Partner Article

The future is bright for employers

Marc Jones, employment partner at law firm Turbervilles, shares his expertise on employment law reform, and explores the changed affecting the fall out of a broken employment relationship.

The annual statistics for claims in employment tribunals (ETs) for 2011/2012 show a 15% reduction in claims and an increase in costs awarded by ETs. Despite this, the Government is intent on its employment law reform programme under the auspices of promoting growth – especially for small businesses. The reforms are, on the face of them, one-sided and favour employers.

What’s hot and what’s not

“No fault dismissals”

An idea by the Government to help businesses with less than 10 employees has been scrapped, which would have a put a bar on the right to claim unfair dismissal. The proposal failed to consider that employees were more likely to job hop to a company that provided job security and that some would be seeking higher salaries, sign-on bonuses and contractual severance payments to work for a micro-business.

Settlement agreements

According to the Government, these are the way forward for ending the employment relationship. Such agreements will be a standardised short-form compromise agreement where employees must take legal advice on the terms of a settlement agreement for it to be binding. In reality this may simply amount to nothing else but a change in name, with the standard clauses you would expect to find in most compromise agreements revised in parts. However, settlement agreements provide a “cloak of protection” for employers in unfair dismissal claims and will be inadmissible.

Settlement agreements will cover other matters and not be limited to the ending of the employment relationship. However, if a settlement agreement is issued to compromise an internal complaint of discrimination but is rejected by the employee, the protection would not bite.

Thankfully, the Government is proposing a statutory code of practice (from Acas) covering the use of settlement agreements, draft letters and template agreements.

Protected conversations

The idea of the protected conversation is that employers can talk to their employees about ending the employment relationship and severance packages without having to worry about those conversations being referred to in a subsequent unfair dismissal claim, if those discussions broke down.

According to the Government’s consultation document ‘Ending the employment relationship’ the possible pros for such communications in the workplace appear to be far outweighed by the cons. It therefore appears unlikely that these will materialise.

When everything goes pear-shaped

Automatic referral to Acas

Before ETs will deal with a claim, it will automatically be referred to Acas to try to facilitate a settlement. There has been scaremongering that this will mean Acas will need further resources to cope with this but all ET claims are currently referred to Acas to conciliate, with a view to reaching settlement. The only difference is that until there has been pro-active steps taken by Acas to settle the claim, ETs will not deal with them. As always, the “devil will be in the detail” on what steps the parties will actually have to do to comply with their pre-claim obligations before ETs will allow claims to proceed.

As part of the Government’s consultation document, Acas has welcomed the opportunity to draft the code of practice.

Cap on compensation

The Government is proposing a cap of one year’s salary on compensation. It intends to abolish the current cap of £72,300 for a compensatory award, which is linked to the cap on a week’s wages, currently £430, calculated for basic awards to the lower figure of the national median average earnings (currently £25,882) or an employee’s annual net salary. However, the Government has not provided any firm details on this and it could be between one and three times the median average earnings.

The compensation for discrimination claims will remain uncapped and therefore some claimants will still try and link dismissal with discrimination to overcome the unfair dismissal cap.

However, this proposal also forms part of the Government’s consultation document and therefore may fall by the wayside after the consultation period has ended.

Fees

What is probably the most contentious of all of the employment law reforms is the introduction of fees from commencement to the conclusion of a claim. The proposed fee structure will have two levels:

• Level 1 claims – generally for sums due on termination of employment e.g. unpaid wages, payment in lieu of notice, redundancy payments, where the issue fee will be £160 and the hearing fee £230
• Level 2 claims – include those relating to unfair dismissal, discrimination complaints, equal pay claims and claims arising under the Public Information Disclosure Act, where the issue fee will be £250 and the hearing fee £950

There will also be fees for a review of default judgment, an application to dismiss following settlement, issuing a counter-claim, an application for a review of a decision and judicial mediation.

ETs were originally designed for litigants in person and have been free since their inception in 1967. The introduction of fees, which are due to come into force in Autumn 2013, will completely change the face of employment law and is likely to place an obstacle to settlement as employers may simply disengage with any settlement discussions until the hearing fee has been paid, hoping that the claimant will simply withdraw a claim rather than pay the fee.

The Government has stated that certain claimants on low-incomes will qualify for remission and only those that can afford to pay will be affected, but as of now there are no guidelines on what levels of income will qualify for remission.

Conclusion

The Government’s reforms will undoubtedly be welcomed by all employers, as any measure that makes it harder to, or hinders a claim, will allow employers to focus on their business rather than having to keep one eye on their employees in case they bring a claim.

This was posted in Bdaily's Members' News section by Marc Jones .