Employment law reform has been in the Coalition Government's sights since it came to power. Its 'comprehensive employment law review' has resulted in an ever-increasing number of reform announcements and public consultations.

As we entered 2013, we had a fairly clear picture of the reforms on the way. However, every week seems to sharpen the focus of the emerging picture. More detail of the changes and their timing is revealed. On 14 March, the Government published a revised timetable for implementation of the reforms. Expressed in 'seasons' rather than precise dates, the new timetable has pushed back many of the reforms from the overambitious timetable set in December last year.

Some of the latest announcements simply confirm what was expected while other announcements contain very significant substantive and timing changes.

Here, we provide a full update on where we are now with the reforms. However, for a short, sharp update of the key changes, see our 'Employment law reform snapshot'.

Spring 2013

Redundancies

Collective consultation periods and guidance

From 6 April 2013, where an employer proposes making 100 or more employees redundant within a 90-day period, the minimum consultation period that must be undertaken before the first redundancy can take effect will be reduced from 90 to 45 days. The existing 30-day minimum period where an employer proposes making at least 20, but fewer than 100 employees, redundant will remain unchanged.

When considering whether the shortened consultation period will apply, it is the date on which the proposals are made which is key. Simply delaying the start of the consultation period until 6 April 2013 will not lead to a 45-day consultation if the proposals were formed before then.

In contrast, the current 90-day maximum award for a 'protective award', where an employer has failed to comply with its duty to consult, will not be reduced but remains a punitive sanction.

A new non-statutory Code of Practice will also be issued by ACAS. The Code is still awaited and is intended to address the principles and behaviours behind a good quality consultation. In particular, it will provide guidance on the meaning of "establishment". The Code is also expected to cover issues such as when consultation should begin, site closures and insolvency situations. While the Code will provide some welcome guidance, remember the Code will be non-statutory, i.e. not binding on tribunals and courts and therefore of limited impact due to ever-changing case law.

However, Employment Appeal Tribunal (EAT) guidance is expected later this year in the case concerning the collapse of Woolworths. The union is challenging a tribunal decision that each individual store amounted to a separate establishment. As a result, those working in a store with fewer than 20 employees were not entitled to be collectively consulted (USDAW v WW Realisation 1 Ltd).

The Government has also decided to legislate to specifically exclude employees on fixed-term contracts "which have reached their agreed termination point" from collective redundancy consultation. Only those employees whose fixed-term contracts are about to end will be excluded. So, fixed-term employees whose contracts are not due to end will still need to be included. In effect, the Government is enshrining in legislation the decision of the Scottish Employment Appeal Tribunal in University of Stirling v University and College Union (despite the Stirling case itself being under appeal).

Family friendly

Unpaid parental leave

Currently, each parent with one year's continuous service with their employer has the right to 13 weeks' unpaid leave per child which can be taken at any time before their child's fifth birthday. Parents of disabled children can take 18 weeks' unpaid leave until their child's eighteenth birthday. No more than four weeks' leave can be taken in any one year and leave must be taken in one-week blocks.

On 8 March 2013, the amount of unpaid parental leave that can be taken per parent per child increased from 13 to 18 weeks in order to comply with the revised EU Parental Leave Directive.

Separately, from 2015 each parent will have the right to take the unpaid parental leave at any time until their child's eighteenth birthday. This comes as part of the announced flexible parental leave proposals (see below).

Statutory payments

From 7 April 2013, the standard rates of statutory maternity, paternity and adoption pay increase from £135.45 to £136.78 per week.

Equality

Third party harassment

Section 40 Equality Act 2010 requires businesses to take reasonable steps to prevent persistent harassment of their staff by third parties. The Enterprise and Regulatory Reform Bill (ERRB) will remove the provision on third party harassment, which the Government described as unworkable.

Regardless of the repeal of section 40, it will still be open to an employee to argue that under section 26, an employer's failure to act in relation to third party harassment itself amounts to unwanted conduct.

This change is subject to the ERRB receiving royal assent. Despite the Government stating that the repeal will take effect in March 2013, it is more likely to be April 2013.

Discrimination questionnaires

Section 138 Equality Act 2010 sets out the questionnaire procedure that enables an individual who thinks he or she has been discriminated against to gather information from his or her employer. The ERRB will remove the statutory procedure which the Government describes as failing to increase pre-hearing settlements and instead creating burdens and risks.

While removing the formal procedure, claimants will still be able to seek such information either through pre-action requests, or applications to the tribunal for orders for further information or disclosure. Employers who fail to answer, run the risk of a tribunal drawing inferences of discrimination.

