UK: Employment Law Reform

Last Updated: 17 April 2012
Article by Ben Smith

Introduction

The government's formal response to the consultation on Resolving Workplace Disputes was finally published in December 2012. As well as the previously announced increase to two years for the qualifying period for unfair dismissal, the proposed reforms place an increased emphasis on workplace mediation, compulsory conciliation and making it much easier to reach settlement where relations have broken down. There are other changes, some subject to further consultation, which will bring about significant reform to employment issues in the workplace and will be of interest to those employing staff in veterinary practices.

The focus is business friendly and will generally be welcomed by employers in general, including those operating veterinary practices, but whether the reforms have all the intended effects will remain to be seen.

Early conciliation

The Government will introduce an early conciliation period. As the first part of the tribunal process, Claimants will have to submit their claim to ACAS (a simple form will be introduced to be used in the process) and will be offered the option of a one month conciliation period. This will not be compulsory and will have a knock on effect on limitation periods. ACAS conciliators will be able to extend the conciliation period by a further two weeks where there is a reasonable prospect of settlement and with the parties' agreement.

A fixed, early conciliation period was introduced by the previous Government but was severely undermined by a lack of resources within ACAS, which is an issue which needs to be addressed if these plans are to succeed. The indications are that ACAS will be provided with greater resources, funded by the savings that the Exchequer is expecting to make as a result of fewer claims reaching the tribunal.

Compromise agreements

The Government wants to encourage the use of compromise agreements to be known as "settlement agreements" and make it easy to reach a no fault settlement by simplifying them. A further consultation will look at developing standard form wording and guidance, amending legislation so that all existing and future claims can be covered, without the need for a full list of causes of action, and the ability to use them at an early stage without the risk of constructive dismissal claims.

The Government will also be consulting on the introduction of a system of "protected conversations" to allow employers or employees to initiate a conversation about an employment issue at any time "as a way of resolving the matter without fear". The stated intention is to allow employers to talk to employees about poor performance or retirement plans. However, what seems like a simple idea is fraught with practical difficulties, and could well lead to disputes around whether there was or was not a protected conversation.

Although not dealt with explicitly it is understood that an employer would not be protected from claims of discrimination or harassment in relation to these conversations which also raises the question as to how it could approach discussions about retirement which would be inherently age discriminatory, without putting itself at risk. Whilst this idea may be welcomed by business, in the longer term the litigation surrounding such conversations may prove costly.

Modernising tribunals

The tribunal procedural rules will be the subject of a fundamental review by the outgoing President of the EAT, Mr Justice Underhill, in order to maximise their effectiveness which will include considering expanding strike-out powers. There are also proposals to consider introducing a "Rapid Resolution" scheme for low value, straightforward claims, bit this will be subject to further consultation.

Whilst many of the proposed tribunal reforms will not happen until after the review, the following changes will take place, subject to Parliamentary process, for cases presented after 6 April 2012:

  • Deposit orders will increase from £500 to £1,000;
  • The maximum amount of costs that can be awarded will increase from £10,000 to £20,000.
  • Witness statements will be taken as read, unless a judge or tribunal orders otherwise.
  • State funded witness expenses will be removed – Tribunals are to be given discretion to direct parties to pay witnesses expenses.

Also, despite little support for the idea, all unfair dismissal claims heard on or after 6 April 2012 will be heard by an employment judge alone (unless they direct otherwise).

Extending qualifying period

As already mentioned, the qualifying period for unfair dismissal claims will increase to two years from April 2012. The Government does not think this will cause a considerable disparity of impact on any particular group but should this be challenged it believes it would be able to justify this as a proportionate means of achieving the legitimate aim of improving business confidence to recruit and retain staff. However, many commentators consider that this change will have a disparate impact on young people, particularly in view of the high levels of youth unemployment.

The change will only affect those recruited on or after 6 April 2012.

Financial penalties

The Government has decided not to impose an automatic penalty for breaches of employment law by employers. Instead, tribunal judges will be given a discretion to consider imposing penalties where the employer's behaviour in committing the breach has aggravating features.

The penalty will be half of the total award made by the tribunal, with a minimum threshold of £100 and a maximum penalty of £5000. The penalty will be reduced by 50% if this is paid within 21 days.

Mediation

The responses to the consultation indicated that a lack of awareness and the cost of mediation were raised as potential barriers to using mediation. The Government is committed to increasing the use of mediation to resolve disputes before litigation arises and in January announced that a pilot mediation scheme would be launched in Cambridge and Manchester for SME's later in the year. BIS will fund training and the scheme will run for 12 months before being extended elsewhere if successful.

