Piecing together the what and the when

Compensated no fault dismissal

One of the most controversial recommendations contained in the Beecroft report was the suggested introduction of 'compensated no fault dismissal'. This was intended to 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 had not been any indication from the Government that it intended to take up such a proposal across the board. However, it was considering introducing such a concept in relation to micro-businesses (i.e. businesses employing fewer than 10 staff).

After months of conflicting press reports, on 14 September, the Government delivered its Response to its 'Call for Evidence: Dealing with dismissal and compensated no fault dismissal for micro businesses'. This officially announced that the 'compensated no fault dismissal' proposal in relation to micro businesses will not be taken forward.

The Government now believes that employer confidence is more likely to be improved by its proposals on 'settlement agreements'. The introduction of different rules for micro businesses is acknowledged as complicating rather than simplifying employment regulation.

'Protected Conversations' and Settlement (Compromise) Agreements

Back in November 2011, the Government announced it was considering the introduction of 'protected conversations'. The 'protected conversations' concept is intended 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.

In effect, this will extend 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.

In June, the Government introduced a clause into the Enterprise and Regulatory Reform Bill to increase the early use of settlement agreements (currently called compromise agreements). Essentially, the new clause provides that in unfair dismissal claims, a tribunal may not take account of an offer made, or discussion held, with an employee with a view to terminating the employment. However, this is subject to a number of very significant exceptions:

  • The provision only applies to unfair dismissal claims, except for automatically unfair dismissals. There are a number of reasons falling under the 'automatically' unfair heading - notably, whistleblowing.
  • As it only applies to unfair dismissal claims, the provision will not apply to discrimination and breach of contract claims. The current wording of the clause also suggests that if a discrimination claim is brought together with an unfair dismissal claim, the 'protected conversation' may be taken into account in the unfair dismissal.
  • The provision will also not apply where the behaviour of the employer has been 'improper'.

In light of the significant exceptions, the current draft clause appears to offer very little comfort to employers.

On 14 September, the Government published the Consultation: Ending the employment relationship to consider how the draft clause will work in practice. In particular, it is consulting on:

  • The content of a new Acas statutory code of practice setting out the principles covering the use of settlement agreements, including:
    • The approach should reflect, as closely as possible, current practice in without prejudice negotiations
    • Settlements should be made in writing and set out clearly what is being offered
    • No undue pressure on employees to accept the offer
    • Where settlement is refused, the employer must then go through a fair process before deciding to terminate the relationship
    • Examples of 'improper' behaviour - notably, that the employer should not make discriminatory comments or act in a discriminatory way.
  • Draft template letters offering settlement and a draft model settlement agreement with guidance are annexed to the Consultation. These template documents are intended for use by employers with minimal tailoring.

The Consultation had also been expected to include a proposal for simplifying the statutory requirements to enable settlement (compromise) agreements to cover existing and future claims without setting out long lists of causes of action - a so-called blanket waiver. While such simplification is tempting, the Government is dropping the proposal in favour of greater certainty. The Government now considers that a blanket waiver would increase the level and cost of legal advice employees would need to fully understand what they were agreeing to.

The consultation closes on 23 November.

The Acas Code of Practice on Discipline and Grievance

Review of the Acas Code formed part of the 'Call for Evidence: Dealing with dismissal and compensated no fault dismissal for micro businesses'. While particular concerns are raised around the suitability of the Code for small businesses, the review extended to the usefulness of the current form of the Code for all employers. This is in light of concerns that it focuses too heavily on disciplinary issues rather than capability/performance ones.

On 14 September, the Government announced that the responses to the Call for Evidence largely agree that the current Acas Code strikes a balance between accessibility for any size business and the detail to adequately address the many different potential situations businesses may face "fairly well". However, some improvements can be made and the Government will work with Acas to make the Code more accessible and understandable, particularly for small businesses.

Unfair dismissal compensation

The draft Enterprise and Regulatory Reform Bill includes a clause giving the Secretary of State power to introduce regulations to limit unfair dismissal compensatory awards to a maximum level of between the national median earnings and 3x median earnings or to a limit of one year's pay. In addition, 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.

The Government has now announced that it fully intends to utilise the power to limit unfair dismissal compensatory awards, if passed by Parliament. As well as seeking views on use of 'settlement agreements', the Consultation: Ending the employment relationship published on 14 September sets out more detail as to the plans for reducing the current compensation cap.

There are two elements to an unfair dismissal award: the basic and compensatory award. The basic award is calculated on the same basis as a statutory redundancy payment subject to a cap currently £12,900. There is no proposal to change the basic award.

The compensatory award is an amount the tribunal considers to be "just and equitable", having regard to the loss suffered by the employee insofar as the employer is responsible. It is generally subject to statutory cap currently £72,300 (this cap is disapplied in some cases, notably where dismissal as a result of having made a protected disclosure or for having asserted a statutory right).

