Innovation meets Employment Law in Retail, Hospitality & Leisure

We are witnessing a surge in self-service checkouts, digital ordering kiosks, robotic cleaners in hotels, automated servers in restaurants, and AI-powered chatbots and virtual assistants. The wave of innovation is far from over. Businesses are actively investing in AI and automation to enhance customer experience and operational efficiency.

For employers, the commercial drivers are clear: reduced costs, streamlined operations, and the ability to operate around the clock. However, for employees, this technological shift can be unsettling. Roles are being redefined or replaced, and workers may be asked to retrain, take on new responsibilities, or adapt to entirely different roles. Understandably, this can lead to concerns around job security, career progression, workplace identity.

Moreover, these changes introduce complex employment law challenges that must be proactively managed. Lydia Button, Employment sector lead in the Retail, Hospitality and Leisure sector at Thackray Williams highlights some key considerations for both employers and employees alike below: 

1. Redundancy and restructuring risks

Where automation leads to a reduced requirement for certain roles – such as replacing cashiers with self-service checkouts – employers must ensure they follow fair and lawful redundancy processes. This includes:

• Notifying employees of potential redundancy.
• Engaging in meaningful consultation – both individually and collectively where applicable.
• Applying objective selection criteria transparently.
• Exploring alternatives to redundancy, such as redeployment or retraining for new roles created by automation (e.g., customer service supervisors or tech support roles).

Employers should also be aware of collective consultation obligations which may be triggered if 20 or more redundances are proposed within a 90-day period at one establishment. Notably, the Employment Rights Bill 2024 may introduce changes to these thresholds, so staying informed is essential.

Failure to follow a fair process can lead to costly employment tribunal claims and reputational damage. 

2. Contractual changes

AI and automation can often reshape job roles, particularly in customer-facing environments. For example, restaurant staff who previously took orders may now oversee digital kiosks or manage automated systems. These changes may require:

• Amendments to employment contracts, including job descriptions, working hours, and responsibilities.
• Consulting with employees on these changes before they are implemented.
• Consideration of implied terms, such as mutual trust and confidence, which could be impacted by unilateral changes to terms and conditions of employment.
• Consideration of laws on fire and rehire practices (which are subject to change following implementation of the Employment Rights Bill 2024).

Employers must tread carefully to avoid breaching contractual terms or triggering constructive dismissal claims. 

3. Employee relations and morale

Technological change can affect employee morale, especially if staff feel undervalued or uncertain about their future. Transparent communication, inclusive planning and investment in training are key to maintaining trust and engagement. Employers should: 

• Involve employees early in the process.
• Provide clear pathways for upskilling and career development.
• Offer support mechanisms, such as mentoring, to help staff navigate transitions.

A proactive approach to employee relations can mitigate resistance and foster a culture of innovation and adaptability.

Looking ahead

Several trends are expected to further transform the Retail, Hospitality and Leisure sector including: hyper-personalisation of room settings (such as adapting lighting, temperature, entertainment to suit specific consumers), dining recommendations, and curated itineraries through AI based on guest preferences and behaviours, contactless and mobile technology to assist check-ins and mobile ordering which are becoming standard across the sector, machine learning to enable businesses to anticipate consumer needs and manage inventory more effectively, and voice-powered AI as a tool to support customer service.

The benefits to the business are clear – however, the human impact must not be overlooked. Employers who embrace innovation while safeguarding employee rights and wellbeing will be best positioned to thrive in this new era.

If you need advice or have any further queries, please do get in touch with Lydia or one of the Employment team on 0208 290 0440 or email hello@thackraywilliams.com.