Piecing together the what and the when
With so much change and debate in this area, our 'Employment Law Reforms Quick View' chart outlines the key pieces of reform and important dates.
Dispute resolution and unfair dismissal
The Government has already increased the qualifying service period for issuing an unfair dismissal claim from one to two years for those whose employment began on or after 6 April 2012. Still to come are:
Compensated no fault dismissal
One of the most controversial recommendations contained in the Beecroft report is the suggested introduction of 'compensated no fault dismissal'. This would allow employers to dismiss someone without giving a reason, provided the employer makes an enhanced leaving payment equivalent to a redundancy payment. While making the headlines and receiving critical opposition from Vince Cable, there has not been any indication from the Government that it intends to take up such a proposal across the board.
What the headlines missed, is that the Government is already considering introducing such a concept in relation to micro-businesses (i.e. businesses employing fewer than 10 staff). On 15 March, the Department for Business, Innovation and Skills (BIS) published a 'Call for Evidence: Dealing with dismissal and compensated no fault dismissal for micro businesses' which runs until 8 June.
As part of the Call for Evidence, BIS has recently published a research paper on how compensated no-fault dismissal works in Germany, Australia and Spain. The research is intended to "stimulate reflection and debate about the UK's dismissal processes". Dependant on the outcome of the Call for Evidence, a formal consultation is expected to take place; most likely at the end of the year/early next year.
Reportedly the Coalition partners' compromise for not running with an across the board 'compensated no fault dismissal' idea, is the introduction of 'protected conversations'. The Government is considering whether to allow employers and employees to have open and frank conversations with each other about any employment issue "free from the worry it will be used as evidence" in a tribunal.
While details are awaited, the proposal appears to involve extending the current 'without prejudice' rules which can be used to prevent things said between parties contemplating litigation from being introduced as evidence. The new concept would, in effect, extend the 'without prejudice' principle to situations where a 'dispute' did not yet exist.
A formal consultation setting out the proposals is expected to be launched "later this year".
The Government plans to rename compromise agreements 'settlement agreements'. It is also considering simplifying the statutory requirements to enable compromise agreements to cover existing and future claims without setting out long lists of causes of action.
The change in name to settlement agreement is included in the draft Enterprise and Regulatory Reform Bill.
The simplifying of the required content of compromise agreements is expected to be the subject of future formal consultation.
The Government would like to see an increase in the use of mediation as an alternative to tribunal claims. But rather than legislate it is instead encouraging the use of mediation through pilot schemes to raise awareness, starting with the retail sector.
The Acas Code of Practice on Discipline and Grievance
The Government is currently considering review of the Acas Code as part of the 'Call for Evidence: Dealing with dismissal and compensated no fault dismissal for micro businesses', published on 15 March and which runs until 8 June. While particular concerns are raised around the suitability of the Code for small businesses, the review extends to the usefulness of the current form of the Code for all employers. This is in light of concerns that it is too focused on disciplinary issues rather than capability/performance ones.
In November, the Government stated in its 'Response to Resolving Workplace Disputes Consultation' that it intends to introduce a requirement for all potential tribunal claims to be lodged with the Advisory, Conciliation and Arbitration Service (Acas) in the first instance. Acas will offer parties the opportunity to engage in early conciliation in an attempt to resolve disputes without recourse to an employment tribunal.
The introduction of pre-claim conciliation is included within the Enterprise and Regulatory Reform Bill. While the Bill sets out the framework for pre-claim conciliation, we await more detail, such as the length of the conciliation period and exceptions. This is to be provided by way of as yet unpublished regulations. On a practical note, It is also not clear how this expansion in the 'Acas' remit will be resourced.
A number of reforms came into force on 6 April. These include an increase in the upper limit on deposit orders to £1,000, costs orders to £20,000 and the removal of state funded witness expenses and other procedural changes. But there is more in store.
In January 2011, BIS, in its consultation 'Resolving Workplace Disputes', proposed that tribunals would automatically levy a financial penalty, payable to the Exchequer, on an employer who loses a claim. This would be in addition to the damages awarded to the claimant. Despite strong opposition in the Beecroft report, the proposal has made its way into the draft Enterprise and Regulatory Reform Bill, subject to an important modification.
