UK: Busy Running A Business? Read Only What You Need To Know About This Summer’s Employment Law Developments

Summary and implications

Do you ever wonder if, instead of focusing on running your business, you spend your life catching up with bureaucracy and endless new government and legislative initiatives? Do you have the time (or inclination) to read and understand the 40 or so new employment provisions due to come into force this year? If your answer is a resounding "no", read on.

Having trawled through these new laws, we see some method in the madness. Below we summarise very briefly what they mean to you.

The crux of the changes is to give with one hand and take with the other. Employees get new rights but lower compensation. Employers get the comfort of tribunal fees but a slap in the form of extra penalties if they "misbehave". So, what do you need to know, what can you ignore and what should you do next?

  • Make sure your staff know the standard of behaviour you expect of them. This makes good business sense regardless of the Government's initiatives. Bear in mind that as of 25 June 2013 employees will be able to complain of unfair dismissal related to their political opinions and affiliation and, in the near future, will be able to pursue whistleblowing claims against colleagues and, vicariously, your business. Now may be the time to refresh memories as to what is acceptable and explain the new legal requirements.
  • Review your strategic view on dispute resolution, bearing in mind the imminent introduction of tribunal fees and pre-claim conciliation procedures.
  • Consider how you can take advantage of other business-friendly measures, including the new employee shareholder status and the portable disclosure and barring service – "DBS" (which has replaced "CRB" checks).

Reminding employees of how they should behave can save you a fortune (and needn't cost much either)

As the range of employee rights (and, therefore, potential claims) increases, communicate to staff your expectations. You can do that in writing, using e-learning modules, or face-to-face. Although the upper limit of the compensatory award for unfair dismissal is set to be capped, it is best not to face a claim in the first place.

1. Keep politics out of the workplace but don't dismiss simply because certain political opinions/affiliations are "unacceptable"

As of 25 June 2013, employees will be able to complain that they have been dismissed unfairly because of their political opinions or affiliations. This will be a "day-one" right, so the normal minimum qualifying period for bringing unfair dismissal will not apply. However, dismissal will not be automatically unfair and may be justified on substantive grounds (e.g. that the individual was seeking to spread their views in the workplace) where a fair disciplinary policy is followed.

Remind staff to keep politics out of the workplace and explain to managers the nature of the new protection (e.g. employees may not be dismissed simply for membership of the BNP, but may be dismissed if they seek to impose or apply their views at work provided a fair procedure is applied). You may want to amend your handbook and disciplinary/conduct policies.

2. Whistleblowing – minimise the risk of claims due to retribution by colleagues

Whistleblowing claims are attractive to employees (and their advisers) for two reasons: the minimum qualifying period does not apply and there is no cap on the compensatory award. This is not going to change and, in fact, from sometime this summer employees who subject a colleague to a detriment because he/she made a protected disclosure may be at the receiving end of a claim. They may land you in hot water too – through the concept of vicarious liability. Update your policies, procedures and communication so that staff know that retaliation against whistleblowers is unacceptable. Monitor compliance and keep records to help you establish a defence if you end up facing a tribunal claim. Employers will have a defence if they can show that they have taken all reasonable steps to prevent the retaliation.

You will be relieved to know that the new laws redefine the scope of protected disclosures. By making it a requirement that disclosures must be "in the public interest" the Government hopes to minimise complaints of breach of contract masquerading as whistleblowing.

Whistleblowing compensation

Under the new legislation, compensation may be reduced by up to 25 per cent if the disclosure is not made in good faith (e.g. to extract revenge).

3. A lower cap on the compensatory award – make sure it works for you

In an attempt to encourage out-of-court settlements, through managing claimants' expectations, the Government is expected this summer to cap the compensatory award for unfair dismissal at the lower of the current rate (£74,200) and an employee's one year's pay (excluding pension contributions, benefits in kind and discretionary bonuses).

Admittedly, this may lead some claimants to try to recover higher compensation through "creative" discrimination and whistleblowing claims.

Caste discrimination

Within 12 to 24 months UK legislation will outlaw caste discrimination, as a strand of race discrimination.

Thou shall settle out of court – the carrot and the stick

1. Tribunal fees may deter some claimants, but otherwise could make litigation and settlements more expensive

Perhaps the most significant development, to take effect on 29 July, is the introduction of compulsory tribunal and EAT fees.

