The Enterprise and Regulatory Reform Bill contains a number of employment-related provisions which are due to take effect this year. The government has recently published further proposals in relation to how some of those provisions will work in practice, namely:

  • pre-termination settlement discussions/agreements;
  • a new cap on unfair dismissal compensation; and
  • mandatory pre-claim conciliation via ACAS.

The government has also introduced a new provision on dismissals related to political opinion or affiliation and has further amended the current protection for whistleblowers.

Below are the key points of the government's further proposals in these areas.

Pre-termination settlement discussions / agreements

The Enterprise and Regulatory Reform Bill ("ERR Bill") includes measures that allow employers to discuss settlement offers with employees without such discussions being disclosable in unfair dismissal proceedings, unless there has been "improper behaviour".

The government has now responded to its "Ending the Employment Relationship" consultation, which sought views on issues relating to the new settlement offer proposals.

Please click here for a link to our previous alert on these provisions in the ERR Bill.

The government's response confirms that ACAS will publish a statutory Code of Practice to provide guidance on the confidentiality of settlement offers, which will include (among other things):

  1. an explanation of what constitutes "improper behaviour". The latest announcement indicates that the test will largely reflect the concept of "unambiguous impropriety", which can lead to conversations that were intended to be "without prejudice" or "off the record" being disclosable in Tribunal proceedings;
  2. an indication of how long employees should to be given to consider a settlement offer;
  3. guidance about the factors that should be considered when making a settlement offer; and
  4. a template settlement offer letter, which will not be compulsory. A model settlement agreement (again, not compulsory) will be included in separate non-statutory guidance.

ACAS has very recently issued a draft Code of Practice for consultation. The government hopes that employers and employees will in future see settlement offers as an acceptable means of ending an employment relationship, and that employers will feel more confident that settlement negotiations cannot later be used against them.

It is important to remember however that settlement discussions will only be inadmissible in relation to straightforward unfair dismissal claims. They will remain admissible in discrimination, whistleblowing and wrongful dismissal claims, as well as where the dismissal is automatically unfair for one of the reasons specified in the Employment Rights Act 1996.

Although the government has stated that it does not intend that the fact that a settlement offer has been made should be admissible in constructive dismissal cases, there will remain a risk of admissibility in cases where the employee alleges that the fact of the settlement offer amounted to a breach of the implied term of trust and confidence. We will have to wait for Tribunals to determine admissibility in these cases.

The latest announcement also confirms that the government will not:

  • take forward proposals for a broader concept of "protected conversations" or "no fault dismissals"; or
  • be proposing a guideline tariff for settlement offers.

The government has indicated that both the new provisions and the ACAS Code will take effect in summer 2013.

New cap on unfair dismissal compensation

The government has also announced an additional cap on the unfair dismissal compensatory award. In response to concerns that employees often have unrealistic expectations about the levels of the award, the cap will change to the lesser of one year's pay and the current cap of GBP74,200. The government indicates that this change will also take effect by summer 2013.

Mandatory pre-claim conciliation via ACAS

The government has published a consultation paper providing further detail about the operation of its proposed "Early Conciliation" (EC) process, under which a prospective claimant will be required to contact ACAS before lodging a Tribunal claim. The consultation paper provides further information about the logistics of the procedure, which we expect to come into force in October this year.

Where has this come from?

The ERR Bill contains language providing for a new mandatory conciliation procedure intended to promote early settlement of potential Tribunal claims and thereby achieve the government's stated aim of increasing the efficiency of the Tribunal system. The government is now consulting on the mechanisms of the process, including draft regulations.

How will it work?

The EC process will oblige prospective claimants to lodge certain information with ACAS before lodging a claim with the Employment Tribunal. The requirement will apply to the vast majority of claims although there are some exceptions (e.g. claims for interim relief, claims forming part of a multiple claim, claims involving both EC claims and those exempt from EC, and if the prospective respondent has already asked ACAS to conciliate)

There are broadly five stages:

  • Stage 1 - The prospective claimant sends a completed EC Form to ACAS. The government has published a draft of the EC Form. The draft requires minimal information - the contact details for the prospective claimant and prospective respondent only. There is no obligation to provide details of the nature of the dispute, which the government considered could be too difficult for prospective claimants - although it is seeking views on this point. Claimants will be encouraged to submit the form online (although it will be possible for hard copy forms to be sent in).
  • Stage 2 - ACAS First Stage Contact . Once received, the EC Form will be passed to an Early Conciliation Support Officer (ECSO) who will call the prospective claimant within 1 working day of receipt of the EC Form. The ECSO will obtain basic information such as length of service, date of dismissal / act complained of, best time / method of contact, etc. The ECSO will also provide basic information regarding qualifying periods of service, for example, which the government hopes will result in a proportion of individuals not pursuing their claim any further.

