Today, the Government has announced a number of measures aimed at resolving disputes more quickly, reducing the pressure on the employment tribunal system and saving costs for employers and the taxpayer.

The Government published its consultation on employment tribunal reform in January (see Hr e-briefing 488 – Employment Tribunal reform: a promising start).  In advance of today’s consultation response, the Government  had already confirmed that it would both increase the current period of service required for employees to be able to bring a claim for unfair dismissal from one to two years and introduce fees for the lodging of employment tribunal claims.

Today, the Government has confirmed that there will be a fundamental review of employment tribunal procedure, to address concerns that it has become too complex and unwieldy, and that the following measures will be introduced:

  • Claims to be lodged with ACAS to allow early conciliation

Nearly all employment tribunal claims will have to be lodged with ACAS so that an attempt can be made to resolve them before they enter the tribunal system. ACAS will have one month (which may be extended for a further 2 weeks) in which to offer non-compulsory early  conciliation, during which period the clock for the relevant time limit will be stopped. ACAS will retain its duty to provide post claim conciliation. A shortened claim form will also be introduced to allow ACAS to receive key details at the early conciliation stage. Latest figures from ACAS show that 74 per cent of pre-claim conciliation referrals resulted in no subsequent claim being made to an employment tribunal. While it is unlikely that this high success rate could be maintained under the Government’s change, it does give strong support to widening access to conciliation in this way. Whether ACAS will be funded to meet this increase in work remains to be seen; the Government’s view is that the savings achieved by reducing Tribunal claims, as a result of early conciliation, can be directed towards ACAS to bridge the funding gap.

  • Mediation and the use of compromise agreements

The consultation paper sought to obtain information about mediation and the use of compromise agreements, with the aim of increasing the use of alternative dispute resolution and, where ending employment is the only solution, improving the use of compromise agreements. The response promises a consultation on shortening and simplifying compromise agreements (to be renamed “settlement agreements”) and a commitment to support the greater use of mediation, particularly by small employers, so that it becomes an established part of dispute resolution.

Compromise agreements are viewed by many as being too long, legalistic and overly complicated. Employers will therefore be pleased that calls for simplification of the law in this area have been heard. A change to a standard format, as suggested, would dramatically reduce the costs and time currently devoted to compromise agreements. In addition, a promise to confirm, by amending legislation, that compromise agreements can be used for Equality Act claims is a helpful move.

  • Tackling weaker cases

One of the most commonly aired criticisms of the employment tribunal system is a perception by employers that it allows employees with weak claims to impose unjustifiable burdens on employers . Introducing a fee, as proposed, will not deter some employees from bringing weak, speculative or purely vexatious claims. While powers exist currently to deal with such claims, in practice they have made little impact. The Government’s response confirms that it will make the existing power to make deposit orders, under which a party is currently required to pay a deposit of up to £500 as a condition of being permitted to continue, more flexible and increase the maximum level of the deposit to £1000 and increase the current cap on cost awards limits from £10,000 to £20,000. However, the Government has shelved plans to extend the current ability of employment tribunals to "strike-out" unmeritorious claims pending the fundamental review.

  • Encouraging settlement

One of the most radical suggestions contained in the Government’s consultation was the proposal to introduce a "formal offers" system, intended to encourage parties to be realistic about their cases. Under this proposal,  written details of a settlement offer would have been lodged with the tribunal, and any compensation awarded by a Tribunal could be increased or decreased if the other party declined to accept a reasonable settlement offer.

In a poll of employers, conducted by Eversheds earlier this year, an overwhelming majority of employers (91 per cent) supported the proposal to introduce the "formal offer" system and 93 per cent felt that their organisation would make use of it. Disappointingly for those employers, the Government has decided against introducing this measure at this stage, amidst fears that such a system might lead to complaints of employees ”blackmailing” employers into settling.

  • Shortening tribunal hearings

One of the Government’s key aims when consulting on modernising the tribunal system was to shorten tribunal hearings. To this end it has announced that witness statements should be taken as read, unless a judge or tribunal directs otherwise. Additionally, parties and witnesses attending tribunal hearings  will no longer be able to claim for the  payment of their expenses.

Furthermore, the Government’s response confirms that unfair dismissal cases will normally be heard by an employment judge sitting alone. Clearly, the time and cost saving which this approach will produce is attractive. However, a fundamental aspect of unfair dismissal law is that, in assessing fairness or otherwise of dismissal, the tribunal must have regard to the possible range of employer responses. Many believe that non-legal members play an essential role in this by reflecting industry practice and also adding a broader perspective (by way of majority view) on what might be “reasonable” in a given situation. Many employers have a particular nervousness that this measure will undermine confidence in the system and the perception that the current balance of views reduces opportunity for bias of any kind. This approach could also lead to more appeals, as parties may find it easier to accept the views of a panel of three than a judge alone.

  • Extending the qualification period for unfair dismissal

Although the Government had already confirmed that it will extend the qualifying period for unfair dismissal claims to two years, today’s response provides no clarification as to how transitional provisions will address the issue of those employees who currently have between 1 and 2 years’ employment from losing the rights they have already accrued.

  • Introduce financial penalties for employers

Worryingly for employers, the Government has accepted the proposal to introduce financial penalties for employers found to have breached employment rights. The stated purpose of such a measure is to encourage greater compliance. Such payments will be payable to the Exchequer, rather than a claimant. A minimum threshold of £100 is proposed, with an upper ceiling of £5000. However, there is some good news for employers as the Government has listened to concerns that the automatic nature of the penalty could have punished inadvertent errors.  Instead, it has decided to give judges the discretion as to whether to impose a fine depending on the circumstances, for example, where negligence or malice is involved.

  • Rapid resolution

A new proposal, not previously contained in the Government’s initial consultation, considers whether and how the Government could introduce a scheme for the rapid resolution of low value claims as an alternative to the Tribunal process. Whilst an attractive idea, as the Government itself acknowledges, much work would need to be done to make this successful and a full consultation is promised.

Other employment developments today

In a busy day for BIS, in addition to the Employment Tribunal reforms described above, it has also issued a call for evidence in relation to collective redundancy consultation duties and promised a consultation on “protected conversations” (see HR e briefing 527).

BIS has also announced that it is seeking views on the effectiveness of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (the TUPE regulations) and how they might be improved, if at all.  This call for evidence is designed to gauge views on whether the TUPE regulations are ‘gold-plated’ (going further than is strictly required by the European Acquired Rights Directive on which they are based) and overly bureaucratic. If the evidence suggests changes might be needed there will be a formal consultation in 2012.

In a speech discussing these changes, Vince Cable also covered the following:

  • amending the Public Interest Disclosure Act to prevent employees from using it to challenge terms of their own contracts (a loophole and not what the legislation is aimed at);
  • making CRB checks simpler to avoid repetition through easier and wider online access
  • reviewing agency worker regulation
  • simplifying National Minimum Wage Regulations by merging everything in to one set of regulations
  • a response to the sickness absence review published this week will be issued next year
  • extending flexible working to all
  • improving parental leave.

You can read the response here:

Resolving Workplace Disputes: Government response