As originally proposed, the penalty will be half of the total award made by the tribunal, with a minimum threshold of £100 and a maximum ceiling of £5,000 and a 50% discount applied if paid within 21 days. However, the levy of a financial penalty will not be automatic in all cases as originally proposed. Instead it will be at the tribunal's discretion to impose where it concludes that the "employer has breached any of the worker's rights" and "the breach has one or more aggravating features". Hopefully guidance will be issued as to the meaning of "aggravating features".
The Government has committed to the principle of charging fees to tribunal users. While the introduction of fees is not up for discussion, how to go about their introduction is still under consideration. In December, the Ministry of Justice launched its consultation, 'Introducing fees in employment tribunals and the Employment Appeal Tribunal'. The consultation sets out two options.
- Under Option 1, two main charging points would be introduced: one on claim issue and a second before the hearing of a claim. The level of the fee would depend on the nature of the claim: level 1 for claims such as unpaid wages; level 2 for unfair dismissal; and level 3 for discrimination and whistleblowing claims.
- Under Option 2 only one main charging point would be introduced at the time of claim issue. Like option 1, differing levels of fee would apply dependant upon the nature of the claim but claimants would also be required to state if they were seeking a potential award of £30,000 or more. If a claimant specified less than £30,000 a reduced fee would be payable. However, any subsequent tribunal award would be subject to a £29,999 cap, even if the tribunal assessed the damages at a higher amount.
The consultation closed on 6 March and we are now awaiting the Government response. If option 1 is chosen, fees are like to be introduced in early 2013 as this can be done via secondary legislation. If option 2 is chosen, the preferred choice in the Beecroft report, they are unlikely to be brought in before 2014 as this would require primary legislation.
Rapid Resolution scheme
The draft Enterprise and Regulatory Reform Bill introduces a 'rapid resolution' procedure to allow legal officers to determine more straightforward employment disputes. Details of the type of claims that can be determined by legal officers will be set out in future regulations, likely to include cases such as unpaid wages claims.
The draft Enterprise and Regulatory Reform Bill introduces changes to the way in which tribunal awards (basic and compensatory) and statutory redundancy payment caps are revised each year. Firstly, to avoid unintended above inflation increases, the statutory formula will allow rounding up to the nearest £1 rather then nearest £10 or £100 pounds. Secondly, traditionally the annual increase takes place on 1 February. This will be moved to 6 April.
Separately the Bill also gives the Secretary of State power to introduce regulations to limit the compensatory award to a maximum between the national median earnings and 3x median earnings or to a limit of one year's pay. Also different limits could be specified for "different kinds" of employer (presumably such as small employers). If exercised this would allow a mechanism to potentially set the statutory limit on a compensatory award at a level lower than the current mechanism.
Third party harassment
Section 40 of the Equality Act 2010 extended statutory liability on employers for harassment of their employees by third parties, such as customers or visitors. Shortly after coming into power, the Government announced an intention to repeal section 40, a measure also recommended by the Beecroft report.
On 17 May, the Government Equality Office (GEO) published its consultation 'Equality Act 2010 consultation on employer liability for harassment of employees by third parties'. The GEO reiterates its view that there is "no significant need" for section 40 in light of pre-existing statutory and common law duties such as those under Health & Safety.
The consultation runs until 7 August. It is expected that primary legislation will be introduced thereafter to remove section 40.
On 17 May, the GEO also published a consultation 'Equality Act 2010: consultation on repeal of two enforcement provisions'. The consultation sets out plans to repeal:
- Employment tribunals' power to make wider recommendations in discrimination cases for the benefit of the workforce as a whole (section 124(3)(b)).
The view of the GEO is that this power is unlikely to serve a practical purpose or to be an appropriate or effective legal remedy for employment tribunals to award. While removing the wider recommendations provision, the original power to make recommendations for the benefit of the individual claimant will remain.
- The statutory questionnaire procedure under s 138.
The GEO believes that this procedure has failed to increase pre-hearing settlements and reduce tribunal workloads, and has instead created burdens and risks.
