The Department for Business, Innovation & Skills has launched a consultation around resolving workplace disputes. This is the Government's response to increasing pressure from business to ease the burden that employment law and the Employment Tribunal system have placed on it. There are widespread calls for change so that businesses are better equipped to deal with the current economic difficulties.

The consultation document is interesting and contains proposals which if implemented could dramatically change Employment Tribunals. While the proposals are mainly "employer-friendly", they are not entirely so. The financial penalty proposal (see further below) in particular could cause problems for employers.

The following proposals stand out:

  • Claimants would submit claims to Acas for one month's pre-claim conciliation before they were then lodged with the Employment Tribunal. A shortened form of the ET1 would be used. As it would not be compulsory for the parties to engage in the pre-claim conciliation this should not prove too onerous for employers. It may even be helpful if Acas manage to dissuade claimants with weak claims from proceeding.
  • Employment Tribunals would automatically impose a financial penalty on employers found to have broken the law. This would be half of the total compensation award given to the employee, subject to a minimum threshold of £100 and a maximum of £5,000. A 50 percent reduction would be made if it was paid to the Exchequer within 21 days. Unsurprisingly the Government recognises that businesses will probably oppose this proposal and we suspect that they are right! Also the suggestion that good employers have nothing to fear may be over-optimistic. The law is increasingly complex and Tribunal decisions sufficiently unpredictable that employers may well feel that this is just another factor compelling them to settle unmeritorious claims just to avoid potential costs. There is also no mention of what happens to the fine if the claim is successfully appealed. Presumably the employer can apply to the Exchequer for return of their money.
  • Users will be asked to contribute to the costs of running the Employment Tribunal system. Consultation on how best to introduce a fees mechanism will begin in the spring. There is little detail on this but it will presumably involve claimants paying a fee on lodging a claim. This may well be helpful in deferring the speculative claimant. No detail is given on the amount of the fee, but it is bound to be contentious.
  • The qualifying period of employment for unfair dismissal claims would rise to two years. This proposal has been widely heralded and employers may well have mixed views as to whether this is welcome. It would take some claimants out of the unfair dismissal regime but this may just persuade claimants to bring the more complex discrimination or whistle blowing claims.
  • Rules would be introduced whereby claimant or respondent could make a formal settlement offer as part of the Employment Tribunal proceedings. We think that this would be a very positive development.
  • Claimants sometimes have a reasonable claim but unreasonable financial expectations. Putting them at risk of costs for refusing a decent settlement offer would be to an employer's advantage. Claimants would have to provide a Schedule of Loss with their ET1s. This is a helpful starting point but the Schedule may need to be regularly updated particularly with claims that take a long time to list.
  • The current cap on costs awards would be increased to £20,000. If Tribunals can be persuaded to use costs orders more often, this could certainly be a useful deterrent to claimants.

The proposals are intended to encourage parties into early dispute resolution, as well as ensuring the Employment Tribunal system runs as efficiently and effectively as possible. Broadly we believe that employers should welcome most of the proposals but fining losing employers seems to be more about funding the Tribunal system than helping resolve employment issues!

Consultation on the proposals will close on 20 April 2011. The Government will then publish a response setting out how it intends to proceed.