La Revue Squire

UK - The Enterprise and Regulatory Reform Bill : Employment Law Implications


Rédigé par Claire Shepherd le 13 Novembre 2012


The UK government introduced the Enterprise and Regulatory Reform Bill to parliament on 23 May 2012, comprising significant employment law changes as well as changes to competition law, copyright and environmental law. The employment law changes are intended to completely reform the employment tribunal system and improve efficiency by encouraging the earlier resolution of disputes. The hope is that this, in turn, will promote long term businesses growth, support smaller businesses and create a more flexible labour market. However, although the reforms appear at first glance to constitute radical improvements to UK employment law, the proposals appear to be insufficiently thought through and many significant flaws are yet to be resolved.

Mandatory pre-claim conciliation procedure

The idea of introducing a mandatory pre-claim conciliation procedure is to reduce the number of claims reaching tribunals by encouraging the earlier settlement of claims. Currently parties are encouraged to attempt settlement before and during proceedings, and they can do this via ACAS. ACAS is a public body, run by an independent council consisting of employers, trade unions and rights organisations, who currently offers arbitration and mediation services to parties in employment disputes. However, under the proposed procedure this will no longer be an optional service for parties. Both the parties and ACAS will be under a duty for a set period to attempt to reach a settlement. Only once it is established that settlement has not been achieved within this period can a party submit a claim to tribunals.

A four step procedure is being proposed:

1. A claimant would send ACAS certain information about the claim in a certain form as prescribed under regulations;
2. ACAS sends this on to a conciliation officer;
3. The officer must then try to promote a settlement within a prescribed period (it is suggested this would be 1 month);
4. If settlement not reached, the officer issues certificate to that effect, which the claimant needs in order to then submit a claim to the tribunals.

The new procedure is fairly simple at first glance and although it will mean a much heavier burden on ACAS than it currently experiences ACAS has not yet indicated that it cannot handle the additional workload.


Nevertheless, a significant issue with the new procedure is that adhering to the time limits for bringing claims is now much more complicated. It is proposed that the time limits, such as 3 months for an unfair dismissal claim, will be suspended between steps 1 and 4. If the time limit would have expired during that time, it will instead expire 1 month after the certificate has been received. These new rules will undoubtedly lead to satellite litigation about whether the time limits have been complied with, thus working against the stated aim of alleviating the burden on tribunals.

Additionally, other proposals on the horizon such as the introduction of tribunal fees for claimants could work against the aims of the conciliation procedure. Employers may resist conciliation and wait to see how serious the employee is about their claim, i.e. whether they will pay the tribunal fees, before considering settlement.

Finally, with the obligation to submit certain information on a certain form, as prescribed in regulations, this could prejudice those with poor literacy or numeracy if they are consequently barred from submitting a claim. If the information they provide on the ACAS form differs from that on the tribunal claim, e.g. after consulting a lawyer, would this constitute a new claim that must again be submitted to ACAS? It could lead to the scheme acting as a barrier to justice.

Rapid resolution scheme

This is a proposal for a “legal officer” (as yet undefined) to determine certain low level claims, such as holiday pay. It would be a decision based only on paper, making the process quicker and cheaper.
However, the process would only be undertaken with the parties’ written consent. Claimants are likely to feel naturally cautious about paper only decisions, so
it could be that very few claimants choose this rapid resolution procedure.

Additionally, it would be a mistake to equate low value claims with being straightforward. Claims about holiday pay, although for small sums of money, can become extremely complicated and may not be sufficiently dealt with under such a scheme.

Unfair dismissal compensatory award

Currently a tribunal can award such amount as it considers just and equitable, subject to a statutory cap which has been increasing each year. Under the new proposals the Secretary of State will have the power to vary this statutory cap. This new limit could either be:

1. Between 1 and 3 times the median annual full time earnings (currently approximately between £26,200 and £78,600);
2. A specified number of weeks’ pay (minimum 52 weeks); or
3. The lower of the two amounts

This third option seems to be the government’s preferred option, with the worst case scenario for employees clearly being a cap of 52 weeks’ pay to a maximum of £26,200.

It has been indicated that the cap will be lower for smaller businesses, demonstrating that the focus is less on the actual loss suffered by an employee. It could lead to satellite litigation about how the employer’s size was calculated, could unfairly disadvantage employees on average or above-average earnings and may make people think twice about working for smaller businesses (who the bill was intended to support).

Financial penalties

Under this proposal an employer could be made to pay a financial penalty where a breach of an employment right has one or more ‘aggravated features’, to target rogue employers where there has been a deliberate or malicious breach.

The penalty will be between £100 and £5000, decreased by 50% if paid within 21 days. The penalty will be defined based on the circumstances of the case, as well as the size of the employer, the duration of the breach and the behaviour of both parties.

There is a suggestion that it may help parties to settle, as employers will not want to have the bad publicity of being fined for its conduct. However, the proposal appears to merely provide another means to give tribunals additional funds, given that it is the government who will profit from the penalty and not the individual who has been subjected to the ‘aggravating features’.

Settlement agreements

There is a proposal to change compromise agreements and the way they are used. Firstly, they are to be renamed as ‘settlements agreements’, to eradicate the implication that anyone is surrendering under the agreement. It has also been proposed, more controversially, that employers will be able to offer these settlement agreements to employees before a dispute has even arisen, with the fact and content of those discussions being inadmissible in unfair dismissal proceedings.

The aim is to enable employers to have serious discussions with employees about potentially leaving the company, in the hopes of preventing a dispute from arising, without fear that what is said or done can be used as evidence in any consequential unfair dismissal proceedings. This currently differs from the ‘without prejudice’ rule, which only protects settlement discussions if they are a genuine attempt to resolve a dispute between the parties. The proposal is to protect such discussions even before a dispute has arisen, which would not currently be protected by the ‘without prejudice’ regime.

However, it should be noted that these discussions are only excluded as evidence from unfair dismissal proceedings. They can, therefore, be referred to in any other cases such as automatically unfair dismissal, discrimination and breach of contract.

This means that, for example, if the employee launches a grievance based on the behaviour in the discussions and the grievance is not adequately resolved by the employer, the employee could claim for constructive unfair dismissal and the discussions then form part of the facts of that claim.

Employers will also not feel protected having exit discussions with employees who have protected characteristics, as the discussions can be admissible in discrimination claims.

Additionally, any discussions where an employer suggests for an employee to resign before a dispute has arisen could constitute a fundamental breach of trust and confidence. The employee could thus have a claim for breach of contract, in which the discussions would be admissible as evidence. Moreover, if a breach of contract is found to have occurred in holding those discussions with a senior employee, employers could face compensation for substantial notice periods and bonuses, as well as the employee being released from their restrictive covenants. Employers in such situations are unlikely to risk having exit discussions without it being clear what the legal effect would be.

This proposal therefore seems ineffectual, appearing to enable employers to hold exit and settlement discussion before disputes arise, yet actually offering them little comfort as to what the legal consequences will be.





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