Two new Acts were passed by Parliament in April 2013 which, when brought into force, will largely complete the Coalition’s programme of employment law reform. These come on top of recent changes to the unfair dismissal qualifying period and collective redundancy consultation.
Changes already in place
In April 2012 the following changes were implemented:
- The qualifying period for the right to claim unfair dismissal rose to two years, though employees already in post prior to 6 April were not affected by this change.
- Lay panels were abolished for some claims, including most unfair dismissal claims, where employment judges will now normally sit on their own.
- Various changes to the employment tribunal rules of procedure were implemented, including increasing the limits for costs and deposit orders (to £20,000 and £1,000 respectively) and removing the right of witnesses to claim expenses from Government funds.
Changes to come: overview
The Coalition’s policy objective is to reduce the burden on business by encouraging earlier settlement of employment disputes, combined with procedural changes to make them less costly to litigate if they do reach the tribunal. Within this policy framework there are three main groups of measures:
- Establishing compulsory early conciliation for most employment claims, combined with measures designed to make comprise agreements more accessible to employers.
- Streamlining the employment tribunal rules of procedure to make them easier to understand and to encourage the active and efficient management of claims.
- Introducing fees in the employment tribunal and the EAT.
These changes are being implemented for the most part by the Enterprise and Regulatory Reform Act, which completed its passage through Parliament in April 2013.
Changes to employment tribunal litigation
The most significant change to employment tribunal litigation in the Enterprise and Regulatory Reform Act is the compulsory referral of the majority of claims to ACAS before proceedings can be issued. A number of details will be filled in by secondary legislation, such as the length of the conciliation period and the scope of the exceptions. We now have a fair idea of what this will look like following the publication of a consultation paper in January 2013. The plan is that for most types of claim a claimant must lodge details with ACAS first. Proceedings can not be commenced until the compulsory conciliation period – normally a month – has passed. The three month time limit that applies to most claims will be extended by the length of the conciliation period. These changes are unlikely to be introduced until April 2014.
Other related employment measures in the Act include provision for legal officers to hear simple disputes, streamlining the composition of the Employment Appeal Tribunal by removing the requirement for lay members in most cases, and imposing fines on employers for breaches of workers’ rights which have ‘aggravating features’. Lay members will be removed from most EAT panels from 25 June 2013, but the fines for employers are not likely to be implemented until 2014 and there is also likely to be some delay in the introduction of legal officers.
Promoting early settlement outside the tribunal
The Act includes a number of measures to encourage employers and employees to settle disputes at an early stage. Of these the most significant is a clause to encourage ‘pre-termination negotiations’. The new clause, at least on the face of it, will allow employers to open negotiations with their employees about terminating their employment on agreed terms, without the risk of these discussions being disclosed in subsequent unfair dismissal proceedings. However, this provision will apply only to ordinary unfair dismissal claims, and not to claims for automatically unfair dismissal or discrimination of any kind. The employer will also lose protection if it has done anything which a tribunal views as ’improper’.
In addition, in a bid to make them more popular, compromise agreements will be re-named settlement agreements, and ACAS has been asked to draw up a code of practice to promote their use.
Mr Justice Underhill, the former president of the Employment Appeal Tribunal, was asked to undertake a radical overhaul of the employment tribunal rules of procedure. The results were published in 2012 and have now been the subject of further consultation. The Government plans to introduce these new rules in Summer 2013.
The new rules will be shorter and simpler, but the changes will not be as radical as the last major set of amendments introduced in 2004. Some details have changed, but it is unlikely employers using the tribunal system will notice a great deal of difference as a result of the rule changes on their own. They are more likely to notice the re-designed forms, and may also benefit from greater consistency across the regions following the introduction of draft guidance for employment judges on a number of procedural matters.
As from Summer 2013, it is planned that claimants who take their case to a full hearing will need to pay both an issue fee and a hearing fee, with the precise amount depending on the complexity of the claim. Fees will also be introduced for counterclaims and some applications such as a review of a default judgment. There will be a fee remission system modelled on what currently happens in the civil courts. The tribunal will have power to order respondents on the losing side to refund the fees. Fees will also be introduced in the Employment Appeal Tribunal.
The Government proposes to introduce a new cap on the compensatory award for unfair dismissal to sit alongside the current maximum figure (£74,200 as from February 2013). This new cap will be specific to the applicant, and will cap that individual’s entitlement at the equivalent of 12 months’ wages, if this is lower than the current maximum.
The Growth and Infrastructure Act, which received Royal Assent in April 2013, establishes a framework for a new employment status, to be known as ’employee shareholder’.
The basic idea is that an employee will be given a minimum of £2,000 worth of shares in their employer or an associated company, in return for relinquishing a defined group of employment protection rights. Of these the right not to be unfairly dismissed and the right to a statutory redundancy payment are the most important. As an additional incentive, the first £50,000 worth of shares will qualify for an exemption from Capital Gains Tax on their disposal. The first £2,000 worth will also qualify for an exemption from income tax and national insurance at the point they are given to the employee.
