New legal reforms could hinder mobility

Upcoming changes to UK employment law, particularly the Employment Rights Act 2025, are set to significantly impact senior solicitors and partners by increasing the financial risks associated with employment disputes. According to Bloomsbury Square Employment Law, employees will soon gain unfair dismissal protection after six months instead of the current two years, and the existing compensation cap for unfair dismissal claims of £118,233 will be abolished. For high-earning lawyers with complex remuneration packages, this shift means that claims can now reflect the full value of their substantial earnings.

Chris Hogg, a partner at Bloomsbury Square Employment Law, explains that "Senior professionals in the legal sector often have complex remuneration structures tied to performance, profit share or long-term incentives. Earlier legal protection combined with uncapped compensation increases the financial stakes considerably in an exit situation." The removal of the compensation cap is expected to alter how claims are formulated. Historically, many senior professionals have relied on discrimination or whistleblowing claims, which carry uncapped damages, to seek larger settlements. However, with the new uncapped compensation for unfair dismissal, some disputes may become more predictable yet costlier for firms.

The phased introduction of these reforms, extending from this year into 2027, also doubles the limit for most employment tribunal claims from three months to six, prolonging uncertainty and potentially delaying financial resolutions following senior departures. Additionally, new restrictions on the use of non-disclosure agreements in harassment or discrimination cases will hinder employers' reliance on confidentiality, thereby increasing their risk exposure.

With the prospect of significantly higher payouts in employment disputes, firms are likely to become more risk-averse regarding senior-level hiring. Chris Hogg further comments that "Although the reforms may make it easier for senior solicitors to pursue substantial employment claims without relying on more complex discrimination arguments, the broader effect could be reduced mobility. Senior-level appointments already commonly take six to nine months, and we may see timelines extend further as firms adopt a more cautious approach to hiring, making career moves at the top end of the profession even harder." This cautious approach could be particularly felt in the lateral hire market at Magic Circle and other prominent City firms, where the financial risks associated with unsuccessful senior appointments could grow substantially.

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