Update on the employment reforms

Update on the employment reforms

21/12/2011

On 23 November, Business Secretary Vince Cable gave a speech at the Engineering Employers' Federation in London outlining the government's plans for reform of employment legislation and practices.  This announcement coincided with the publication of the government’s written response to the Resolving Workplace Disputes consultation, containing further details of many of the proposals and "calls for evidence".  Following our article last month which detailed many of these reforms John Moore takes another look at some of the key announcements and analyses what we and the employment market in general, have made of them.

Protected conversations

In the main this proposal is seen as unworkable in practice and riddled with potential pitfalls.  However, the scope of protected conversations appears to be wider than the current ‘without prejudice’ communication provisions, on the basis that they can be held without there being an existing dispute between employer and employee. In that respect it could be helpful forum to both parties in achieving early settlement of risk issues. 

One thing that has been noted is that the potential for factual disputes arising as to what was, or was not, a "protected" conversation is high.  On the one hand employees may feel pressured to attend such conversations and agree settlement, whilst, on the other hand, employers may be wary as to whether such discussions will be used against them later on and the extent to which they can be relied on.

Unsurprisingly, the government has said that discrimination claims would not be protected under these conversations which immediately call into question their – contradictory - indication that one use of protected conversation is discussions around retirement, i.e. where the purpose of any such discussion is age. 

What is clear is that a lot more detail is required to clarify the remit of protected conversations before it can seriously be considered a viable option for employers and employees alike.

Increase in unfair dismissal qualifying period

It was announced that the purpose behind this is to encourage employers to take on new employees, with the Department for Business, Innovation and Skills (‘BIS’) claiming that the change will save businesses £6million per year, with a reduction of 2,000 tribunal claims per year.

This prediction has, however, been met with a muted response, with many of us within the employment legal field questioning on what basis it has been made (especially as the consultation demonstrated a lack of support for it). In reality the change is only likely to have a positive effect on a small proportion of employers and may in fact end up having little to no effect on the number of claims being brought overall in the tribunal.

We find that it is common for unfair claims to be lodged alongside discrimination claims and therefore claims of this sort will not be significantly affected on the basis that there is no qualifying period for discrimination claims and also, double recovery is not permitted in any event.  In addition we may well see an increase in discrimination claims being brought by potential claimants who have less than two years service.  Whilst these types of claims may ultimately be unsuccessful (if they are poorly disguised unfair dismissal claims), dealing with them will still be costly to employers especially as they are already regarded as the most burdensome due to increased complexity and therefore more costly to defend.

Financial penalties for employers

The proposed policy of a discretion for tribunals to award financial penalties against employers who lose claims has been viewed by many as a – poorly – disguised effort to raise funds.  Such an award would be made in addition to any damages awarded, thereby increasing the financial burden on employers by up to £5,000 (or half that if paid within 21 days).  Even in the event an employer is found to have behaved unlawfully, one still questions the fairness of this additional ‘punishment’, especially as there are already compensation measures in place which can be awarded by the tribunal on a punitive basis if this is felt to be appropriate.

Although the original proposals indicated this would be an automatic penalty, an amendment has replaced this, stating it will be awarded at the discretion of the tribunal.  The guidelines for this discretion are, however, less clear.

On the basis that many have suggested the proposed measures lean too favourably towards employers, one may question how far this is an attempt to appease employees, especially on the basis that many cases, where the employer is at fault, settle before reaching the substantive tribunal stage.

Tribunal fees

By way of an update, since our last edition the Ministry of Justice has now issued a consultation document, setting out alternative options for tribunal fees:

Option 1: the fee would depend on the nature of the claim, with three suggested levels.

  • level one: claims for unpaid wages and redundancy payments;
  • level two: unfair dismissal claims; and 
  • level three: discrimination and whistleblowing claims.

Separate issue and hearing fees are proposed, with "indicative fees" of between £150-£250 for issue of a claim and £250-£1,250 for a hearing.

Option 2: would introduce a fourth level of fees, for claims where the claimant is seeking an award of over £30,000, and have issue fees only, ranging from £200 to £1,750.

In theory fees should help dissuade potential claimants from bringing spurious claims in the tribunal, however one must question whether it will create a barrier to those with limited means, even if their claims have merit. Many legal professionals have expressed concern that fees would only increase the inequality of representation between claimants and respondents.

However, the government has indicated that there will be either financial help, or exemptions, for those who cannot afford to bring claims and a number of options in this regard are also being consulted on. In our experience a significant number of claimants who bring claims are unemployed and therefore would likely come within the remit of such exemptions which may therefore severely reduce any impact that the introduction of fees may have on the number of claims being brought, regardless of merit. 

Whistleblowing

To clarify, this proposal would see the end to a whistleblowing complaint about a breach of the employment contract being considered as a protected disclosure.  It has long been argued that there was never an intention that such a complaint should be a protected disclosure and that this was simply a loophole in the legislation.  On that basis the effect of this measure is widely welcomed, with many pointing out that it will restore whistleblowing to its proper meaning and end the more spurious claims being lodged under the whistleblowing heading.

Call for evidence: collective redundancies

One of the proposals within this call for evidence is to reduce the minimum periods for consultation with and notification to employee representatives.  90 days can be seen as difficult for both employer and employee, who can feel matters are unnecessarily and, for employers facing financial difficulty, damagingly, ‘dragged out’. Limiting this is therefore seen as a sensible decision although there is debate as to what the correct period should be, with the government indicating that 60, 45 or 30 days are all possibilities.  The call for evidence should reveal how many consultations do last this long and how many could have been completed in a shorter timeframe.  In our experience, and those of other practitioners, we have clients who have been prepared to risk the penalties that apply for failure to fully consult rather than carry out a full 90 day consultation period, thereby strongly suggesting how unnecessary it can prove to be. Reducing the period by statute is a far more sensible option, rather than reliance upon agreements from employee representatives.

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