The House of Lords originally opposed the introduction of this new status. In order to secure its passage through Parliament, the Government introduced a package of concessions. These included the requirement that the employee takes independent legal advice at the employer’s expense before signing up for one of these contracts, and the introduction of a seven day ’cooling off’ period.
The Government plans to bring this legislation into effect in September 2013.
With effect from 6 April 2013, the minimum consultation period for the largest scale collective redundancies was reduced from 90 to 45 days. The consultation period for smaller redundancy exercises (ie, between 20 and 100 redundancies over a 90 day period at a single establishment) remains at 30 days.
In the consultation responses many had urged the Government to consider other legal changes, for example to clarify the definition of establishment for these purposes. For the most part, it has ruled this out. Instead ACAS has published a non-statutory code of practice, which the Government hopes will help promote greater legal certainty. The only exception relates to the position of employees on fixed-term contracts, where the Government has legislated so that the expiry of a fixed-term contract at its pre-agreed termination point will not trigger the obligation to consult.
This change affects only the minimum consultation period. In large and complex redundancy exercises, it may be necessary for the employer to exceed the new 45 day period to ensure that there is genuine consultation, as the law requires. In addition, while the minimum period is being reduced, the original consultation paper made it clear that there were no plans to reduce the maximum protective award. This therefore remains at 90 days’ pay.
Amendments to Equality Act 2010
The following amendments to the Equality Act are being made by the Enterprise and Regulatory Reform Act:
- Repealing the provision that makes employers liable for harassment of their employees by third parties in certain circumstances.
- Repealing the questions procedure that provides a mechanism for individuals to obtain information about potential discrimination from an alleged discriminator.
- Adding a power to make regulations requiring employment tribunals to impose equal pay audits on those who have breached equal pay law, or have discriminated in contractual pay because of a person’s sex.
- Introducing a power to include caste as an additional protected characteristic.
The Government also plans to remove the power of employment tribunals to make non-binding recommendations beyond those that are intended to benefit the successful claimant.
No clear timetable for the implementation of these changes has yet been published.
Reviewing public sector duties
The Home Office has commissioned a review of the public sector equality duties set out in the Equality Act. This will cover both the general duty to promote equality of opportunity that applies to all public authorities, as well as
more specific duties that are imposed by regulations on local authorities, universities and other similar bodies. It has been asked to report by April 2013.
Other employment changes
The maximum period of parental leave was extended from 13 to 18 weeks in March 2013.
As from late June 2013, whistleblowers will need to satisfy a public interest test when making a disclosure. Although this will not have a major impact on most categories of disclosure, it will mean that it will be more difficult to gain protection when an employee is complaining about a breach of his or her contract of employment.
Other technical changes to the legislation will also be introduced. Of these the most significant is likely to be a provision that makes employers vicariously liable if a whistleblower is victimised by work colleagues, unless they have taken ’all reasonable steps’ to prevent this happening.
Unfair dismissal and political belief
In response to a recent decision of the European Court of Human Rights, the two year qualifying period will be removed for unfair dismissal cases where the main reason for dismissal is the employee’s political opinions or affiliation. This is also timetabled for late June.
Looking further ahead
The following plans have been announced at the time of writing. The details and timing are of course subject to adjustment:
- A consultation paper, which envisaged pruning back the Transfer of Undertakings Regulations fairly drastically, was published in January 2013. Among the changes proposed are removing the dedicated provisions on service provision changes and the separate requirement for employers to provide employee liability information. The Government hopes to introduce the changes in October 2013.
- Back in 2011, the Government consulted about amending the Working Time Regulations to reflect recent case law. Among the proposals is an amendment that will allow the carry forward of annual leave in certain circumstances. A response to the consultation is still expected.
- The Government now plans to implement the main recommendations of the Black Report on Health at Work in 2014. That will involve the establishment of a national health and work assessment and advisory service.
- 2014 is also the year in which the extension of the right to request flexible working will be extended to all employees with at least six months’ service.
- It will not be until 2015 that the plans for fully flexible parental leave will be implemented, though we can expect to see draft legislation well before then.
Already in force
- Unfair dismissal qualifying period
- Extension of parental leave
- Changes to collective consultation requirement
25 June 2013
- Whistleblowing changes
- Removing unfair dismissal qualifying period for politically motivated dismissals
- Streamlining EAT panels
Summer 2013 (no precise date yet)
- New tribunal rules of procedure
- Fees in ET and EAT
- New unfair dismissal compensation cap
- Pre-termination negotiations and other measures to promote settlement
- Employee shareholders
October 2013 (provisional)
- TUPE reforms
April 2014 (provisional)
- Compulsory pre-claim conciliation
- Penalties for employers who fail to comply with employment law
- Extension of right to request flexible working to all employees
Links for further information
There is a wealth of published material on these proposals. Here is a selection of the most recent:
draft ET and EAT fees order
Employee owner status