The consultation runs until 7 August. It is expected that primary legislation will be introduced thereafter to remove sections 124(3)(b) and 138.
Equal pay audits
BIS in its 'Consultation on Modern Workplaces' launched last May set out proposals to give employment tribunals powers to order an employer to carry out an equal pay audit, where that employer has lost an equal pay case.
Although the consultation closed back in August, the Government's response to the consultation has been delayed. In light of opposition from employer groups, the initial proposal of requiring tribunals to make such orders is likely to be subject to a number of exceptions; notably, a small employer exception as recommended by the Beecroft report.
The Beecroft report strongly recommends the reintroduction of a default retirement age. At present there has not been any indication that the Government intends to take up such a recommendation.
Goods & services
In March, the Government decided to delay implementing a ban on age discrimination in the provision of goods, services and facilities until October 2012 at the earliest. The measure, contained in the Equality Act 2010, was originally due to come into force in April 2012.
The GEO has stated that ministers are still considering the scope of the ban and exceptions to it. We await confirmation as to when the provisions will be brought into force. However, notably, on 22 May the GEO published 'The equality strategy - building a fairer Britain: progress report' confirming that agreement has been reached with the insurance industry to improve access and transparency for older people. So, hopefully an announcement as to the revised timeline may be available soon.
In May 2011, the Government committed to reviewing discrimination awards in light of business concerns which stem from their uncapped nature. Finding a way forward is proving difficult as EU legislation prohibits fixed caps on discrimination awards.
The Beecroft report sets out a 'cunning plan' on how to restrict such awards, in essence capping the individual elements making up a discrimination award, save the injury to feelings element. However, the Government legal advisors do not support such a recommendation, as it is highly unlikely to comply with the EU legal requirements.
The Government believes that much of the business concern is based on a misperception of likely award levels in light of a few large awards hitting the headlines. The reality of a likely award level is very different to the headline awards. As such, the Government intends to provide more information on tribunal claim forms as to median discrimination awards.
Additionally, a solution may be through the proposed introduction of charging fees to bring a tribunal claim. In December, the Ministry of Justice launched its consultation, 'Introducing fees in employment tribunals and the Employment Appeal Tribunal'. One of the options being considered is requiring claimants to specify if they are seeking an award of £30,000 or above. A reduced fee would apply for claims less than £30,000. Where a reduced issue fee is paid, the maximum award recoverable would be £29,999 (see tribunal reform).
Equality and Human Rights Commission
On 15 May the GEO published its Response to the consultation 'Building a fairer Britain: reform of the Equality and Human Rights Commission', setting out wide-ranging reforms to the Equality and Human Rights Commission (EHRC).
The reforms include:
- Clarifying the EHRC's remit in order to focus the EHRC on its core functions. As a result the EHRC's general duty and good relations duty will be repealed.
- Stop non-core activities. The helpline will be moved to the new Equality Advisory and Support Service due to be launched in the Autumn. However, the EHRC's strategic grants programme will be retained.
- Improve financial and operational performance. A new framework document will be introduced to establish tighter financial controls.
The progress of the EHRC will be reviewed again in Autumn 2013. If substantial progress has not been made, the Government says it intends to implement further substantial reform. This may include more fundamental structural changes to the EHRC's remit, including removing or splitting some of its current responsibilities.
The draft Enterprise and Regulatory Reform Bill contains provisions to enable the Government to make the proposed changes.
Public Sector duties
The GEO's Response to the consultation 'Building a fairer Britain: reform of the Equality and Human Rights Commission' also announced an intention to review the operation of the public sector equality duty that requires public bodies to consider, among other things, the impact of their decisions on those who share a relevant protected characteristic such as sex or race (section 149 Equality Act 2010).
The unimplemented socio economic duty contained in section 1 of the Equality Act 2010 will be repealed. If it had been brought into force, the section 1 duty would have obliged public bodies to have regard for the desirability of exercising their functions; the aim being to reduce the inequalities of outcome which result from socio-economic disadvantage.