The Government believes that the current cap has led to unrealistic perceptions about the level of tribunal awards. While the cap is £72,300 the median award is only around £5,000. The Consultation seeks views on its plans to reduce the cap on the compensatory award by revising how the overall cap is set and also introducing a secondary individual cap:

  • Overall cap: the current formula in relation to the annual revision of the cap will be replaced with a power for the Secretary of State to set the overall cap within a range of median earnings (currently £25,882) and three times median earnings (currently £77,646); and
  • Individual cap: in addition, a cap on individual awards will also be applied (where this is less than the overall cap) of 12 month's pay.

The consultation closes on 23 November.

Tribunal fees

The Government has committed to the principle of charging fees to tribunal users. While the introduction of fees was not up for discussion, how to go about their introduction was the subject of a Ministry of Justice (MoJ) consultation, 'Introducing fees in employment tribunals and the Employment Appeal Tribunal'. The consultation set 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.

On 13 July, the MoJ published its Response to the consultation. The MoJ has decided to introduce the Option 1 fee structure from Summer 2013. Basically, fees will be charged in two stages: the first at the issue of the claim, and the second prior to the hearing.

The remission system, which currently operates in the civil courts, will be extended to the employment tribunals, so that those on low incomes will be excused payment. Furthermore, tribunals will be given a discretionary power to order the losing party to reimburse any fees paid to the successful party. There are a few tweaks from the original proposal, most notably the merging of levels 2 and 3 fee levels.

Level 1 claims are generally for sums due on termination of employment, for example unpaid wages, payment in lieu of notice, redundancy payments. Level 2 claims include those relating to unfair dismissal, discrimination complaints, equal pay claims and whistleblowing claims arising under the Public Information Disclosure Act.

For single claimants the fees will be:

Click here to view table.

There are increased fees bands for claims brought by two or more joint claimants, dependant on the number of claimants involved. For instance, a level 2 claim issued by between two and ten joint claimants will attract an issue fee of £500 and a hearing fee of £1,900.

We understand it is not proposed that each and every complaint made on a claim form would attract a separate fee, for instance where a claim form includes claims of unfair dismissal, unpaid wages and discrimination. The fee payable would be that which relates to the highest level claim.

A counter-claim by a respondent will attract a fee of £160. All appeals to the Employment Appeal Tribunal will attract an appeal fee of £400 and a hearing fee of £1,200.

Tribunal rules

In July, Mr Justice Underhill, the former President of the EAT, completed a fundamental review of employment tribunal rules. Alongside his report, new draft rules are proposed to replace the existing Tribunal Rules and Regulations. The new rules use simpler language, and are less than half the length of the old rules, in an effort to make them more understandable by unrepresented parties.

The Consultation: Employment Tribunal Rules Review by Mr Justice Underhill on the proposals was published on 14 September.

A notable proposed change is the introduction of a 'sift' stage. A judge will review the case on the papers once the claim and response have been received to make directions or, if appropriate, consider whether to strike out a party's case. Other changes the Government is seeking views on include:

  • tackling non-payment of tribunal awards, specifically a proposed 14-day deadline for payment after which interest would accrue;
  • introduction of Presidential guidance to manage expectations and ensure consistency in case management; and
  • removal of the £20,000 cap on costs awards.

The consultation closes on 23 November.

Transfer of Undertakings (Protection of Employment) Regulations  

In November, the Department for Business, Innovation and Skills (BIS) issued a 'Call for Evidence Effectiveness of Transfer of Undertakings (Protection of Employment) Regulations 2006'. This responded to concerns that the regulations gold-plated the Acquired Rights Directive and are overly bureaucratic. In particular, the Government has been considering whether changes are required to the 'service provision change' provisions, the insolvency provisions, interaction with collective redundancy consultation obligations and post-transfer harmonisation.

The Beecroft report advocated changes to enable a seller (transferor) to rely on the buyer's (transferee) valid ETO (economic, technical or organisational) reason to affect 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.

On 14 September, the Government published its Response to the Call for Evidence. There will now be "a period of policy design", during which the Government will consider a number of suggestions to be followed by a consultation expected by the end of the year.

Suggestions being considered include:

  • whether the 'service provision changes' provisions introduced in 2006 should be retained or repealed;
  • whether liability for employees should pass entirely to the transferee as now, or be held jointly and severally by transferee and transferor;
  • whether employee liability information should be provided earlier to the transferee;
  • whether an amendment to TUPE would be possible to ensure that a change of location of the workplace following the transfer is capable of constituting an economic, technical or organisational reason entailing changes in the workforce.

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. The compromise allowed the opt-out of the 48-hour working week to be retained, but with some significant new restrictions. The compromise was only made 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 whish gave them until September to reach an agreement or decide to extend the time further. Unsurprisingly, further time is needed and the European Commission has now agreed to extend the period for reaching agreement until 31 December 2012.

Areas where revision is expected include 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.

National minimum wage

From 1 October 2012 the hourly national minimum wage will be:

  • the adult rate, increases from £6.08 to £6.19;
  • or 18 to 21 year olds, remains at £4.98;
  • for 16 to 17 year olds, remains at £3.68; and
  • for apprentices, increases from £2.60 to £2.65.