The Employment Bill received its first reading in the House of Lords on 6 December 2007. The aim is for the bill to receive Royal Assent by Summer 2008. However, most of the bill will not come into force on that date. The Dispute Resolution provisions, for example, will come into force at a date to be appointed by the Secretary of State, which we understand is unlikely to be before April 2009. The dates on which the other provisions are likely to come into force are mentioned below.

The Bill, when enacted will make the following important changes:

Dispute Resolution

The Bill will;

  • repeal the existing statutory dispute resolution procedures;
  • repeal related provisions about procedural unfairness in dismissal cases (i.e. that a dismissal is automatically unfair where an employer does not complete the statutory procedure);
  • give Employment Tribunals a discretion to increase or decrease any award by no more than 25% where an employer or employee fails unreasonably to follow a relevant statutory code (which in most cases will be the ACAS code);
  • give power to make regulations to establish a new fast track procedure to settle monetary disputes in certain limited cases;
  • give wider discretion to ACAS officers to conciliate in pre-Tribunal disputes;
  • remove fixed periods for conciliation so that ACAS’s duty to conciliate in Tribunal cases subsists throughout the proceedings; 
  • give Tribunals power to order employers to compensate workers for any financial loss (e.g. bank charges and interest) sustained as a result of any unlawful deduction of wages or non payment of redundancy awards (thus removing the need for the employee to make a separate County Court claim for these losses);

By way of background, readers will recall that a full public consultation (“Resolving Disputes in the Workplace”) took place in March this year following the independent Gibbons review (“A Review of Employment Dispute Resolution in Great Britain”) which concluded that the statutory procedures introduced in October 2004, whilst right in principle, have as a result of their mandatory nature, led to unforeseen consequences. The Bill will therefore repeal sections 29-33 and schedules 2-4 to the Employment Act 2002, thus removing the statutory procedures in their entirety.

Once the automatic unfair dismissal provision relating to the statutory procedures (Section 98(A) Employment Rights Act 1996) is removed, the handling of breaches of procedure in unfair dismissal cases will revert to the pre-2004 position which was based on case law, and in particular the House of Lords judgement in Polkey v AE Dayton Services Limited [1998] AC344. Under the Polkey principle, if the Tribunal finds that following the correct procedure would have made no difference in any event, the dismissal may be unfair but the Tribunal should reduce or eliminate the compensation payable (other than the basic award).

The Explanatory Notes to the Bill explain that the ACAS Code of Practice on disciplinary and grievance procedures is being substantially revised for reissue at the time the Bill comes into force. The Code is not legally binding in the same way as the statutory procedures but it can still be taken into account by the Tribunal. This means that where an employer has failed to follow the Code when dismissing an employee, the Tribunal will be able to take this into account when considering if a fair procedure was followed.

The draft Bill is not specific as to how the “Polkey” reduction inter-relates with the proposed new discretion given to the tribunal to increase or decrease by 25% the compensation payable for unreasonable failure to follow the relevant statutory code. However, it seems that the tribunal will first apply any “Polkey” reduction to the compensatory award and then apply such increase or decrease as the tribunal considers just and equitable in all the circumstances. Potentially this could have rather odd results where, say, the tribunal reduces the award by 50% because it considers a fair procedure would not have made any difference, but then increases it again by 25% because the employer failed to follow the procedure set out in the ACAS Code.

National Minimum Wage

The Bill will;

  • provide a mechanism for increasing a worker’s remuneration, above that currently provided for as a national minimum wage (“NMW”), where arrears of the NMW have been outstanding over a period of time, so as to take account of the length of time that arrears have been owing (this provision will be retrospective as regards payments in arrears at the date it comes into force); 
  • replace the existing enforcement and penalty notices with a new single “notice of underpayment”; 
  • provide for a new “civil penalty” payable by the employer to the Secretary of State to be set out in the “notice of underpayment” requiring the employer to pay a financial penalty within 28 days, equal 50% of the total underpayment (minimum £100, maximum £5000); payment within 14 days would reduce the penalty by 50%;
  • allow for suspension of the “civil penalty” where certain criminal proceedings have been issued eg for wilfully neglecting to pay the NMW or failing to keep records;
  • provide mechanisms for the employer to appeal the notice of underpayment and for an NMW officer to withdraw and replace the notice; 
  • give power to NMW officers to take copies of records; 
  • increase the penalty available to the Court on conviction for certain offences under the NMW Act (by making them triable as indictable offences as well as summary offences, meaning they could be tried in the Crown Court as an alternative to the Magistrates Court);
  • exclude Cadet Force Adult Volunteers from the NMW; and
  • provide for most provisions to come into force on a day to be appointed by the Secretary of State (other than the powers of officers to take copies of records and the Cadet Force provisions which will come into force two months after the Act is passed).

Employment Agencies

The Bill will;

  •  increase the penalty available to the court on conviction for an offence committed under the Employment Agencies Act 1973 (“EAA”);
  • Strengthen the powers of inspection for inspectors appointed under the EAA;
  • provide for partners who make up a partnership in Scotland to be prosecuted for offences under the EAA, as well as the partnership (this reflects a difference between English and Scottish law as under Scottish law, a partnership is a separate legal entity, distinct from the partners who make up a partnership);
  • provide for these provisions to come into force on 1 October 2008, or if the Act is passed after that date, 6 April 2009.

Trade Union Membership

The Bill amends trade union membership law to enable trade unions to apply membership rules which prohibit individuals who belong or who have belonged to a particular political party from membership of the trade union (the amendment is made to ensure UK compliance with the European Court of Human Rights ruling on Aslef v UK). This provision will come into force at a date to be appointed by the Secretary of State.

Click here to view the Bill and associated Impact Assessments published on the BERR website.