UK: Employment Law Reforms Announced

Last Updated: 29 January 2013
Article by Adam Lambert and Ruth Bonino

The storm clouds of possible employment law reforms broke at the end of last week in a flurry of Government announcements. The snow may be moving on but some of those reforms could be here to stay.

Cap on compensatory award for unfair dismissal

The Government has announced that the cap on the compensatory award for unfair dismissal purposes will change to the lesser of:

  • an overall cap (currently GBP 72,300, increasing to GBP 74,200 on 1 February 2013)
  • one year's pay

The Government hopes that a pay based cap would, amongst other things, create more certainty over the likely total costs for employers in an unfair dismissal claim. It is likely that the definition of "pay" will follow the definition currently contained in the Employment Rights Act 1996 so it would not include discretionary bonuses and benefits in kind. We await the draft regulations.

Settlement offers to be inadmissible in unfair dismissal claims

There will be a change to the current law to make it easier for employers and employees to negotiate a settlement before employment ends. For this purpose, employers and employees will not be able to use as evidence in an unfair dismissal claim any offer of settlement made before a dispute arises.

The key features of the proposals are:

  • They will apply to unfair dismissal only and not to wrongful dismissal, whistleblowing and discrimination claims where evidence of any such offer will be admissible in the proceedings
  • Either party can make an offer of settlement
  • Both parties will be protected against any "improper behaviour" by the other e.g. undue coercion, discriminatory behaviour
  • A new statutory ACAS Code of Practice will guide employers on how to make such settlement offers to their employees and will include non-compulsory template letters covering such settlement offers
  • The new Code will give guidance on "a reasonable period of time " for an employee to consider an offer and on the meaning of "improper behaviour" (which is expected to reflect current case law on the "unambiguous impropriety" exception to the without prejudice rule)
  • Where an employer breaches the Code, an Employment Tribunal may take the Code into account in considering whether a settlement offer or conversation is admissible in an unfair dismissal claims but, unlike the ACAS Code on discipline and grievance procedures, there will be no uplift compensation for breach of the Code
  • There will be guidance supporting the new Code which will include a voluntary and simple template settlement agreement
  • There will be no guideline monetary tariff for settlement agreements as initially proposed by the Government in consultation but the guidance will assist employers and employees on how to negotiate a financial settlement
  • There will be guidance on the relationship between a settlement agreement and redundancy procedures since the Government recognises employers will use the proposed settlement offer route to seek out volunteers for redundancy before going through the full redundancy procedures.

What next?

The cap on the unfair dismissal award and the proposals regarding admissibility of settlement offers are contained in the Enterprise and Regulatory Reform Bill which is expected to receive Royal Assent by spring 2013.

In the meantime, Acas will shortly publish the draft statutory Code of Practice for consultation but the provisions on inadmissibility of settlement offers will not come into effect until 40 days after the final Code is laid before Parliament. This is expected to be in summer 2013, which is also when the cap on compensatory awards is likely to come into effect.

For more detail see: Ending the employment relationship: government response to consultation

Other reforms and consultations announced

TUPE regulations consultation

A new consultation has been announced on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The most significant proposal contained in the consultation paper is the repeal of the "service provision change" provisions which were introduced in 2006 to provide more certainty in contracting-out, contracting-in and retendering transactions. The consultation will close 11 April 2013. A separate client alert with more detail on these proposals will be available shortly.

For more detail see: TUPE: consultation on proposed changes

Acas pre-claim conciliation

A consultation has also been announced on the proposal to introduce mandatory pre-claim conciliation as part of the reforms to overhaul the employment tribunal process. The consultation period is very short, ending on 15 February 2013. The key proposals are:

  • It will be mandatory for all prospective claimants for most tribunal claims (subject to certain limited exceptions) to contact Acas prior to making a claim
  • Application to Acas must be made on a prescribed form giving only very basic information such as parties names and contact details but no information regarding the claim
  • If either party does not wish to conciliate, Acas must issue a certificate to the claimant to confirm they have complied with their duty to contact Acas
  • If the parties do want to conciliate, the conciliator will have up to one calendar month to do so (this can be extended by 2 weeks with the parties' agreement)
  • When the prescribed form is received by Acas the running of the limitation period for making the relevant claim will stop - it will begin to run again the day following receipt by the prospective claimant of the Acas certificate of compliance
  • There is provision for a prospective respondent to make a request for early conciliation before the prospective claimant does so

For more detail see: Early conciliation: consultation on proposals for implementation

Long-term workplace sickness absence

Following Dame Carol Black's independent review of sickness absence in 2011, the Government has now responded to the various recommendations made. The Government's key action points contained in its response include the following:

  • Abolition of statutory sick pay record keeping obligations, leaving employers to manage records in a way that best suits their organisation
  • Abolition of the Percentage Threshold Scheme which compensates mainly small employers for high rates of sickness absence but has the disadvantage of reducing incentives to manage absence
  • A promise to consider introducing tax relief for certain employer expenditure (e.g. medical treatment or vocational rehabilitation) which is designed to speed up an employee's return to work, or keep them in work
  • Revision of the Government's "fit note" guidance to highlight the importance of assessing the condition of an individual's health in relation to work in general, rather than for one specific role
  • Establishing a health and work assessment and advisory service to assist employers and employees in managing long term employee absence

For more detail see: New support to tackle long-term sickness absence

Employment agencies consultation

The Government has announced a new consultation on the reform of the employment agencies legislation. The consultation will close on 11 April 2013.

The consultation paper seeks views on a number of issues including:

  • Whether employment agencies should (as well as in the entertainment and modelling sector) be able to charge fees in certain circumstances
  • Various enforcement issues, including whether it is necessary for the Government to enforce the recruitment sector legislation, whether under the current enforcement regime individuals should be able to enforce their own rights (under the Conduct of Employment Agencies and Employment Business Regulations 2003) at an Employment Tribunal, and whether prohibition orders should be retained (these can prevent an individual from running or being involved in the running of an employment agency or business for a maximum or ten years)
  • Clarity on who is responsible for paying agency workers

For more detail see: Consultation on reforming the regulatory framework for employment agencies and employment businesses

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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