Since gaining power in 2010, the coalition government in the UK has been committed to what it has described as the “most radical reform to the employment law system for decades,” as it seeks to assist businesses and promote economic growth. The reforms envisaged by the government are now starting to take shape, with more expected during the remainder of this Parliament.

Current Changes

Several reforms have already been implemented, with the following having come into effect on 6 April 2012:

  • The qualifying period for unfair dismissal claims has been increased from one to two years for those employees who started work on or after 6 April 2012.
  • The Employment Tribunal system is currently in the process of being reviewed. However, new measures have already been introduced for claims presented on or after 6 April 2012, which include:
    • An increase in the amount of a deposit order that an Employment Tribunal can make a party pay where their claim has little reasonable prospect of success, from £500 to £1,000.
    • An increase in the maximum amount of costs that may be awarded by an Employment Tribunal, from £10,000 to £20,000.
    • Witness statements will now be taken as read at the hearing, unless the judge or Employment Tribunal directs otherwise.
    • State-funded witness expenses have been withdrawn, with the Employment Tribunal having the ability to direct parties to pay witness expenses.
    • An employment judge will sit alone in unfair dismissal cases heard after 6 April 2012 (unless the Employment Tribunal directs otherwise).  

Further Plans

Last month, the even more radical Enterprise and Regulatory Reform Bill was presented to Parliament for discussion. The key proposed measures in the Bill so far include:

  • A mandatory requirement for prospective claimants to contact the Advisory, Conciliation and Arbitration Service (ACAS) first before making their tribunal claim, so that the parties can attempt pre-claim conciliation.
  • The introduction of a “rapid resolution scheme” to deal with low-value straightforward claims, where with the parties’ consent, in which a “legal officer” will be able to determine proceedings without the need for a full hearing.
  • The power to change the maximum compensatory award for unfair dismissal, with the new limit being the lower of (i) a set amount (between one and three times the median annual earnings—currently £26,200—as set out by the Office of National Statistics) or (ii) a certain number of weeks’ pay (but not less than 52 weeks’ pay).
  • A discretionary power for Employment Tribunals to impose financial penalties on employers who lose in proceedings where they are found to have breached an employee’s rights and their behaviour in committing the breach was found to have one or more aggravating features. The amount of such penalty will be half of the total award made by an Employment Tribunal (subject to a maximum cap of £5,000), which will be paid by the employer to the Exchequer, but can be reduced by 50 percent if the employer pays within 21 days.
  • The whistleblowing “loophole”, which currently enables a disclosure by an employee in relation to breach of their own contract of employment to constitute a protected disclosure, will be addressed. Claimants will need to show that they believe their disclosure to be made in the public interest, and that their belief was reasonable in the circumstances, in order for their whistleblowing claim to succeed.
  • Compromise agreements to be renamed as “settlement agreements” to more accurately reflect their function.

Looking Further into the Future...

There has also been a suggestion that legislation will be introduced providing for:

  • The introduction of “protected conversations” that allow employers to discuss issues like retirement or poor performance in an open manner with staff, without such conversations being used in any subsequent Employment Tribunal claims. However, initial proposed wording for the legislation has just been released and suggests that they would be so limited as to have very little practical benefit for employers in reality.
  • The use of compromise agreements and in particular, whether the legislation should be amended so that all existing and future claims are covered without the need for a full list of the causes of action.
  • Cutting “red-tape” in discrimination cases, with proposals to abolish statutory discrimination questionnaires, to remove the power of the Employment Tribunal to make non-binding recommendations that affect the whole workforce (which was introduced under the Equality Act 2010), and to remove the provisions that require employers to take reasonable steps to protect employees from third-party harassment.
  • Binding shareholder votes and increased transparency on executive pay.

In addition, the government has launched calls for evidence on:

  • The proposal to introduce “compensated no-fault dismissal” for employers that have fewer than 10 employees.
  • The proposal to simplify the existing dismissal processes, which will look at the use of the ACAS Code of Practice on Discipline and Grievance Procedure and whether it could be made more accessible and easier to use by smaller businesses.
  • The operation of the consultation rules for collective redundancies and whether the current 90-day consultation period for more than 100 redundancies can be reduced.
  • The effectiveness of The Transfer of Undertakings (Protection of Employment) Regulations.

There have also been other developments which the government have initiated:

  • Mr. Justice Underhill, the previous President of the Employment Tribunals, has been appointed to lead an independent review on the existing rules of procedure governing Employment Tribunals, with a consultation on Mr. Underhill’s proposals expected later in the year. 
  • The outcome of the consultation on Employment Tribunal fees is due, where two different fee-charging structures have been proposed (currently it is a “no-costs” venue, save in certain exceptional circumstances).  

And, finally…

The government recently published the highly controversial Beecroft Report on employment law that had been prepared by the venture capitalist, Adrian Beecroft. One of the highest profile proposals of the Beecroft Report was the introduction of “compensated no-fault dismissal”, and this has proved to be divisive within the coalition. Vince Cable, the Business Secretary, issued a statement at the same time as the report was published and on the issue of no-fault dismissals, appeared to dismiss the proposal by stating that it “had been very rarely raised with me as a barrier to growth” with businesses being much more concerned about “access to finance or weak demand than they are about this issue.” The call for evidence on “compensated no-fault dismissal” closed this month and Mr. Cable has since announced that the government would not be introducing these “no-fault” proposals.