This change is subject to the ERRB receiving royal assent. Despite the Government stating that the repeal will take effect in March 2013, it is more likely to be April 2013.

Caste discrimination

An amendment has been added to the ERRB which will add 'caste' as a specific protected characteristic under the Equality Act 2010. The Government opposed the amendment, instead favouring an education campaign. However, the House of Lords passed the amendment on 4 March 2013. Their Lordships concluded that there is clear evidence of caste discrimination in the public sphere.

We wait to see if the Government will now accept the amendment without further challenge. At present, whether this new protected class will make it on the statute books is highly uncertain.

Sickness absence

Statutory payments

From 6 April 2013 the standard rate of statutory sick pay increases from £85.85 to £86.70 per week.

Wages

National Minimum Wage

The Government will simplify the national minimum wage legislation. The existing 17 pieces of legislation will be consolidated into one set of regulations by the end of April 2013.

Employment agencies

Employment businesses and agencies

On 17 January 2013, the Government published a consultation on its proposals to simplify and streamline the regulation of the recruitment sector under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. The Government proposes:

  • Employment businesses and agencies will continue to be prevented from charging fees to work-seekers. However, the new legislation will go further and require that employment businesses cannot force work-seekers to pay for additional services, such as accommodation, training or CV writing.
  • Clarity on who is responsible for paying agency workers.
  • Agency workers should not be hindered from moving between jobs, and connected with this, temp-to-perm transfer fees should be reasonable.
  • Agency workers should have confidence to use the recruitment sector and must be able to assert their rights. The consultation seeks views on the current enforcement regime and whether individuals should have greater powers to enforce their own rights at an employment tribunal under the Employment Agencies Act 1973 and Conduct Regulations.

The consultation closes on 11 April 2013.

Pensions

Workplace pension reform

Following the introduction of workplace pension reform from October 2012, ever-increasing numbers of businesses will follow the UK's largest employers in having to start automatically enrolling workers during 2013. The reforms affect all employers, irrespective of their size or type of business.

For the first time, employers must automatically enrol certain workers into a pension scheme that meets certain quality criteria. And, also for the first time, employers will have to pay a minimum level of contributions, with contributions gradually increasing during a phasing period, up to "steady state" (when overall contribution levels must be achieved) in 2018.

The 1 October 2012 milestone for auto-enrolment affected just four of the UK's employers. The New Year opened with a 1 January 2013 staging date for those employers employing between 30,000 and 49,999 workers. By the end of 2013, all employers with more than 499 workers will be subject to the automatic enrolment requirements.

Summer 2013

Termination agreements

Pre-termination negotiations & settlement agreements

Under the Enterprise and Regulatory Reform Bill (ERRB), compromise agreements will be renamed 'settlement agreements'. The Government had hoped to simplify the current provisions governing the validity of compromise agreement through a so-called 'blanket waiver', but this has been dropped. However, employers will be given more freedom to have discussions with employees about a proposed settlement outside the context of an existing dispute.

The ERRB contains a clause to prevent a tribunal, when considering the fairness of a dismissal, from taking into account any offer or settlement discussion held with a view to terminating employment. The new statutory provision will enable an employer to raise a performance or capability issue and include within that discussion a proposal to end the employment relationship on negotiated terms. That conversation would then not be able to be used as evidence that a subsequent decision to dismiss was predetermined, regardless of procedural obligations, in later ordinary unfair dismissal proceedings.

In essence, this is an extension of the current 'without prejudice' discussion principle to a situation where there is not yet an existing dispute. Currently, although the label is often applied, 'without prejudice' conversations only genuinely take place where they are about resolving an existing dispute between the parties.

The new provision may provide comfort to employers seeking to resolve a delicate situation. However, beware the important limitations. The statutory provision will only prevent what is stated in the settlement offer, or during discussions about it, from being admissible in ordinary unfair dismissal proceedings. This means that the fact and content of such offer or discussions may be referred to in relation to other claims, such as automatic unfair dismissal, breach of contract and discrimination. Also, no "undue pressure" can be placed on the employee and the provision will not apply where the employer's behaviour has been "improper".

The new statutory provision will be supplemented by an Advisory, Conciliation and Arbitration Service (ACAS) Statutory Code of Practice and guidance. On 12 February, ACAS launched a public consultation on the draft Code which runs until 9 April. The draft Code sets out a non-exhaustive list of what might constitute 'improper behaviour' and 'undue pressure', resulting in the removal of the protection surrounding the settlement offer:

Improper behaviour

  • All forms of harassment that include intimidation through the use of offensive words or aggressive behaviour.
  • Physical assault and other criminal or wrongful behaviour.
  • Victimisation for invoking/seeking to invoke a statutory right.
  • Discrimination.

