Following several months of uncertainty regarding the Coalition Government’s proposals for employment law reform, the Enterprise and Regulatory Reform Bill received Royal Assent and became law on 25 April 2013. The Enterprise and Regulatory Reform Act 2013 (ERRA) introduces a number of key legal reforms which will affect all employers. We highlight some of the main changes below:

What to expect in 2013

Employees’ rights to political opinions or affiliations 

From 25 April 2013, employees are protected from dismissal due to their political opinions or affiliations outside the scope of the Equality Act 2010. There is no qualifying period for dismissal based on political opinion or affiliation as was the case in Redfearn v United Kindgom 2012 in which an employee was dismissed by his employer after being elected as a local councillor for the British National Party. Employers must now respect their employees’ universal right of freedom of assembly which applies to all associations, including those whose views offend, shock or disturb! They would, for example, also be protected from views associated with socialism, Marxism or free-market capitalism. With sustainability being a hot topic for most sectors, it is worth remembering that environmentalism and belief in climate change has already been held as potentially capable of amounting to a philosophical belief under the Equality Act in Grainger plc and others v Nicholson 2010.

Capping unfair dismissal compensation

From 25 June, the Government has the power to reduce or increase the statutory cap on compensatory awards. By summer, the Government will introduce secondary legislation for a new limit to apply in unfair dismissal cases: this will be the lower of the current cap of £74,200 or one year's gross pay. The calculation of 52 weeks' pay will be based on the statutory definition of 'a week's pay'. This means that the upper limit will be based on a year's gross salary (ie before tax and NICs) but that pension contributions, benefits-in-kind and discretionary bonuses will be excluded. This development will be helpful to employers as employees are often influenced by what they read in the media about compensation entitlement without any regard to their own employment earnings and circumstances. In addition, annual changes to unfair dismissal compensatory limits will in future take effect on 6 April rather than 1 February.

Significant changes to whistleblowing laws

From 25 June, workers are protected against dismissal or detrimental treatment if they reasonably believe that their disclosure is in the public interest. This may for example apply if a colleague complains about working time breaches, illegal workers or food safety.  There will no longer be a need for whistleblowing to be made in 'good faith' although tribunals may reduce any compensation awarded by up to 25% if the disclosure was motivated primarily by money or spite, rather than a desire to rectify a wrong.  Note that the normal two year qualifying period and the cap on the compensatory award will not apply if a worker makes a qualifying disclosure.  This new law will not apply to disclosures before 25 June.

Compromise agreements and discrimination questionnaires

From October 2013 (or by April 2014), compromise agreements will be renamed 'settlement agreements'. Discrimination questionnaires, which are often used by employees against their employer, will be abolished at the same time - a positive step for employers.

Employment Tribunal Fees

HM Courts & Tribunal Service has announced that the date for the implementation of fees into the employment tribunals (ET) and Employment Appeal Tribunal (EAT) will be 29th July 2013.

From this date, all claims and appeals presented to HM Courts & Tribunals Service will be liable under the Fees Order and supporting rules to pay a fee unless a fee remission applies.

Claimants will need to pay a fee to lodge a claim and another fee if the claim proceeds to hearing, payable four to six weeks before the date of the hearing. The level of the fee will depend on the type of claim being made:

  • Category A: Equal pay, breach of contract, redundancy payments, holiday pay, unauthorised  deductions from wages) - £160 issue fee, £230 hearing fee 
  • Category B: Unfair dismissal and discrimination claims - £250 issue fee, £950 hearing fee.

Only one fee is payable where the claimant has more than one claim of the same type but, if there is a mix of category A and B claims, the higher fee is payable.

The good news to employers is that a tribunal will reject an employee's claim if it is not accompanied by the fee (or a remission application).  If the hearing fee is not paid by the due date, the claim may be dismissed.  The tribunal has a discretion to reinstate the claim if the fee is paid (or remission application made) after the deadline has passed.

Defending tribunal claims

For employers who defend cases regardless of their merits, here is a word of caution.  Financial penalties will apply for employers who lose their cases at the tribunal and for cases which carry 'aggravating features'.

While 'aggravating features' are not clearly defined, the Government suggested that tribunals would impose penalties where "the breach involves unreasonable behaviour, for example where there has been negligence or malice involved".  Tribunals are to have the power to fine employers up to £5,000 (payable to the Government) if they lose their case. Like a parking fine, the penalty is halved if paid within 21 days of the tribunal's decision being sent to the employer.  The provisions relating to financial penalties on employers come into force in respect of any tribunal claim presented on or after 25th October 2013.

What to expect in 2014

Compulsory Acas conciliation before making tribunal claims

To make the tribunal system more efficient, a disgruntled employee will, from April 2014, be required to contact Acas, which will attempt to promote a settlement, before they can submit a claim to the tribunal.  The time limit for bringing a claim will be put on hold while early conciliation is attempted. This will allow employers another opportunity to resolve a dispute after internal processes, such as disciplinary and grievance procedures, have been fully exhausted.