In this round-up of recent employment law news, we report on the recently published Enterprise and Regulatory Reform Bill, and a newly launched consultation on changes to rules on collective redundancies.

Enterprise and Regulatory Reform Bill

Further to our announcement last month on the publication of the Enterprise and Regulatory Reform Bill, we consider below the contents of the Bill in more detail.  The Bill, if passed, will introduce changes in relation to encouraging early conciliation of claims, compensation for unfair dismissal and financial penalties for employers who lose unfair dismissal claims amongst other things.  The key features include:

  • Early conciliation: the Bill provides that claimants will be obliged to send information about their claims to ACAS before they can bring an Employment Tribunal claim; ACAS will then have a duty to try to promote a settlement.  Time limits for bringing tribunal claims will be extended to enable settlement discussions to take place;
  • Unfair dismissal compensation:  the Bill contains a power for the Secretary of State to vary the cap on unfair dismissal compensatory awards, by substituting a specified amount of either:
  1. between one and three times average annual earnings, based on official figures (  the current median average earnings is £26,200); or
  2. an individual's week pay multiplied by a specified number, no less than 52 (it is not  made clear whether an individual's week's pay would be subject to the statutory limit on  a week's pay); or
  3. the lower of the above two amounts.Different caps could be applied to different  categories of employer; so, for example, the limit on compensation could be lowered  for SMEs;
  • Financial penalties: Tribunals will have the power to impose financial penalties on employers who have breached employment rights where there have been ‘aggravating features’.  The Bill does not specify what these aggravating features would be.  The penalty would be 50% of any compensation awarded to the claimant, subject to minimum and maximum levels of £100 and £5,000 respectively, with a 50% reduction for payments made within 21 days.  The penalties will not apply to claims presented within six months of the Bill being passed;
  • Whistle-blowing: protection for whistleblowers in the Employment Rights Act 1996 will be amended so that it only applies where the individual has made a disclosure which he or she believes to be “in the public interest”;
  • Rapid resolution: instead of all Tribunal claims being dealt with by an Employment Judge or Tribunal panel, the Bill will enable some proceedings to be determined by “legal officers”.  The idea behind this is that it will enable less complex claims to be dealt with more quickly and cheaply;
  • Compromise agreements: these will be renamed “settlement agreements”.  There is no reference in the Bill to amending rules surrounding compromise agreements to allow blanket settlements of all and any claims an individual might have, without having to specify each potential claim individually, and it seems that consultation on this point is still on-going;
  • Employment Appeal Tribunal: following the recent changes to Employment Tribunal Procedure, the usual rule will be for appeals to the EAT to be heard by a judge sitting alone;
  • Indexation of awards: increases to a week's pay will be rounded up to the nearest £1 instead of the current £10;
  • “Protected conversations”: after the Bill was published, an amendment to the Bill was announced, to insert a clause into the Employment Rights Act 1996 providing that, subject to certain exceptions, where an offer is made or discussions are held with an employee with a view to terminating employment, these cannot be taken into account in unfair dismissal proceedings.  This is similar to the previously discussed “protected conversations”.  However, this will not apply in discrimination claims, automatic unfair dismissal claims or breach of contract claims, or if the employer acts improperly.  The impact of these many exclusions seriously calls into question whether these provisions are, therefore, going to have any meaningful effect.  

Notable by its absence from the draft Bill is a provision dealing with “compensated no-fault dismissals”, a feature of the recent consultation on reforms.  The Government have confirmed that this proposal will not be pursued.  The Bill is currently being debated in Parliament, with amendments no doubt likely to arise along the way.  Initial interest is likely to be focused on caps to the unfair dismissal compensatory award, something that was not a feature of the consultation which preceded the draft Bill, as well as the pre-claim ACAS conciliation and the proposed introduction of protected conversations.

Consultation on changes to collective redundancy rules

Following its call for evidence in November 2011, the Government has launched a consultation on proposed changes to collective redundancy rules.  Proposed reforms are based around three objectives, namely:

  • a reduction of the 90 day consultation period, which applies when there is a proposal to dismiss 100 employees or more, to either 30 days (as it is currently for redundancies affecting 20-99 employees) or to 45 days;
  • the introduction of a non-statutory code of practice for collective redundancies covering matters such as when consultation should start, what it should cover and when it can be considered complete; and
  • the improvement of government guidance on support available to ensure it is accessible and accurate.

The consultation is open until 19 September 2012, and can be accessed here.