Undue pressure

  • An employer not allowing an employee a minimum of seven working days to consider an offer.
  • An employer reducing the value of a financial offer during the seven working days an employee has to consider the offer.
  • An employer saying before any form of disciplinary process has begun that if the offer is rejected then the employee will be dismissed.
  • An employee threatening to undermine an organisation's public reputation unless the employer agreed to sign.

ACAS is currently seeking views on the above, in particular the proposed minimum seven working days time period for an employee to consider an offer. Further, ACAS welcomes views as to whether it should include examples of behaviour that would not be deemed as improper or undue pressure. For instance, stating likely alternative processes to be entered in to if no agreement is reached, such as a formal disciplinary process.

The draft Code also recommends that while not a requirement of the legislation, initial offers should be set out in writing and employees be allowed to be accompanied at a meeting. The draft Code also includes optional template settlement letters. However, ACAS is considering moving these to non-statutory guidance.

Subject to the ERRB receiving royal assent and the ACAS Code being in place, the relevant provisions are expected to be brought into force 'this summer'.

Public interest disclosures

Whistleblowing

Linking a dismissal to a protected disclosure is an attractive objective for a claimant, as there is no financial cap on compensation and no service requirement. Disclosing information about a 'breach of any legal obligation' is one of the six possible categories of a qualifying disclosure under the Public Interest Disclosure Act 1998. Despite the use of 'public' in the Act's title, this category has been interpreted broadly in case law to include a breach of the worker's own employment contract.

As introduced in May 2012, the ERRB contains a provision to amend the existing statutory provision to emphasise the 'public interest' nature of the Public Interest Disclosure Act. The change will mean that for a whistleblowing claim under the Employment Rights Act, the claimant must show that he or she believed their disclosure was made in the public interest and that their belief was reasonable in the circumstances.

Essentially, workers will no longer be able to bring whistleblowing claims relating to a breach of their own contract of employment, unless they can show it is in the public interest; for example, where an employee complains about a general discriminatory culture or practice in the workplace.

While the 'public interest' requirement restricts the current potential scope, two significant further amendments to the whistleblowing provisions were recently announced, extending the potential scope.

On 14 February 2013 the Government tabled an amendment to remove the 'good faith' requirement to establish a protected disclosure in whistleblowing cases. Instead, tribunals will have a new power to reduce compensation by up to 25% if the disclosure was not made in good faith and the tribunal considers it just and equitable in all the circumstances to do so.

On 21 February 2013, the Government announced further amendments which will make employers vicariously liable where its employees victimise a whistleblowing colleague. Detrimental acts of one co-worker towards another who has blown the whistle will be treated as being done by the employer, therefore making the employer responsible. This will be subject to a statutory defence available to an employer who is able to show that it took all reasonable steps to prevent the detrimental treatment of a co-worker towards another who blew the whistle. In addition, a co-worker who has victimised a colleague may be personally liable.

Subject to the ERRB receiving royal assent, the new provisions are expected to come into force 'this summer' having been pushed back from April.

Unfair dismissal

Compensation

There are two elements to an unfair dismissal award: the basic and compensatory awards. The basic award is calculated on the same basis as a statutory redundancy payment, subject to a cap which is currently £13,500 (since 1 February 2013). There is no current proposal to change the basic award.

The compensatory award is an amount the tribunal considers to be "just and equitable", having regard to the loss suffered by the employee insofar as the employer is responsible. It is generally subject to a statutory cap: currently £74,200 (since 1 February 2013). This cap is not applied in some cases; notably where there is a dismissal as a result of having made a protected disclosure, or for having asserted a statutory right.

The Government believes the current cap has contributed to unrealistic perceptions about the level of tribunal awards. The (ERRB) contains a clause to further limit unfair dismissal compensatory awards.

The existing 'overall' cap of £74,200 will remain. However, a secondary 'individual' cap of 12 months' pay will also be applied where the claimant's annual wage is less than the overall cap. This means that for employees earning an annual salary in excess of the overall cap, the overall cap will apply. For employees having an annual wage less than the overall cap, compensation will be capped at 12 months' pay (the individual cap).

Subject to the ERRB receiving royal assent, the change to the compensatory award cap is expected to be brought into force in the summer.