Flexible parental leave
On 16 May 2011, BIS published its 'Consultation on Modern Workplaces', setting out proposals to introduce a new system of shared flexible parental leave. The proposals entail a significant reshaping of the existing maternity, paternity, adoption and parental leave provisions centred around an 18-week period of maternity leave for mothers, followed by a new 34-week period of flexible parental leave.
Under the proposals, either the mother or father could take the flexible element of the leave either at different times or concurrently and will not be required to take the leave in one continuous block. If the employer agrees, the leave could be taken in blocks of one day to allow a return to work on a part-time basis.
We still await the delayed Government response. However, despite the Beecroft report's opposition to the proposed changes, it appears the Government is intending to press ahead with the proposals as referred to in the Queen's Speech. These will form part of the Children and Families Bill expected to be introduced jointly by the Department for Education and BIS in Parliament next year. It is anticipated that the changes may be brought into force in 2015.
Separate from the above, from March 2013, the existing unpaid parental leave period of 13-weeks will be increased to 18-weeks in light of changes to the EU Parental Leave Directive.
Right to request flexible working
The 'Consultation on Modern Workplaces' also proposes to extend the existing right of employed parents and carers to request flexible working to all employees with 26-weeks' continuous service. Again, despite opposition to the plan in the Beecroft report, the change is expected to be included in the Children and Families Bill announced in the Queen's Speech.
In light of recent European case law on the inter-relationship between annual leave and sickness absence leave, the Government intends to make much needed amendments to the annual leave provisions contained in the Working Time Regulations 1998. The 'Consultation on Modern Workplaces' published in May 2011 sets out BIS's proposals to reconcile the regulations with recent case law.
Basically, employees on sickness absence or maternity/paternity/adoption/parental leave ('family leave') will be entitled to carry over the first four weeks of unused statutory annual leave. As to the additional 1.6 weeks of statutory leave, an automatic right to carry over will apply to those on 'family leave'. Those on sickness absence will be subject to the existing position, whereby carry over is only permitted by agreement with the employer.
We await the delayed Government response.
Working Time Directive Review
At the end of 2008, it looked like after five years of negotiating, the revision of the Working Time Directive (WTD) had finally been agreed with the opt-out of the 48-hour working week being retained, but with some significant new restrictions. The compromise was only possible by linking revision of the WTD with the new Agency Workers Directive. The Commission's relief at finally brokering an agreement was short lived when the European Parliament rejected the compromise, continuing to insist on the complete removal of the opt-out. However, the European Parliament's objections merely resulted in the status quo being maintained: opt-out retained in its current form.
The European Commission is currently busy working on a revised proposal. In November, the social partners entered into further talks and have until September to reach an agreement or decide to extend the time further. Areas where revision is expected include a retention of the 48-hour opt-out, but subject to some restrictions and new classifications for on-call working time. If, and it is a big if, any amendments are agreed, it will take some considerable time before they are implemented.
Review of sickness absence
In February 2011, Dame Carol Black, the Government's national director for health and work, and David Frost CBE, the Director General of the British Chamber of Commerce, were appointed to undertake a review of sickness absence. The review aimed to identify ways of minimising loss of work due to ill health.
The Government is currently considering the recommendation of the report, 'Health at work - an independent review of sickness absence'. The report includes recommendations such as:
- establishing a new Independent Assessment Service which, after an employee has been absent for four weeks, can provide expert advice on whether an employee can return to work and, if so, how they can be supported; and
- revised 'fit notes' so that an individual's capacity to return not only to their own job, but to work more generally, are considered.
The Government's response to the report is expected 'later this year'.
Breach of a legal obligation
In November, Vince Cable announced that the Government intended to 'close the loophole' in the Public Interest Disclosure Act 1998, whereby a complaint by an individual about a breach of their own employment contract can count as a qualifying disclosure.
The draft Enterprise and Regulatory Reform Bill proposes to close the perceived loophole by inserting new statutory wording to reinforce that any protected disclose must be "made in the public interest".
In November, BIS issued a 'Call for Evidence on collective redundancy consultation rules' seeking views on the operation of the rules for collective redundancy consultation. In particular, the Government sought views on the consultation process itself, the minimum periods for consultation and notification, and the overlap between those rules and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and insolvency legislation.
