Impending Employment Law Reforms

Following the controversial Adrian Beecroft report for the government in October, the government last week laid the Enterprise and Regulatory Reform Bill before parliament, which included a section on proposed variations to Employment Tribunal procedures. 

Employers generally are frustrated by the cost of being involved in post termination disputes with ex-employees and the government are aware of the cost of Tribunal proceedings and the inevitable delays, due to the volume of work before them. They have of course recently imposed variations, so that the qualifying period for Unfair Dismissal has been increased since April from one year to two years for new employees, and the government have tried to speed up Tribunal proceedings, so that in Unfair Dismissal cases they will be heard by an Employment Judge alone without its lay members. 

The government’s previous attempt to reduce the amount of litigation was the introduction of the Statutory Disciplinary and Grievance Procedures, which was intended to improve interaction between employees and employers, in the hope that it would reduce subsequent litigation before the Employment Tribunal Service.  It was an unmitigated disaster in that the number of cases was increased due to the complexity of the interpretation of the procedures, which invoked more litigation over possible breaches of the procedure, instead of the basic legislation itself.  The government decided to retract and repealed the legislation and require employers now to rely on the ACAS Code of Practice in dealing with disciplinary procedures. 

The Bill laid before parliament provides for:

• Mandatory period of ACAS conciliation before proceedings can be instituted which will involve extension of limitation periods to allow for the pre-issue ACAS conciliation.  There will be heavy reliance on the regulatory details, which as yet have not been published.  The aim is to reduce the number of cases that are unresolved in the early stages to avoid proceedings being issued.  Currently many proceedings are issued following termination of employment, with settlement being effected quite often just prior to the hearing, which could be many months after the original employment ended.
• There is a constant delay in Tribunals administration needing to be dealt with by Employment Judges and there will be the introduction of Legal Officers who will make decisions in certain cases, if all parties are in agreement.  That should improve the response for any applications that are made for various orders or adjournments, which currently can take days or weeks to be dealt with by the Tribunal Service.
• The Secretary of State is to be given power to limit the Unfair Dismissal compensatory award to a maximum between the national median earnings and three times median earnings, which according to the Department of Business Innovation & Skills have indicated the current median average earnings are £26,000.00 per year, so that means if the power is exercised the compensatory award will be capped at somewhere between £26,000.00 to £78,000.00.  Alternatively there is power for the Secretary of State to limit the Unfair Dismissal compensatory award to one year’s earnings.
• It is proposed that the Tribunal will have power to impose a penalty on employers of 50% of any financial award, subject to a minimum payment of £100.00 and a maximum of £5,000.00 where there are “aggravating features”.  They currently are not defined.  Very much like parking fines there is a proposal that there will be a 50% discount on that penalty, if paid within 21 days, and that money will not go to the employee but be retained by the government and will be placed in the Consolidated Fund.
• Redefinition of “qualifying disclosure” in whistleblowing legislation is to be restricted to disclosures “in the public interest” although again that is not currently defined.
• It also provides for a re-branding of Compromise Agreements to “Settlement Agreements” which appears to be simply cosmetic rather than a change in substance.  These will still be an important tool for an employer to contemplate as the employment ends, even with the proposed increase in conciliation through ACAS.

The intention of increasing the qualifying period for employees to bring a claim for Unfair Dismissal to two years, was to give employers extra flexibility to weed out those employees not meeting their normal standards.  Whilst it may reduce the volume of Unfair Dismissal claims, the risk will be that a disgruntled employee who cannot bring an Unfair Dismissal claim will try and bring a discrimination claim, which still has no qualifying period of employment. 

There is going to be an encouragement for those who can bring Tribunal proceedings to do so, with the risk to an employer, if the matter proceeds to a Tribunal, of not only paying compensation if the case goes against them, but also a 50% penalty up to a maximum of £5,000.00.  It must make the employees’ negotiating position somewhat strong to conclude either a Compromise Agreement or an ACAS settlement, so employers need to ensure that unsuitable employees have their contracts terminated before they gain the qualifying two-year period of employment.