Qualifying service

Generally, the right to bring a claim for unfair dismissal is dependant upon the employee having the requisite period of continuous service: one year for those employed before 6 April 2012 and two years for those employed on or after 6 April 2012. However, section 108 of the Employment Rights Act 1996 contains a list of reasons for dismissal where the qualifying service requirement is dispensed with. The list includes, among other reasons, dismissal as a result of having made a protected disclosure, trade union membership, maternity and asserting a statutory right. Dismissals relating to 'the employee's political opinions or affiliation' will now be added to the list.

On 13 February 2013, the Government proposed an amendment to the ERRB to bring existing legislation in line with the European Court of Human Rights' (ECtHR) ruling in Redfearn v United Kingdom. In that case, the ECtHR ruled that the UK is in breach of Article 11 of the European Convention on Human Rights by preventing individuals who do not have the requisite qualifying period of service from making claims for unfair dismissal on grounds of political opinion or affiliation.

Please note that this does not mean that a dismissal relating to 'an employee's political opinions or affiliation' will be automatically unfair. Simply, that the qualifying service period will not apply.

The change will come into effect two months after the ERRB receives royal assent and apply to dismissals taking place after that date.

Tribunal reform

Tribunal fees

From the summer, fees will be introduced into the employment tribunal system. Basically, fees will be charged at two stages: the first upon issue of the claim; and the second before the hearing. Those on low incomes will be excused payment. Tribunals will be given a discretionary power to order the losing party to reimburse any fees paid to the successful party.

The level of the fee will depend on the nature of the claim. Level 1 claims, covering disputes over matters such as unauthorised deductions from wages and unpaid redundancy payments, will be subject to a £160 issue fee and £230 hearing fee. Level 2 claims, which include claims for unfair dismissal, discrimination, equal pay claims and whistleblowing, will be subject to a £250 issue fee and £950 hearing fee.

In addition to the two main charging points, there will also be five application-specific fees: counterclaim (£160), judicial mediation (£600), setting aside a default judgment (£160), application to dismiss following settlement (£60) and application for review (£100 for Level 1 claims and £350 for Level 2 claims). The first four will be payable by the employer and the fifth by the party making the application.

The Ministry of Justice has announced that an online facility to pay employment tribunal fees will be introduced by July 2013, suggesting that the new fee regime will come into effect then.

The operational changes to the employment tribunal system are being driven by a demand for increased efficiency and a shift in the funding of the service, moving away from the taxpayer and onto the system users. Payment of fees will no doubt affect the mind set of many tribunal users. Reimbursement of fees will inevitably be a feature of any settlement negotiations. Will we see a spike in settlements being agreed just before the significant hearing fee is due to be paid?

Tribunal rules

Following the Underhill Review, new employment tribunal rules are expected to be introduced in the summer. The new draft rules use simpler language and are less than half the length of the old rules, in an effort to make them more understandable by unrepresented parties.

While the final version of the new rules is now expected to be published in May, from the draft, a notable proposed change is the introduction of a 'sift' stage. A judge will review the case on the papers once the claim and response have been received to make directions or, if appropriate, consider whether to strike out a party's case. Other changes include:

  • Tackling non-payment of tribunal awards, specifically a proposed 14-day deadline for payment after which interest would accrue.
  • Introduction of Presidential guidance to manage expectations and ensure consistency in case management.
  • A new procedure for preliminary hearings.
  • A simplified procedure for withdrawing and dismissing claims.

The new rules were to have been brought into force in April. However, their introduction has now been delayed to the summer to coincide with the introduction of tribunal fees (see above).

Vetting and barring

Goodbye CRB checks, hello portable DBS checks

The Disclosure and Barring Service (DBS) was created by the merger of the Criminal Records Bureau (CRB) and the Independent Safeguarding Authority (ISA) on 1 December 2012. As a consequence, CRB checks are now referred to as 'DBS checks'.

So that employees and volunteers will no longer have to apply for a new check each time they apply for a job, 'portable' checks are being introduced. On payment of a fee, employers that register with the DBS can, in conjunction with job applicants for designated posts, apply for access to standard and enhanced criminal records checks. Once a DBS check has been completed, the results are available online for employers to confirm that no new information has been added since the check was originally conducted. This means that DBS checks will be portable and that an employee will not have to have a new check every time he or she starts a new job. Volunteers will be able to use the service for free.

Originally due to be introduced from 1 March 2013, their introduction has been delayed to 'summer' 2013.

Agency workers

Review of the Agency Workers Regulations

Even as the Agency Workers Regulations (AWR) came into force on 1 October 2011, the Government committed to keeping them under review. A formal review of the operation of the regulations and "opportunities to simplify it" is expected to be launched in June 2013. The review will focus on the paperwork obligations associated with the AWR.