The Call for Evidence closed at the end of January and a BIS formal consultation is expected to be launched in the Autumn. The headline change is likely to be a reduction in the current statutory 90-day minimum consultation period before dismissal can take effect, where 100 or more redundancies are proposed. Reduced periods of 60, 45 or 30 days are currently under consideration. Unsurprisingly, the Beecroft report advocates a reduction to a 30-day period and further reduction to only five days for a business in a formal insolvency process.
Together with the call for evidence in relation to redundancy collective consultation, also in November, BIS issued a 'Call for Evidence Effectiveness of Transfer of Undertakings (Protection of Employment) Regulations 2006'. This Call for Evidence is in response to concerns that the regulations gold-plated the Acquired Rights Directive and are overly bureaucratic. In particular, the Government is considering whether changes are required in relation to the 'service provision change' provisions, the insolvency provisions, interaction with collective redundancy consultation obligations and post-transfer harmonisation.
The Beecroft report advocates changes to enable a seller (transferor) to rely upon the buyer's (transferee) valid ETO (economic, technical or organisational) reason to effect redundancies immediately before the transfer - quite sensible. More controversially Beecroft also recommends the wholesale repeal of the 'service provision change' provisions. Even more controversially, Beecroft has come up with another 'cunning plan' this time to get round the problem of EU restrictions on post-transfer harmonisation. While his suggested alternative interpretation of the phrase 'collective agreement' shows imagination - as the Government's own legal advisers have pointed out -it is unlikely to work.
We await the BIS formal consultation expected to be launched in the Autumn as to what proposals the Government intends to take forward.
Vetting and CRB checks
The Protection of Freedoms Act 2012 received Royal Assent on 1 May 2012. Part 5 of the Act deals with "safeguarding vulnerable groups, criminal records etc".
The Vetting and Barring scheme (VBS) will be amended including changes to the definitions of regulated activity and a narrowing of the circumstances in which an individual will be included on a barred list.
Criminal Records Bureau (CRB) checks are also being amended, most notably a new system for updating certificates will mean that they become 'portable' by their holders.
It is anticipated that these provisions will come into force in April 2013. In the mean time it remains business as usual at CRB and the Independent Safeguarding Authority.
In relation to current CRB checks, from 28 May, the identification checking guidelines, will be strengthened to make it more difficult for individuals to conceal previous criminal records by changing their identity. In particular, the list of documents acceptable as proof of identity will be reduced.
Rehabilitation of offenders
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 also received Royal Assent on 1 May 2012. The Act contains amendments reducing 'rehabilitation periods' - the amount of time for which offenders have to declare the previous commission of certain offences to prospective employers. It is anticipated that these provisions will also come into force in April 2013.
Those deemed to be the most serious offenders, who have to declare their criminal record for the rest of their lives, will be those receiving prison sentences in excess of four years (rather than the current in excess of two and a half years). However, all offenders will still have to declare previous convictions when applying for jobs in sensitive workplaces, such as schools.
Agency Workers Regulations 2010
Even as the Agency Workers Regulations came into force in 1 October 2011, the Government committed to keeping them under review. A formal review of the operation of the regulations and "opportunities to simplify it" is expected to be launched in June 2013.
Employment agencies and businesses
The Government has also pledged to "simplify and streamline" the rules governing the recruitment sector by reviewing what are perceived to be complex rules on employment agencies and businesses. A consultation is expected to be launched "later this year".
The draft Enterprise and Regulatory Reform Bill contains a provision intended by the Government to address "the disconnect between directors' pay and long-term company performance by giving shareholders of UK quoted companies binding votes on directors' remuneration". The Bill repeals section 439(5) of the Companies Act 2006, removing the statutory provision which currently prevents the statutory requirement for a vote on the directors' remuneration report having the effect of making a person's entitlement to remuneration contingent on the outcome of the shareholder resolution.
National minimum wage
In November, Vince Cable announced that the Government intends to simplify the national minimum wage legislation by consolidating the existing 17 pieces of legislation into one set of regulations. The draft consolidated regulations are due to be published by March 2013.