Law Commission recommends changes to Employment Tribunal jurisdiction
3 May 2020
Whilst the world is (unsurprisingly) focusing all its attention on the Covid-19 pandemic, the Law Commission have produced their report “Employment Law Hearing Structures” which recommends some quite significant changes to the way in which employment claims are dealt with by the Employment Tribunals. We take a look at the key recommendations and why they could be significant.
What are the proposed changes?
- Jurisdiction in breach of contract claims brought during employment
The first, and arguably the most significant, relates to the Employment Tribunal’s jurisdiction to deal with breach of contract claims. Tribunals were first given the power to hear some breach of contract claims back in 1994, and the rules relating to this have not changed since. Tribunals were only given the power to hear breach of contract claims which arose or were outstanding on the termination of employment. They could not hear claims for breach of contract which arose during the employment relationship where that employment was ongoing.
Now, the Law Commission are recommending that Tribunals should also be allowed to hear claims which arise during the employment relationship, without there being a need for the employment to have ended. This is potentially a very important change. At present, breach of contract claims in the Tribunals are almost always in respect of notice pay, often combined with a claim for unfair dismissal where an employee has been dismissed for gross misconduct, i.e. without notice or payment in lieu of notice. If the proposed change is accepted by the Government, it will give employees a right to bring claims where, for example, an employer seeks to change someone’s working practices, allegedly in breach of contract, without the person having to leave their employment. At present, those types of claims can only be brought in the courts, or by the employee resigning and, usually, also claiming constructive dismissal.
2. Increase in the maximum value of breach of contract claims
The second significant proposal is to the potential value of a breach of contract claim which a Tribunal will have jurisdiction to hear. This was set at a maximum of £25,000 in 1994 and has never been increased. Back in 1994, there were caps on virtually all claims brought in the Employment Tribunal, and they were not that high. The maximum for unfair dismissal was in the region of £8,000 (today it is £104,659), and for discrimination about £8,500 (today it is unlimited). In this context, £25,000 was quite generous and adequate in the vast majority of cases.
However, wages have of course increased very significantly over the last 25 years or so, and now the cap can be quite a problem, particularly for higher paid employees. For example, if a person is earning £120,000 and is on 3 months’ notice to terminate their employment, then if they were dismissed without notice, their claim for notice pay would be £30,000. They would not be able to bring that claim in the Tribunal, and would have to bring the claim in the courts. If, as is very often the case, they are also bringing a claim for unfair dismissal, they would have to bring that claim in the Employment Tribunal as they have exclusive jurisdiction to hear those claims, so there would be two sets of parallel litigation being heard in different forums, but both based on the same facts. This is clearly a huge waste of effort and money for both the employee and the employer, as well of course for the Courts and Tribunals Service.
The proposed amendment is to increase the limit on breach of contract claims from £25,000 to £100,000. In our view this would be a welcome change from everyone’s perspective. The only question is why have a cap at all? If Tribunals are trusted to award unlimited compensation in discrimination cases (and some have been in the millions), then one would have thought they should be trusted to hear breach of contract claims of any size – after all, breach of contract claims are usually much simpler and far easier to quantify than discrimination cases.
3. Increase to time limit for bringing claims
The other main proposal is to increase the time limit for bringing all claims in the Employment Tribunals to 6 months. At present the limit for the vast majority of claims is 3 months (in both cases, ACAS Early Conciliation can ‘pause the clock’ for a certain period). In contrast, the limitation period for most court claims is 6 years.
The 3 month time limit was introduced when Employment Tribunals (which were then known as Industrial Tribunals) were created as part of the Industrial Relations Act 1971. It was deliberately made short in line with the intention that Employment Tribunals should be informal forums in which to resolve employment disputes. Much has changed over the past 50 years or so, and the whole idea that Tribunals should be informal forums has long since disappeared. The change in the time limit, if implemented, will obviously add to the length of uncertainty for employers who believe that a claim against them may be made, but obviously will help employees who are slow off the mark in bringing a claim.
4. Change to the time limit test
Another proposed change to the time limits is a bit more technical, but also important. At present, if a claim for anything other than discrimination is received by the Tribunal out of time, the claimant has to show that it was not “reasonably practical” to bring the claim in time if they want to proceed. In practice, this is a very high burden for them to overcome, and there have been cases where claims filed electronically have been received by the Tribunal a few minutes after midnight on the last day, and have not been allowed to go ahead, even where the claimant has managed to show that they sent the claim before midnight.
In discrimination cases the test for whether to allow a claim which is received out of time to proceed is whether it is “just and equitable” to allow it to continue. This is a much lower burden, and to some extent it will be for the employer to show why they would be disadvantaged by the claim being allowed to proceed, for example key witnesses having left etc.
The new proposal is that all claims received out of time will be subject to the just and equitable test. This will certainly simplify things and get rid of the anomalous situation which can arise where a claimant puts in claims of unfair dismissal and discrimination out of time, and because of the different tests, the discrimination claim is allowed to proceed and the unfair dismissal claim is not. However, relaxation of the time limits is not likely to be welcomed by employers.
5. Other changes
There are other changes proposed, but they are to do with allowing Employment Judges with experience of dealing with discrimination claims to hear non employment discrimination claims in the courts, and that does seem to make sense.
If the Law Commission’s recommendations are implemented, then in our view they will be very significant indeed. However, it remains to be seen whether any or all of them are adopted by the Government. We will of course keep you updated on any developments.
If you are an employer dealing with an Employment Tribunal matter, then we can help. Please call us on 01243 836840 for a no obligation chat, or email us at [email protected].