ARTICLE
2 August 2012

Enterprise And Regulatory Reform Bill

The government may have said no thanks to no-fault dismissals but what other news has the Bill generated?
United Kingdom Employment and HR

The government may have said no thanks to no-fault dismissals but what other news has the Bill generated?

Settlement agreements

Legislation to introduce settlement agreements will be announced later this month. It follows the Bill's amendment to include 'protected conversations' provisions. Under the new rules, an employer will be able to offer a termination package without this coming to light at a subsequent tribunal hearing.

Sound like compromise agreements? There are some important differences. Settlement agreements will only apply to unfair dismissal (but not automatically unfair dismissal) cases. Also, there won't need to be an existing dispute between the employer and employee before a valid agreement can be entered into.

As the birth of settlement agreements draws nearer, we'll continue to hear debates on the pros, cons and potential loopholes and legal arguments likely to be associated with the new system. One of these will be the proviso that a tribunal will have scope to take pre-termination negotiations into account where there has been impropriety. Another will be about what happens if a breach of contract claim for example is brought at the same time as an unfair dismissal claim, as often happens in constructive dismissal. A space to watch.

Compensatory awards

The Department of Business, Innovation and Skills has said that the cap on the unfair dismissal compensatory award may well be based on median average earnings of £26,000. This is higher than some people thought. The bracket of compensation should therefore be £26,000 (one year's earnings) to £78,000 (three years' earnings). DBIS have also said they will introduce a power to cap the compensatory award at one year's earnings – meaning that employer's may (depending on what happens) end up liable only for £26,000 or, if less, one year's earnings.

Directors' pay

The government has announced a package of reforms that it thinks will address failures in corporate governance. It's about directors' pay and, more specifically, giving shareholders more say. The reforms are intended to (among other things):

  • enable shareholders to hold companies to account by voting on pay policies and exit payments
  • encourage transparency in pay and in the link between pay and performance.

These reforms will be introduced as an amendment to the Bill.

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