Yesterday the Government announced details of its plans to overhaul the Employment Tribunal system as well as further measures aimed at making it ‘easier for businesses when taking on, managing and letting go their staff, while also being fair to workers.’

Tribunal reform

In its response to a consultation that took place earlier this year the Government announced that it is launching a fundamental review of employment tribunal procedure, to address concerns that it has become too complex and unwieldy.  In addition, the following measures will be introduced.

Fees for lodging Tribunal claims

The Government has previously announced that, in future, claimants will have to pay a fee when lodging a tribunal claim.  A consultation on the level of fees payable is expected shortly.

Claims to be lodged with ACAS to allow early conciliation

The Government has also announced that 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 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. Fees for lodging claims 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.  It will also 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 a fundamental review of tribunal rules which will be carried out next year.

Financial penalties for employers

Worryingly for employers, the Government has accepted a 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. Payments will go 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.

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 unfair dismissal cases will normally be heard by an employment judge alone, rather than by a full panel made up of a judge and two non-legal members.

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.

In a further move to shorten tribunal hearings, witness statements should be ‘taken as read’ unless a judge or tribunal directs otherwise.  This means witnesses will not have to read their statements aloud to the tribunal.

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.

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.

Other employment developments

Extending the qualification period for unfair dismissal

The Government has confirmed that it will extend the qualifying period for unfair dismissal claims from one to two years with effect from next April.

It is also going to be seeking views on a proposal to introduce ‘compensated no-fault dismissal’ for micro firms of fewer than 10 employees.  If enacted, this will enable small employers to dismiss workers without fear of a claim of unfair dismissal provided they pay compensation of an amount fixed by law.

Protected conversations

The Government plans to change the law to allow employers to have ‘protected conversations’ with employees about issues like retirement or poor performance, without this being used in any subsequent tribunal claims.  This would be of particular use to employers in dealing with the abolition of the default retirement age (DRA). Although the devil will be in the detail, what is proposed could allow employers to raise the issue of an employee’s future plans when they reach a certain age without fear of an age discrimination claim. Employers need to know about employees’ future plans to help plan succession. Employees may also want to be able to talk about the options available for winding down or redesigning their job specification.

In relation to poor performance, without further information this appears to suggest a widening of the ‘without prejudice’ rule which currently permits communications made in a genuine attempt to settle an existing dispute from being put before a court or Tribunal. It has been suggested that, for employers dealing with performance issues, the proposed new rules could permit tough conversations about employees’ performance without fear of recrimination in the employment tribunals for having tackled issues head on. However, it is far from clear how this will work in practice and what this proposal does not do is address the real issue that many employers have when dealing with performance issues, which is that, if they wish to dismiss fairly, they are bound to follow a long and, some would say, cumbersome process involving a series of warnings and opportunities to improve.

Collective consultation

The Government has also issued a ‘call for evidence’ on the collective redundancies consultation rules, in particular  looking at the impact of reducing the current 90 day consultation period.  This could be followed by a consultation on specific proposals next year if change is felt necessary.

Many employers believe the 90 day consultation period is too long. It can stretch out unnecessarily the uncertainty for employees and can inject excessive delay at a time when employers may need to act with urgency to sustain a business.  There is scope under EU law to reduce the 90 day period to as little as 30 days. But, employers would remain under the legal obligation to begin consultation ‘in good time’, according to EU law, to allow meaningful consultation to take place. This means that even if the 90 day period was revised down to 30, employers would need to ensure that genuine consultation remained paramount, regardless of any set timescale, or risk legal claims for inadequate consultation.


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.

Other changes

In a speech discussing these changes, Vince Cable also said the Government would:  amend whistle-blowing protections to prevent employees using them to complain about breaches of their own contract terms; make CRB checks simpler; review agency worker regulation; simplify National Minimum Wage regulations; extend flexible working to all; and improve parental leave.

Further information can be found here:

Resolving Workplace Disputes: Government response

Call for evidence- collective redundancy

Call for evidence - TUPE