If the prospective claimant cannot be contacted after a number of attempts or after a certain number of days (to be determined), or the claimant indicates they do not wish to conciliate, the case will be closed and a certificate confirming that the prospective claimant has complied with their obligation to contact ACAS will be issued (the "EC Certificate"). The prospective respondent will not be advised about the potential claim to avoid employers "tak[ing] steps that would incur costs."

  • Stage 3 - ACAS Conciliator Contact - Where the prospective claimant does wish to conciliate, the ECSO will pass the details to a Conciliator, who will then contact the prospective respondent. If the respondent declines conciliation or cannot be contacted, the Conciliator will immediately issue an EC Certificate. If, however, both parties agree to conciliate, the Conciliator will have up to 1 calendar month from the date of receipt of the EC Form to facilitate a settlement, extendable by a further 2 weeks with the agreement of the parties.

Time limits for the submission of a claim to a Tribunal will be extended to reflect the mandatory conciliation period, with a "stop the clock" mechanism operating between the date when the EC Form is received and the date when the EC Certificate is issued. However, slightly different rules apply where the time limit is due to expire during the mandatory conciliation period or within one month after the end of that period. In this case, the prospective claimant will have until 1 month after the EC Certificate has been issued in order to submit his/her claim.

  • Stage 4 - Settlement / EC Certificate - If a settlement is not reached (either because the ACAS officer concludes it is not possible or because the period for settlement expires), the ACAS officer will issue an EC Certificate to that effect. ACAS will also issue an EC Certificate even if settlement is reached, "just in case" the settlement fails and the claimant needs to demonstrate compliance with the EC process. The EC Certificate will be issued electronically if the claimant has provided an email address, otherwise by post. Time will start to run again for limitation purposes from the day following the receipt of the EC Certificate.
  • Stage 5 - Employment Tribunal Claim - A claimant will only be able to proceed with his or her claim once the EC Certificate has been issued. The ET1 Form will be amended to require the claimant to include details of their unique EC reference number. If the ET1 does not contain this information, the Tribunal will dismiss the claim.


There is no doubt that the government's aims in seeking to implement EC are admirable. However, there have been doubts about ACAS' ability to resource this, and the stringent timescales proposed are also ambitious. The impact on time limits for submitting a claim are also likely to lead to headaches, with arguments about whether claims have / have not been submitted in time likely to increase the workload of Tribunals in the short to medium term. There also seems to be potential for abuse of the system, with claimant lawyers leaving it to the last minute to submit their EC Form, benefiting from an extra period of conciliation, together with a further 1 month from the date of the EC Certificate to issue a claim.

Dismissals for political opinions / whistleblowing claims

In a recent amendment to the Bill, the government has introduced a new provision which will remove the requirement for any qualifying period of service for unfair dismissal claims where the reason ( or principal reason) for dismissal is or relates to an employee's political opinions or affiliation.

The government's decision follows the recent judgment of the European Court of Human Rights in Redfearn -v- United Kingdom where the ECtHR held that UK law is in breach of Article 11 of the European Convention on Human Rights, (which provides for a right to freedom of peaceful assembly and to freedom of association with others), by failing to allow employees who do not have the requisite period of service to claim unfair dismissal in circumstances where they are dismissed because of their political opinions or affiliations, ( membership of the BNP on the facts of the case). The ECtHR commented that Article 11 provides a "universal right" which applies even where the views of a particular party or association may "offend, shock or disturb".

The new provision will not, however, mean that dismissals by reason of political opinion or affiliation will be automatically unfair, simply that employees will have the right to challenge the fairness of any dismissal whatever their length of service.

The new provision will take effect two months after the Bill receives Royal Assent, (expected in April ), and will apply to dismissals effected on or after that date.

Finally, a further proposed amendment to the Bill will remove the requirement for an employee or worker to act "in good faith" when making a protected disclosure in order to benefit from the statutory protection given to whistleblowers. The government seems to have responded to arguments that the new "public interest" requirement for protected disclosures, (also set out in the Bill), represents an additional hurdle, (over which the government did not consult), that might prevent employees from raising concerns.

The good faith issue will not however be completely irrelevant in whistleblowing claims as employment tribunals will have the power to reduce compensation ( by up to 25 percent ) where protected disclosures are not made in good faith.

We will continue to monitor the progress of the Bill. Please click HERE for the latest proposed amendments.