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THE FUTURE IS BRIGHT FOR EMPLOYERS – THE FUTURE IS BLUE AND GOLD!
Changes affecting the fall out of a broken employment relationship
The annual statistics for claims in employment tribunals (ETs) for 2011/2012 have just been published. The statistics show a 15% reduction in ET claims being presented and an increase in costs awards by ETs, where over 80% have been made against claimants. Despite this, the Government is intent on its employment law reform programme under the auspices of promoting growth – especially for small businesses.
The reforms are on the face of them one-sided and favour employers. The first of wave of reforms came into force on 6 April 2012. The right to claim unfair dismissal was increased from 1 year to 2 years (i.e. as it was before 1998), deposit orders (i.e. the price a claimant has to pay for continuing with claim that is judged on the papers to have little prospect of success) increased from £500 to £1,000 and costs orders (i.e. where a party has acted unreasonably in bringing or defending a claim) increased from £10,000 to £20,000. These measures alone will provide some comfort for employers facing unreasonable and speculative claims, which was of great concern to the majority of employers.
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“No fault dismissals”
An idea by the Government to help micro-businesses (i.e. those with less than 10 employees) has been scrapped, which would have a put a bar on the right to claim unfair dismissal. These were clearly open to abuse by unscrupulous and/or clever employers and lawyers. The proposal failed to consider the negative impact on businesses in that employees were more likely to job hop to a company that provided job security and further failed to take account that some employees would be seeking higher salaries, sign-on bonuses and contractual severance payments to work for a micro-business.
According to the Government, these are the way forward for ending the employment relationship. Such agreements will be a standardised short-form compromise agreement – so nothing new there apart from the text! However, as with existing compromise agreements employees must take legal advice on the terms of a settlement agreement for it to be binding. In reality this may well simply amount to nothing else but a change in name with the standard clauses you would expect to find in most compromise agreements revised in parts. However, unlike compromise agreements that can be used for a multitude of sins, settlement agreements provide a “cloak of protection” for employers in unfair dismissal claims and will be inadmissible.
Like compromise agreements, settlement agreements will cover other matters and not limited to the ending of the employment relationship. However, if a settlement agreement is issued to compromise an internal complaint of discrimination but is rejected by the employee then the protection would not bite.
Thankfully, the Government is proposing a statutory code of practice (from Acas) covering the use of settlement agreements, draft letters and template agreements.
The idea of the protected conversation is that employers can talk to their employees about ending the employment relationship and severance packages without having to worry about those conversations being referred to in a subsequent unfair dismissal claim, if those discussions broke down.
According to the Government’s consultation document ‘Ending the employment relationship’ the possible pros for such communications in the workplace appear to be far outweighed by the cons. Therefore, it appears unlikely that these will materialise.
When everything goes pear-shaped
Automatic referral to Acas
Before ETs will deal with a claim, it will automatically be referred to Acas to try and facilitate a settlement. There has been scaremongering that this will mean that Acas will need further resources to cope with this. However, all ET claims are currently referred to Acas to conciliate with a view to reaching settlement. The only difference is that until there has been pro-active steps taken by Acas to settle the claim, ETs will not deal with them. This appears to be similar to the much maligned Statutory Dispute Resolution Procedures, where hurdles were placed in front of claimants to comply with procedural stages before ETs had jurisdiction to determine claims. This led to considerable satellite litigation at much cost and confusion and contributed to their demise. As always the “devil will be in the detail” on what steps the parties will actually have to do comply with their pre-claim obligations before ETs will allow claims to proceed.
As part of the Government’s consultation document ‘Ending the employment relationship’ and Acas has welcomed the opportunity to draft the code of practice.
Cap on compensation
The Government is proposing a cap of a year’s salary on compensation. It intends to abolish the current cap of £72,300 for a compensatory award, which is linked to the cap on a week’s wages currently £430 calculated for basic awards to the lower figure of the national median average earnings (currently £25,882) or an employee’s annual net salary. However, the Government has not provided any firm details on this and it could be between 1 and 3 times the median average earnings.
The compensation for discrimination claims will remain uncapped and therefore, some claimants will still try and link dismissal with discrimination to overcome the unfair dismissal cap.
This proposal also forms part of the Government’s consultation document ‘Ending the employment relationship’ and therefore, may fall by the wayside after the consultation period has ended.
What is probably the most contentious of all of the employment law reforms is the introduction of fees from commencement to the conclusion of a claim. The proposed fee structure will have two levels:
Level 1 claims – generally for sums due on termination of employment eg unpaid wages, payment in lieu of notice, redundancy payments, where the issue fee will be £160 and the hearing fee £230.
Level 2 claims – include those relating to unfair dismissal, discrimination complaints, equal pay claims and claims arising under the Public Information Disclosure Act, where the issue fee will be £250 and the hearing fee £950.
There will also be fees for a review of default judgment fee, an application to dismiss following settlement, issuing a counter-claim, an application for a review of a decision and judicial mediation.
ETs were originally designed for litigants in person and have been free since their inception in 1967. The introduction of fees, which are due to come into force in Autumn 2013, will completely change the face of employment law and is bound to reduce claims as claimants will be concerned about paying the fees. It is also likely to place an obstacle to settlement as employers may simply disengage with any settlement discussions until the hearing fee has been paid – hoping that the claimant will simply withdraw a claim rather than pay the fee.
The Government has stated that certain claimants on low-incomes will qualify for remission and only those that can afford to pay will be affected. But as of yet there are no guidelines on what levels of income will qualify for remission.
The Government’s reforms will undoubtedly be welcome by all employers, as any measure that makes it harder to, or hinders a claim, will allow employers to focus on their business rather than having to keep one eye on their employees in case they bring a claim.
Marc Jones joined Turbervilles as an employment partner in June 2004. He has specialised in employment law and human resources, in particular litigation since 1994. He qualified as a barrister before transferring to become a solicitor in 1998.