Autumn 2013

Employment status

Employee shareholders

The Government is pushing ahead with its plans to introduce the new 'employee shareholder' employment status - despite 92% of respondents to the brief public consultation viewing the plans in a negative or mixed way.

Employee shareholders will receive shares with a value of at least £2,000 in return for giving up specified employment rights. The shares will be exempt from capital gains tax, up to a maximum threshold of £50,000.

In exchange for the shares, the employee shareholders will give up the right to:

  • Claim unfair dismissal (except in health and safety cases, automatically unfair cases, or cases where the dismissal is discriminatory under the Equality Act 2010).
  • A statutory redundancy payment.
  • Make a statutory flexible working request.
  • Make a statutory request in relation to study or training.

Employee shareholders will also have to give 16 weeks' notice to return early from additional maternity, adoption or paternity leave (as compared with eight weeks for employees).

This new employment status is being introduced as part of the Growth and Infrastructure Bill currently before the House of Lords on its journey through Parliament. While some aspects of the proposal have faced severe criticism from many peers, no amendments have yet been made. Originally intended to be introduced from April 2013, the introduction of the new 'employee shareholder' status has now been pushed back to 'autumn' 2013.

It will be interesting to see how many businesses are willing to give up a share of their equity to benefit from employees with more limited employment rights, in particular new startups. Arguably, the two most significant rights being signed away are the right to claim ordinary unfair dismissal and statutory redundancy payments.

But no new joiner will have ordinary unfair dismissal or redundancy rights for two years from joining in any event. Also, new joiners will remain protected against those categories of 'automatically' unfair dismissals where no qualifying service is required (e.g. whistleblowing) and from discrimination. Accordingly, employers will still need to tread with caution with employee shareholders.

TUPE

Stripping away gold-plating?

Following concerns that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) gold-plate the Acquired Rights Directive and are overly bureaucratic, the Government is consulting on the reform of TUPE.

On 17 January 2013, the Government published a consultation seeking views on its intention to:

  • Repeal the "service provision change" provisions introduced in 2006.
  • Repeal the specific requirements to provide Employee Liability Information.
  • Amend the restrictions in Regulation 4 (changes to terms and conditions) and Regulation 7 (protection against dismissal because of transfer) to "more closely reflect the wording of the Directive ".
  • Limit the future applicability of terms and conditions derived from collective agreements to one year from the date of transfer.
  • Amend the meaning of "economic, technical or organisational reason" (ETO), entailing changes in the workforce so as to cover changes in the location of the workforce.
  • Allow a transferor to rely upon a transferee's ETO in respect of pre-transfer dismissals.
  • Allow the transferee to commence collective redundancy consultation pre-transfer.
  • Allow micro-businesses to consult directly with employees, rather than through representatives, where no union or existing employee representatives are in place.

While the Government indicates that it would have supported a move to permit greater post-transfer harmonisation of terms and conditions, it acknowledges this would be incompatible with the Acquired Rights Directive (ARD) in light of current case law. What the Government is suggesting instead is that Regulation 4 may possibly be amended so that while changes by reason of the transfer itself would remain prohibited (unless the transferee is able to establish an ETO reason for the change), the parties would be able to agree changes they could have agreed had there not been a transfer. We wait to see if more flexibility is achievable.

Likewise, the change to Regulation 7 would result in a potentially more restricted protection: only dismissals by reason of the transfer itself would be automatically unfair. Under the current provisions, a dismissal for a reason "connected" to the transfer is also automatically unfair unless there is an ETO defence.

The concept of 'service provision change' transfers was introduced by the previous Government in 2006 and does not derive from the ARD. Last year, case law revealed a shift to a more restrictive, less purposive approach by the tribunals and courts to 'service provision change' transfers. Instead of providing more certainty, the 'new' statutory provisions, rather inevitably, resulted in numerous legal challenges. It now looks like we will have a wholesale repeal of the service provision change rules. So, back to the pre-2006 position?

The consultation runs until 11 April 2013. The Government states "If the consultation supports change", the Government intends to bring changes into force as early as October this year. It will be interesting to see what the Government interprets as responses which 'support change'. In the case of the introduction of employee shareholder status, it decided to press ahead with its plans despite 92% of respondents viewing the plans in a negative or mixed way. No doubt change is coming.

Workplace disputes

Disciplinary process guidance

ACAS is to produce "a simple online guidance tool on the entire disciplinary process". Aimed at small businesses, the online tool is due to be launched in 'autumn' 2013.