Consultation on charging fees in the employment tribunal

Consultation on the introduction of employment tribunal fees was launched in December 2012. The consultation sets out 2 options:

  • Option 1: This would involve an issue fee and a separate hearing fee. The level of the fee would depend on the type of claim issued, but would range from £150 to £250 for issue and £250 to £1250 for the hearing.
  • Option 2: This would involve only an issue fee, the level of which would depend on the compensation being sought (whether the total is more or less than £30,000), and be between £200 and £1,750.

It is also proposed that neither the issue fee nor the application specific fees should be refundable, and there will be no refund for hearing fees where a case is settled or withdrawn once the case has been listed for hearing.

Both options propose a range of additional application specific fees. Whilst this will be largely welcomed by those operating veterinary practices, as it may deter spurious claims, the fees will inevitably be taken into account in settlement discussions and may often end up being borne by the employer in the long term by being added to compensation.

It is anticipated that if Option 1 is adopted, likely implementation will be 2013; and if Option 2 is adopted, then 2014.

Calls for evidence

Collective redundancy

BIS has issued a call for evidence, seeking views on the operation of the rules for collective consultation. Under current legislation collective consultation obligations are triggered where an employer is proposing to make 20 or more redundancies in a 90 day period. The government are considering reducing the consultation period for redundancies involving over 100 employees from 90 days to 60, 45 or 30 days.

This will be welcomed by businesses who often see these provisions as a barrier to constructive restructuring. There will be a full consultation process following the call for evidence, so reform is not imminent.

TUPE

BIS has also issued a call for evidence over concerns that the UK have "gold plated" TUPE, going further than required under the Acquired Rights Directive. In particular the call for evidence is looking at whether the increased certainty about the application of the regulations to service provisions changes has resulted in benefits, or burdens, for business. The government is also seeking views on whether the legislation should be changed to specify which insolvency proceedings fall under which provisions. The wording currently mirrors the wording from the Directive which does not reflect the wording used in the UK in relation to insolvency issues.

The Government is also considering what post transfer harmonisation might be permitted, whilst remaining compliant with the Directive.

Current dismissal procedures

BIS has issued a call for evidence on whether current dismissal procedures are too onerous, too complex and whether or not there is a lack of understanding in their application. This will also look at the use of the ACAS Code of Practice on Discipline and Grievance and whether it could be made more accessible to use by smaller businesses.

Views are also requested on the idea of compensated no-fault dismissal for micro-businesses with fewer than 10 employees. Under such a system a business would be able to dismiss a worker from a micro-business, where no fault had been identified on the part of the employee, with the payment of a set amount of compensation. This would prevent the employee from bringing an unfair dismissal claim but not any other type of claim arising out of their dismissal.

Executive pay

Business secretary, Vince Cable has outlined proposals on quoted company executive pay. The proposals, some of which will be consulted on, include:

  • Requiring remuneration reports to have two sections dealing with (i) pay in the last year and future remuneration policy, (ii) explain the performance targets used and how employee earnings were taken into account, and (iii) include a single total figure for each director and figures on potential pay outs.
  • Remuneration reports will need to explain how the company consulted employees and took account of their views.
  • Reforming votes on remuneration reports: to include binding votes on (i) future pay policy, (ii) director's notice periods longer than one year and, (iii) exit payments over one year's salary. There will also be consultation in increasing the majority required to 75%.
  • Greater transparency regarding the work and pay of remuneration consultants.
  • Amending the UK Corporate Governance Code to prevent serving executives sitting on other companies' remuneration committees and requiring large public companies to adopt incentive clawback provisions.
  • Launching a new High Pay Centre, to be led by the chair of the recent High Pay Commission.

Still to come...

There are a number of other proposals. These include the Government's plans to amend the whistle-blowing legislation so that a claim cannot be based on an alleged breach of the employee's contract of employment. Such claims are currently used as part of what are in essence purely internal disputes regarding that employee's employment situation, and do not involve any disclosures of a breach of any wider law or regulations.

The Government has also stated it intends to consult on removing third-party harassment provisions in the Equality Act 2010 which it considers place an "unworkable requirement" on employers. These provisions currently require an employer to take reasonable steps to protect employees from third-party harassment.

We are also waiting for the outcome of the Government's Consultation on Modern Workplaces. Key proposals include flexible parental leave, extending the right to request flexible working to all employees and amendments to the Working Time Regulations to bring these into line with ECJ decisions on sick leave and annual leave.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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