Following various ‘calls for evidence’ and consultation exercises, the Government has finally decided which of its proposals to reform employment law it wishes to pursue. The Enterprise and Regulatory Reform Bill is currently going through the committee stage in Parliament, and no doubt there will be some amendments made before the provisions apply, but many of the items in the Bill have potentially far-reaching implications for employment law.
The main employment law issues dealt with in the Bill are as follows:
Changes to the compensatory award for unfair dismissal
This is one of the most significant changes, yet it has been tucked away in the detail of the Bill and has not attracted the attention it deserves.
If the Bill is passed as it is currently drafted, the Secretary of State will have the power to change the maximum compensatory award. The new limit can be changed to a set amount, a certain number of weeks’ pay or the lower of the two. If a set amount is used, the Bill states that it cannot be lower than the median annual earnings or higher than three times the median annual earnings, and if a number of weeks’ pay is used, the minimum number which can be specified is 52. The Secretary of State would also have a power to specify different maximum compensatory awards for different types of employer, which could allow different rules to apply for small businesses.
So what does this mean in real terms? The current cap on the compensatory award in unfair dismissal cases is £72,300. Based on the current median earnings in the UK, the Secretary of State could potentially lower the maximum compensatory award to as little as £26,000. That would have a dramatic effect on the effectiveness of an unfair dismissal claim, particularly for higher earners.
Compulsory pre-claim conciliation through ACAS
ACAS currently have an obligation to conciliate in all Employment Tribunal cases, but it is still relatively unusual for the parties to be able to use ACAS conciliation before a claim is issued. The idea of compulsory pre-claim conciliation is that a prospective Claimant will be required to submit details of their claim to ACAS before they bring a claim. No detail has been given as yet about how the prospective Respondent will be able to put across their version of events. ACAS will then conciliate for a specified period (the details of which have not been announced yet, but will be detailed in regulations) or until they feel there is no prospect of a settlement being reached.
This is of course yet another measure designed to reduce the burden on the Tribunal system, and most people would agree that this is a good thing. However, for those of us who remember the statutory dispute resolution procedures from the Employment Act 2002, and the fixed conciliation period that came with them, compulsory conciliation seems to be a re-hash of an idea which did not work the first time around. We will of course need to wait and see how this takes shape once the details become known.
The idea here is that simple Tribunal claims can be dealt with by “legal officers” rather than judges or Tribunal panels. As the Bill currently stands, rapid resolution would only apply if both parties consent in writing – presumably it would involve a shorter waiting time than a full hearing with a judge.
Financial Penalties for Employers
As we covered previously both in our updates and in our January seminars on the reforms, another measure the Government are keen to introduce in order to reduce the number of Tribunal claims is imposing penalties on employers who lose. The provisions in the Bill are very similar to those on which the Government was previously consulting, but rather than being compulsory, the decision on whether to impose a penalty will be a matter for the Tribunal’s discretion depending on whether there are any ‘aggravating features’ in the case. This is not defined, but the Guidance to the Bill states that aggravating features could include where actions are deliberate or malicious, where the employer had a dedicated HR team, or where the right had been breached on more than one occasion. If a financial penalty is imposed, it will be at 50% of the compensation awarded to the Claimant, with a minimum of £100 and maximum of £5,000. There is a discount of 50% if the penalty is paid within 21 days.
Whistleblowing needs to be in the public interest
Claims relating to whistleblowing are brought under the Public Interest Disclosure Act 1998, but despite the name of the Act, there is not necessarily a requirement for the whistleblowing to have a public interest element in order for the whistleblower to benefit from the protection it gives.
In particular the case of Parkins v Sodexho came in for criticism from employers because it established that an employee could attract whistleblower status purely for raising issues about potential breaches of his own contract of employment. It has been argued that this is not within the spirit of the Act, and this appears to be the motivation for the change. However, some commentators have argued that the changes go too far – rather than simply dealing with the Parkins v Sodexho type cases, they would also discourage genuine disclosures about internal wrongdoing within private businesses, which would not necessarily meet the requirement for ‘public interest’.
The Bill would re-name Compromise Agreements as ‘Settlement Agreements’ and would also introduce standard form documents and letters. For more information about these proposals please see our article on Settlement Agreements here.
All in all, the Bill will probably be considered good news for employers, as it intends to try and reduce the number of claims – but with every change comes uncertainty of how the new rules will be interpreted. We will of course keep you updated on the progress of the Bill and when (or if!) these proposals become law.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team on 01243 836840 or [email protected].