Employment Bill - replacing dispute resolution legislation
An overview of the new scheme
The new scheme has two elements.
First, it involves a return to the pre-2004 law of unfair dismissal based on the House of Lords’ decision in Polkey. This requires the tribunal generally to find a dismissal unfair where the employer has not followed the correct procedure but then to consider reducing the compensatory award to reflect the likelihood of the employee being dismissed in any event, even had the correct procedure been followed.
The second, crucial, element of the new scheme introduced by the Bill is a provision allowing tribunals to increase or decrease compensation awarded by up to 25% in all of the main tribunal jurisdictions (i.e. not limited to unfair dismissal claims) where either party has unreasonably failed to comply with a statutory Code of Practice. The relevant statutory code in almost all cases will be the Acas Code of Practice on disciplinary and grievance procedures, which Acas is currently revising.
We welcome the fact that under this new provision tribunals will not be compelled to increase compensation where the employer makes a procedural mistake and the fact that the maximum uplift will be 25 rather than 50 per cent. We do, however, have three key concerns about the scheme.
How will the Code look?
Our first concern is that, until we have sight of this draft Acas Code, the nature and extent of the obligations being imposed on employers cannot adequately be assessed. It will be one thing if the draft code is a very short statement of basic principles which all employers and workers can be expected to know and understand but quite another if it is, as now, a 36-page treatise on good practice for employers.
Emphasis on procedure
EEF’s second concern is that this provision (like the current dispute resolution regulations) puts a premium in unfair dismissal cases on compliance with procedural hurdles rather than concentrating on whether dismissal was an option open to the employer. In a case where the tribunal forms the view that no reasonable employer would have dismissed in the circumstances but where all the procedural boxes have been ticked, there is no uplift in compensation.
By contrast, where it was entirely open to the employer to dismiss the employee on the facts but the employer slips up in complying with the Acas Code, a tribunal may well find itself first uplifting compensation by up to 25% but then considering how much to reduce it by, under the Polkey ruling.
Settling claims
EEF’s final concern about this provision is that it continues the problem of the current legislation of making settlement of claims both more difficult and expensive than under the pre-2004 law. Currently, the potential for an uplift of 10-50% in the compensation has to be factored in to settlement discussions. Whilst the present legislation reduces the maximum to 25% and removes the minimum, the problem remains.
Terminating the employment of senior executives (where it is well understood that procedures will not be followed but compensation will be agreed) will continue to require the payment of a substantial premium. Even in ordinary dismissal cases, the potential impact of the Acas Code and the exercise of the tribunal’s discretion will have to be factored into settlement discussions, potentially making settlement harder rather than easier.
Other Gibbons recommendations
The Bill takes forward other recommendations made by the Gibbons Review, in particular, removing the fixed periods for Acas conciliation prior to tribunal hearings; encouraging decisions without hearings in cases of simple monetary claims (subject to the right of the parties to insist on a hearing); and enabling Acas to offer conciliation in more cases before any tribunal claim has been launched.
Awards for consequential loss
The Bill also introduces a new power for tribunals to compensate workers for consequential loss sustained as a result of unlawful deductions from wages and non-payment of redundancy payments. So, for example, if a worker incurs overdraft charges by reason of not being paid, the tribunal can award this additional sum on top of the unpaid sum.
This provision is intended to encourage ‘rogue’ employers, who wilfully do not pay workers their entitlements, to meet their obligations. EEF’s experience of this type of monetary claim, however, is that – where our members are involved in such cases - there is usually a genuine difference of view or understanding as to whether any payment is due, which requires the determination of the tribunal.
In those circumstances, we are concerned that the risks of being exposed to liability for substantial consequential loss if a case is lost at tribunal may force employers into giving in to claims for payment where there is a genuine reason to dispute the claim. We are also concerned that this power may give rise to complex legal questions as to what losses the employer has to make good.
Other provisions
The Bill in addition introduces a tougher National Minimum Wage enforcement regime, new obligations and penalties on those running employment agencies and enables trade unions to prohibit those who belong or have belonged to a particular political party from membership of the union. EEF has expressed its concern that this last provision gives carte blanche to unions to exclude members of mainstream as well as fringe political parties.