Spring 2014

Tribunal reform

Pre-claim conciliation

The ERRB contains a clause to introduce a requirement for most types of potential tribunal claims to be lodged with ACAS in the first instance. ACAS will offer parties the opportunity to engage in early conciliation in an attempt to resolve disputes without recourse to an employment tribunal.

While it will be a requirement for prospective claimants to contact ACAS before they can lodge proceedings at the employment tribunal, the decision whether to accept the offer of early conciliation will be entirely voluntary. So the requirement is to merely contact ACAS, rather than actually take part in pre-claim conciliation as originally mooted.

On 17 January 2013, the Government published a consultation on how the process will operate in practice which closed on 15 February 2013. Under a proposed two-stage process, a potential claimant will simply need to fill in an early conciliation form. This only requires basic contact details. Details of the claim itself are not required.

An Early Conciliation Support Officer (ECSO) will then make 'reasonable efforts' to contact the claimant to obtain basic information and outline the conciliation process. If the claimant does not wish to participate in early conciliation after being contacted or cannot be contacted (deemed refusal), ACAS will issue a certificate confirming the claimant complied with their duty to contact ACAS. They will then be able to present a claim to a tribunal.

Where the claimant does wish to participate in early conciliation, the ECSO will pass the matter to a conciliator who will then contact both parties. If the respondent does not wish to participate, the conciliator will immediately issue the compliance certificate. If the respondent does agree, the conciliator will have up to one calendar month (which can be extended by a further two weeks) to facilitate a settlement.

Subject to the ERRB receiving royal assent, ACAS announced on 15 February 2013, that it intends to introduce the new system of pre-claim conciliation from April 2014.

On a practical note, resourcing of the increased role for ACAS is a concern. Back in June, Vince Cable indicated that the Government does not have current plans to allocate additional funds to ACAS for its expanded conciliation role. Mr Cable stated that "it is important that it is properly resourced... but we have had no warnings that it cannot handle the processes that we propose to introduce". A bit of wishful thinking perhaps?

Penalties

The ERRB contains a clause to introduce financial penalties for employers who lose a claim. The penalty will be payable to the Exchequer, not the claimant.

A penalty may be levied where the employer's breach has 'one or more aggravating features'. It may be ordered even if a financial award has not been made in favour of the employee.

The level of a penalty will be subject to a minimum threshold of £100 and a maximum ceiling of £5,000. If a financial award has been awarded to the employee, the penalty will be half of the total award made by the tribunal, subject to the minimum and maximum thresholds. A 50% reduction will be applied if paid within 21 days.

The penalty is intended to encourage businesses to have greater regard to what is required of them in law. In particular, the Government states the intention is that penalties are levied where there are 'aggravating features', such as malice or negligence, and not where an employer made an 'inadvertent error'.

On 14 February, a requirement that a tribunal must have regard to the employer's ability to pay any penalty was added to the draft clause. The explanatory notes to the ERRB suggest that it will be for the employment tribunal to decide whether to impose a penalty, taking into account any factors that it considers relevant, including: 'the size of the employer; the duration of the breach of the employment right; or the behaviour of the employer and of the employee'. No doubt arguments over what constitutes an 'aggravating feature' will follow.

Subject to the ERRB receiving royal assent, the new provisions are to come into force in 'spring' 2014.

Equal pay

Private sector gender pay gap information: voluntary reporting or statutory requirement? This has been the debate for years. Equality campaigners have long argued that to tackle the gender pay gap, employers should be required to undertake internal gender pay audits and publish their findings.

The Government is proceeding with a limited step toward required reporting. The ERRB when passed will enable the Secretary of State to give employment tribunals power to order an equal pay audit where an employer is found to have discriminated on grounds of sex in contractual or non-contractual pay.

An audit will not be ordered if an audit has been completed in the last three years, the employer has transparent pay practices or the employer can show a good reason why it would not be useful. Employers who do not comply with an order for a pay audit will be subject to a civil financial penalty.

A further consultation is expected soon on the exact details of how the audits will operate and what publication requirements will apply. When such power will in fact be given to tribunals is still unclear, but it is unlikely to be before 2014.

Sickness absence

Independent Assessment Service

A 2011 report, "Health at work: an independent review of sickness absence" by Dame Carol Black and David Frost CBE, made a number of recommendations aimed at ways of minimising loss of work due to ill health.

The report included recommendations such as:

  • Establishing a new Independent Assessment Service which, after an employee has been absent for four weeks, can provide expert advice on whether an employee can return to work and, if so, how they can be supported.
  • Revised 'fit notes' so that an individual's capacity to return not only to their own job, but to work more generally, are considered.

