As you will no doubt have seen in the media, the Government has set out proposals for changes to the way in which employment disputes are to be resolved. If implemented, they will see the biggest change in the Employment Tribunal system since its introduction 40 years ago. We examine the key points and their potential impact for employers.
Pure Employment Law will be making representations on the proposals and we welcome your thoughts and comments. We will pass on any comments received as part of our response to the consultation. If you wish to see the full consultation document (all 88 pages of it!) it is available here.
The consultation will close on 22 April 2011, so if you would like us to include your views in our response please let us have them by 15 April 2011 at the latest.
The main proposals
The Government is keen to understand what the scope is for increased use of mediation to resolve employment disputes in the workplace. Certainly, if both parties agree to mediation and are prepared to accept the result, it is a cheaper and faster way of resolving employment disputes than going through the Employment Tribunal process. However, the opportunity to use mediation in the workplace has been around for several years and the take up has been low. Some employers are reluctant to incur the costs of mediation. In addition, anecdotal evidence suggests that, to date, most successful mediation has been where there has been a dispute between two employees (or groups of employees) and the employer is in a “piggy in the middle” situation. It is interesting to speculate how keen employers, and in particular small employers, will be to accept the conclusions of a mediator where the dispute is between management and the employee.
- Early conciliation
Where the employment relationship has broken down and the employee instigates proceedings in the Employment Tribunal, the Government believes that both parties often tend to be over optimistic about their chances of success and the potential value of the claim. The Government therefore intends to provide information on the claim form relating to the likely value of awards and the time it might take to complete the Tribunal process. Employers will also be made aware what the claim might be worth, but given the nature of litigation, it is hard to see how this will be achieved in anything other than a very general way.
Of more substance is the proposal that before any claim can be lodged with an Employment Tribunal it must first be submitted to ACAS on a shortened claim form. It will then be up to the parties whether they want to enter into pre claim negotiations through ACAS. Where the conciliation is successful ACAS will record the settlement on a COT3 (as now) and that will be the end of the matter. If the pre claim conciliation does not resolve the dispute, then a full claim will be submitted to the Employment Tribunal and a full defence entered. It is not clear from the consultation document whether the employer will have the opportunity to submit a defence to the short claim form submitted to ACAS.
It is clear that if pre claim conciliation succeeds, then the process will be simpler and cheaper for both claimants and respondents. However, where it fails, it appears that the process will be more complex and time consuming for both parties as certainly the claimant (and possibly the respondent) will have to submit both the shortened claim and the full claim (or defence).
Pre claim conciliation has been available for nearly two years already, but due to a lack of resources, ACAS have sometimes been unwilling to offer it. Presumably if it is to become compulsory, the Government will have to provide adequate funding.
On the question of time limits, once the claim has been received it will in effect stop the clock for the purposes of Employment Tribunal time limits and if the claim is submitted to ACAS in time it will be in time.
- Tackling weaker cases
The Government is keen to reduce the burden on business by weeding out weak cases. They are therefore proposing increasing the powers for Tribunals to strike out weak claims, possibly even without a hearing or giving the parties any opportunity to make representations. It is proposed that this provision will also apply to responses submitted by employers.
Employment Tribunals have had limited powers to strike out cases for years (but not without a pre hearing review), but have in practice been very reluctant to use them as the normal response is that they need to hear evidence before making any determination. Clearly a culture change will be required.
- Deposit orders
Employment Tribunals already have the power to make deposit orders against either party at a pre hearing review where they believe that a claim or response has little reasonable prospect of success. The deposit is paid to the Tribunal and returned to the payer if they succeed. It is proposed to allow Tribunals to make such orders without the need for a hearing.
In practice Tribunals are currently fairly reluctant to make deposit orders. The Government is inviting views on whether the present “little prospect of success” test should be amended to make it more likely that Tribunals will make deposit orders.
It is also proposed to increase the maximum deposit which can be ordered from £500 to £1,000.
- Costs in Employment Tribunals
At present each party bears their own costs in the Employment Tribunal unless the Tribunal makes a costs order, basically because of the unreasonable behaviour of one of the parties in bringing, defending or progressing a claim. The Government has made it clear that it does not want to move to a system where costs follow the event as in the civil courts. It is proposed to double the maximum costs award from the present £10,000 to £20,000.
At present, our experience is that Tribunals are rarely willing to award costs, and where they do, it is rare indeed for them to award anything near the maximum.
- Encouraging settlement
It is proposed that claimants will be required to submit a schedule of loss in their claim form so that the employer knows at the outset what the likely maximum value of the claim may be. At present a claimant is normally required to produce a schedule of loss as part of the standard directions from the Tribunal, but not until later in the process.
It is also proposed that either party can make a formal settlement offer by submitting an offer to the Tribunal office and to the other party. If an offer is made and rejected, the Tribunal will be able to use this in assessing whether to award costs against the party which refused the offer – but it will not be obliged to make an award.
- Tribunal hearings
It is intended that where possible Tribunal hearings will be shortened from their current length. It is proposed that witness statements will be taken as read, rather than read out at the hearing. This is already adopted by some Tribunals.
It is also proposed that the range of cases which can be heard by Employment Judges sitting alone without wing members is increased to include cases of unfair dismissal.
It is also suggested that the Employment Tribunals employ legal officers to perform much of the interlocutory work currently done by Employment Judges, thus freeing them up to hear more cases.
It is proposed that users of the Tribunal system will have to pay a fee. The press have suggested figures of £350 and £500, or a week’s pay for that particular claimant. It is not clear whether it is intended that the fee will be repaid to a successful claimant, or whether it will be paid by the losing employer. The Guidance Notes refer to the burden being “shouldered by the party who causes the system to be used”. It is not clear whether that is the claimant as they submit the claim, or the employer who has for example unfairly dismissed someone.
We think it likely that if fees are to be repaid by a losing employer the insurance industry will devise a product which a claimant can purchase to minimise the risk of them having to pay fees.
- Increasing the qualification period for unfair dismissal from 1 year to 2 years
This proposal has been well rehearsed in the media and we have of course been here before. The qualification period was 2 years under the last Conservative government and was reduced to 1 year in 1997. The present Government’s view is that the right for employees to claim unfair dismissal after 1 year is a bar to recruitment. It is not clear what the evidence is for this.
This increase will not impact on the so called ‘day one’ rights (for example discrimination, whistleblowing etc). It is quite likely that if employees are denied the right to bring unfair dismissal claims they will bring claims based on ‘day one’ rights instead. There are already quite a number of these types of claims from people with less than the current qualification period.
- Financial penalties for employers
It is proposed to introduce a financial penalty on employers who have breached the rights of an individual. This is in addition to any uplift currently payable by an employer who has failed to follow the ACAS Code on Discipline and Grievances. However, unlike those awards, the new payments will not go to the claimant, but to the Treasury.
It is suggested that the award should be half the award made to the employee, but subject to a minimum of £100 and a maximum of £5,000.
If you would like to discuss these proposals or if you have any comments you would like us to feed back as part of our consultation response, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])