In the tribunal, two fee levels will operate, depending on the type of claim an employee pursues. Fees will be payable in two stages: on issue of a claim and before the hearing. A claim will only proceed or continue if fees are paid or, in appropriate circumstances, remission is granted (see the box below). However, time limits for lodging a claim will not be extended, e.g. to allow a claimant to get his/her funds in order. If an employee brings more than one type of claim, a single fee will apply, at the highest rate applicable. The cost of lodging an appeal with the EAT will be £400 and the EAT hearing fee currently stands at £1,200.

By way of an example, an employee who pursues an unlawful deduction of wages claim will have to pay £160 when issuing the claim (serving an ET1) and £250 as a hearing fee, approximately four to six weeks before the full tribunal hearing. If the same employee was to pursue an unfair dismissal or discrimination claim, the issue fee will rise to £230 and the hearing fee will be set at £950.

The fees will apply to all tribunal claims and EAT appeals which are lodged on or after 29 July 2013). This is something you should bear in mind if you are currently conducting disciplinary or similar proceedings.

The fee remission system – when claimants do not have to pay fees

Alongside the new tribunal fee regime, the Government is planning to introduce a fee-remission system, which will allow some claimants to only pay a portion of the fees, or no fees at all.

The remission system, currently still under consultation, will require an individual to pass two distinct tests relating to their and their partner's disposable capital (e.g. savings and shares) and income. As a result of the disposable capital test, not every individual in receipt of income-related state benefits will automatically be excused from paying the fees in part or in full.

So, what do the changes mean to you?

  • Some employees may think twice before issuing a claim. There is an argument, however, that once a claimant has paid the fees, he/she may be more reluctant to settle without a hearing.
  • Tribunals can order the losing party to pay the winner's fees. This should be factored into any risk assessment and settlement negotiations.
  • Preliminary applications, to allow claimants to proceed with a claim that is brought out of time due to fee-related issues (e.g. a claimant failed to raise funds in time) may increase and result in additional costs, until tribunals clarify their approach to such arguments.

2. Pre-claim conciliation – choose your battles

From April next year, prospective parties to employment litigation will be offered the chance to resolve their dispute before it reaches the tribunal, using the ACAS pre-claim conciliation service. In brief:

  • Before issuing the claim form, a prospective claimant will have to submit his/her details to ACAS, which will then offer the parties to engage in pre-claim conciliation. Time for bringing a claim will be extended by up to one month.
  • The parties are not obliged to engage in conciliation, in which case the claimant is free to issue the ET1 and time will run as usual.
  • If the parties engage in conciliation, but it is unsuccessful, the claimant may proceed to issue the claim form.

3. If you lose a case, you may have to pay a limited additional penalty

Much has been made of the new power for tribunals to impose an additional penalty on employer, equal to up to 50 per cent of the award made to the employee or £5,000, whichever is lowest. The award is payable to the secretary of state, not the employee.

This penalty will only be ordered if the case has "aggravating features" – a concept that is yet to be explained or defined – and will be reduced by 50 per cent if paid within 21 days. This is a potential additional cost, but given the cap of £5,000 it will rarely cause employers to settle claims they would otherwise fight. This new power is expected to come into force in April 2014.

Negotiating an exit

Many an HR director spoke to us in frustration about managers' lack of understanding of the "without prejudice" principle. We fully sympathise and expect to hear more on the issue once the new law on "pre-termination negotiations" is in place (probably this summer).

In brief, certain exit discussions will not be disclosable in tribunal, but only in relation to "normal" unfair dismissal claims. By and large, we recommend a very cautious approach and take the view that this new proposal has many potential pitfalls for employers.

Take advantage of whatever sweeteners are on offer

Find out as much as you can about the pros and cons of the new employee shareholder status – don't believe everything you read in the press. In the right environment the new status can:

  • remove the risk of a range of claims (e.g. "normal" unfair dismissal and statutory redundancy pay); and
  • increase morale, productivity and engagement (achieved through share ownership and a greater sense of personal responsibility).

Remember also that the Disclosure and Barring Service's new "update service" will be launched on 17 June. Under this service, individuals will be able to register once for a DBS check which will then be automatically updated and available for you to check free of charge.

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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