On 17 January 2013 the Government published its response in which it has largely accepted the report's recommendations. In particular:

  1. A health and work assessment and advisory service will be introduced from 'spring' 2014. The service will provide:< >A state-funded assessment by occupational health professionals for employees who are off sick for four weeks or more.Employers and employees with advice on overcoming the barriers that prevent employees from returning to work.Case management for employees with complex needs who require ongoing support to facilitate their return to work."Signposting to appropriate interventions" including Universal Jobmatch for those employees able to work, but unable to return to their current job.Revised fit note guidance was also published on 7 March 2013, emphasising the importance of assessing an individual's health condition.
  2. The Statutory Sick Pay record-keeping obligations are also to be abolished, allowing employers to keep records in a flexible manner which is more suited to their organisation.

Family friendly

Flexible working

The right to request flexible working will be extended to all employees who have worked for their employer for 26 weeks or more. The current statutory procedure which governs the right to request flexible working will be repealed. It will be replaced by a duty on the employer to consider requests for flexible working 'in a reasonable manner' and to notify the employee of its decision within three months. The proposed changes are set out in the Children and Families Bill (CFB) published on 4 February 2013.

A new ACAS statutory code of practice will be produced on the handling of requests. On 25 February, ACAS published a consultation on the draft code which runs until 20 May 2013. The draft code is 'deliberately concise', only one and half pages, and 'principles-based'.

The new regime is intended to be much simpler and to give employers the freedom to operate their own procedures. However, employers should note that all requests, including any appeals, must be considered and decided on, within a period of three months from first receipt, unless the employee has agreed to extend this period. Also, employers will still only be able to reject a request for flexible working based on one of the statutory grounds (as in the current regime).

Subject to the CFB receiving royal assent, the Government intends to introduce this change in 'spring' 2014.

2015 and beyond

Family friendly

Flexible parental leave

Family friendly leave will be significantly reformed from 2015. While retaining the existing maternity leave and ordinary paternity leave systems, the additional paternity leave introduced in 2010 will be abolished. Instead, mothers will be able to elect to replace a portion of their maternity leave (other than the compulsory maternity leave period) with a new system of 'shared parental leave', shared between the mother and the father/mother's partner which may even be taken concurrently.

The original proposed name for the new leave was 'flexible' parental leave. However, it has now been renamed 'shared' parental leave and pay. This is to avoid confusion with the EU-derived entitlement to unpaid parental leave which may be taken flexibly.

Under the new system, mothers who meet qualifying conditions can elect to end their maternity leave and pay period early and convert any remaining balance to shared parental leave and pay. Notable difference between shared parental leave and the existing additional parental leave system include:

  • All the maternity leave and pay periods will be available for sharing, save for the compulsory maternity leave period being the first two weeks (four weeks for factory workers).
  • The mother will only need to specify when she intends to end her maternity leave period to transfer the remaining leave; she does not need to have first returned to work. This will enable the father to start taking shared parental leave while the mother is still on maternity leave, if the couple so wish.
  • Parents will be able to take shared parental leave in minimum blocks of one week, in a pattern of their choice, provided their employers agree. In cases where employers and employees cannot agree on a proposed pattern of leave, the default position will be that the employee takes the full amount of leave available to them in a single continuous block, starting on a date of their choosing.
  • Shared parental leave can be taken by either the father/mother's partner or the mother. This means the mother can take a period of maternity leave, return to work for a period and then take a period of shared parental leave.

Fathers/mothers' partners will also be given a new right to take unpaid time off work to attend two antenatal appointments, limited to 6.5 hours per appointment.

The current adoption leave system will remain but with some significant enhancements. Adoption leave will become a 'day one' right with the ability to convert to the new shared parental leave system. The level of statutory adoption pay will be increased to mirror statutory maternity pay. Additionally, surrogacy arrangements will be covered by adoption leave, with the right to unpaid leave for the intended parents to attend two antenatal appointments.

The proposed changes are set out in the Children and Families Bill published on 4 February 2013. However, much of the detail on how the new system will work in practice will be set out in future regulations. As such, on 25 February 2013, the Government published a consultation on 'Shared Parental Leave and Pay Administration'. The consultation runs until 17 May 2013 and invites responses on issues such as:

  • Eligibility criteria (each parent must have been employed by his or her employer for 26 weeks by the fifteenth week before the baby's due date and meet an 'economically active' test).
  • Notice (proposed eight weeks).
  • Agreement of patterns of leave period (proposed two weeks from notice).
  • Time limit in which to use the shared parental leave (52 weeks from (option 1) start of maternity leave or (option 2) from birth).
  • Keeping in touch (KIT) days (proposed ten KIT days per parent).
  • Right to return to the same job (maintained for those returning from (option 1) the first continuous block of 26 weeks or less, or (option 2) leave that totals 26 weeks or less.

