The Government has just published the Enterprise and Regulatory Reform Bill, which covers a diverse range of measures relating to directors pay, the new Competition and Markets authority, the UK Green Investment Bank and more. The Bill also includes some key employment law reforms.
Business secretary Vince Cable laid the Enterprise and Regulatory Reform Bill (the Bill) before Parliament on Wednesday, saying that it will “improve our employment tribunals, reform and strengthen competition enforcement, scrap unnecessary red tape and help ensure that people who work hard and do the right thing are rewarded”.
The Bill includes a range of measures, including some of the first repeals to be implemented from the Red Tape Challenge, i.e. the Government’s commitment to eliminating unnecessary regulation.
These are the main reforms to employment law:
Mandatory ACAS conciliation
Claimants will be required to submit their claim to ACAS before issuing employment tribunal proceedings to see if ACAS can promote a settlement.
The time limits for lodging claims in the employment tribunal will be extended to allow sufficient time for conciliation.
Cap on unfair dismissal compensation
The current maximum unfair dismissal compensatory award is £72,300.
The Bill contains a power for the Secretary of State to limit the future maximum available unfair dismissal compensatory award.
This part of the Bill is just conferring a power on the Secretary of State to introduce a new cap, rather than actually changing the cap. In other words, it acts as a gateway for further, secondary, legislation.
The Bill states that any future maximum award could be:
- EITHER a cap based on the individual’s earnings, which would be at least 52 week’s pay but could be a higher multiple (based, according to BIS, on actual pay rather than capped week’s pay)
- OR a cap based on a set amount between national median earnings and 3 x national median earnings (according to BIS this means a cap somewhere between £26,000 and £78,000)
- OR the lower of those two figures (e.g. the cap could be 52 weeks’ pay or £78,000, whichever is the lower).
The Bill also allows for the set amount to be fixed at different levels “in relation to employers of different descriptions”. According to the Explanatory Notes to the Bill, this means that there could be a lower amount for small businesses.
Fines for employers who lose employment tribunal claims
The Bill contains a power for an employment tribunal to impose a fine on employers who lose a claim in circumstances where there are "aggravating features".
The fine could be as much as 50% of any financial award, subject to a minimum of £100 and maximum of £5,000, with a 50% discount for payment within 21 days.
It is disappointing that the Government is continuing to press ahead with these proposals, which we have always resisted as an unfair tax on employers. However, the proposals have at least been significantly watered down since they first appeared in the 2011 consultation paper on Resolving Workplace Disputes where it was suggested that they would be imposed automatically upon any employer who lost at tribunal. The current proposal is that employment tribunals will have the discretion to impose fines where there are “aggravating features”.
“Aggravating features” are not defined in the Bill. The Government previously said that this would include situations where the employer’s breach involves unreasonable behaviour, for example where negligence or malice was involved. The Explanatory Notes give a further example of where the employer had repeatedly breached the employment right concerned.
In our view, the concept of “aggravating features” needs further definition to avoid the risk of these fines being routinely imposed. That said, the real impact of this power (when in force) will depend on how willing or otherwise employment judges are to exercise it in practice. In our experience of other similar discretionary powers (such as the power to award costs), the willingness of the tribunals to exercise the power in practice matters just as much (if not more) than how the power is worded.
Scope of whistleblower protection cut back
According to the ruling in the Employment Appeal Tribunal case of Parkins v Sodexho, employees can blow the whistle about alleged breaches of their own employment contract and then claim protection from dismissal or detriment as a “whistleblower”.
EEF has long called for the Government to close this loophole and to restore the legislation to its original purpose, that of protecting genuine whistleblowers – i.e. those who blow the whistle in the public interest.
The Bill includes a provision restricting protection to employees who make disclosures where they “reasonably believe” that their disclosure is made "in the public interest".
Reforms to compromise agreements
Compromise agreements are to be renamed 'settlement agreements' in order to help improve understanding of their purpose. This is another proposal which emerged from the Resolving Workplace Disputes Consultation.
We called for a broader package of measures to simply compromise agreements, such as permitting “full and final settlement clauses” and abolishing some of the unnecessary technicalities currently associated with their drafting. The Government promised to consult about some of these wider issues with a view to possible further reform.
This re-naming measure might therefore be just the beginning of further reforms in this area.
Changes to who can hear employment tribunal claims and appeals
The Bill will allow 'legal officers' (as opposed to employment judges) to make decisions in certain employment tribunal cases if all parties agree in writing. This is intended to help speed up the tribunal process by allowing more straightforward disputes (such as some claims for unpaid holiday) to be resolved more quickly without clogging up the system.
Employment Appeal Tribunal cases are to be heard by a judge alone (without lay members), unless ordered otherwise. This follows the move in April of this year to allow employment judges to hear unfair dismissal claims in the employment tribunal on their own without lay members.
Apart from the proposed fines on employers who lose tribunals, EEF welcomes these proposed reforms as being steps in the right direction.
However, many other (real) employment law burdens remain unchanged – most notably lengthy consultation periods in redundancy situations and the various problems associated with TUPE. We are still waiting for the Government’s proposals on these “big ticket items” following the calls for evidence earlier in the year.
The Bill now begins its passage through both Houses of Parliament. It is not expected to become law until October 2013 at the earliest.
We will continue to monitor the Bill and report to EEF members on its progress.
You can download a copy of the Bill from here (see sections 7-17, and Schedule 2 for the Employment Law Reforms)