetheless. Once the Claimant had made her objection clear, continuing to use the term created an offensive environment. The result was a finding of age- and sex-related harassment and £1,425 in compensation for injury to feelings.

The message is straightforward. Workplaces rightly celebrate cultural difference, but respect is measured by how conduct lands not how it was intended. When a colleague asks to be addressed differently, the right response is to listen. Once someone has asked for something to stop, continuing is a choice and choices have consequences.

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Final thoughts

May's developments span a wide range of issues, but a few common themes run through them. First, early action reduces exposure, whether that is on collective consultation or offer letter drafting.

Second, the written contract is rarely the whole story as implied terms, conditions subsequent and the vanishing dismissal principle all show how legal obligations can arise in unexpected places.

Third, HR professionals are increasingly operating in a more regulated environment when it comes to technology and data, and keeping pace with that requires active audit and documentation, not just awareness.

If any of these issues are live in your organisation, getting early advice is almost always cheaper than managing the consequences later.