Although not coming into force until 2015, employers need to start considering the reshaping of the existing maternity, paternity, adoption and parental leave systems. In particular, employers should consider terms of any existing enhanced occupational maternity schemes.

Childcare Vouchers

Since April 2005, employers have been able to opt in to offer childcare vouchers as a benefit. Under the current employer supported scheme, parents can receive vouchers for childcare worth up to £55 a week tax free, commonly as part of a salary sacrifice scheme.

On 19 March 2013, the Government announced plans for a new government direct childcare voucher scheme. From autumn 2015, households will be eligible where both parents work (one parent in the case of lone parent families) and each parent must be earning less than £150,000 a year. Those on tax credits will not be eligible.

When the government direct scheme is in place, employer supported schemes will become closed to new participants. However, parents already participating in an employer supported scheme will be able to continue to do so.

Training

Apprenticeships

On 14 March 2013, the Government published a consultation on the future of apprenticeships which runs until 22 May 2013. The Government's plans include:

  • Employers putting recognised and meaningful industry standards at the heart of every apprenticeship.
  • Targeting every apprenticeship at a skilled job, involving substantial new learning that will provide the foundations for a career and a springboard for progression.
  • Delivering training and accreditation of existing fully competent workers separately.
  • Focusing apprenticeships on the outcome: clearly setting out what apprentices should know and be able to do at the end of their apprenticeship.

The Government will set out implementation plans in autumn 2013. However, it has already indicated that it hopes the first teaching of the new apprenticeships will begin in 2014/2015.

Working time

Holidays

The inter-play between taking paid holiday and being on sick leave will continue to be a grey area. Reconciling the recent European case law on this topic with the provisions of the Working Time Regulations 1998 (WTR) continues to be difficult.

Following European case law, a worker "prevented" from taking their annual leave due to sickness, must be allowed to carry it over into the subsequent leave year. This includes sickness that arises while on annual leave. The UK courts have also clarified that where a worker is on sick leave for an entire leave year, the failure to request or defer annual leave does not affect that individual's right to carry their leave over into a new holiday year.

But does this relate only to the first four weeks of statutory leave (Regulation 13 leave) which derives from the Working Time Directive (WTD), or does it also extend to the additional 1.6 weeks statutory leave entitlement under regulation 13A WTR? Does it extend even further to any enhanced contractual leave entitlement?

The Government appears to be struggling to resolve the discrepancies between the WTD case law and the provisions of the WTR. Back in May 2011, the Government's 'Consultation on Modern Workplaces' set out proposals to amend the WTR so that:

  • The restriction on carrying days over in relation to Regulation 13 leave (the first four weeks of leave) would be removed for those on sickness or family leave absence, where it is not possible to reschedule the leave in the current leave year.
  • The restriction that regulation 13A leave (additional 1.6 weeks) can only be carried over by agreement be removed for those on family leave absence, but retained for those on sickness absence.
  • In relation to all workers, to allow employers to "buy out" the Regulation 13A leave (1.6 weeks).
  • A new default order in which Regulation 13 and Regulation 13A is deemed taken.

Nearly two years on, we still await full details of the proposals suggesting that resolving the discrepancy between the case law and WTR provisions is proving difficult.

Equality

Board equality

The European Commission has abandoned its plans to introduce a mandatory quota for achieving a gender balance on boards. Instead, a draft Directive has been published which will set an objective for EU-listed companies to achieve 40% representation of "the under-represented sex" among non-executive directors by 1 January 2020, or 1 January 2018 in the case of public undertakings.

Companies that do not meet the objective must ensure that their recruitment processes are transparent and unbiased, and give preference to equally qualified female candidates. If companies fail to meet the objective by the target dates, they must provide an explanation. Companies will also be required to set a voluntary target for the number of executive directors.

On the domestic front, the Business, Innovation and Skills Select Committee announced a new inquiry into women in the workplace in September 2012. The Committee is considering topics of pay and job segregation inequalities, the impact of the current economic crisis on female employment, gender stereotyping in particular occupations and the promotion of part-time working. Under the first phase, the Committee sought written submissions by the end of last year. The Committee is now considering those submissions.