Vince Cable announced a further package of employment law reforms on Friday. The announcement forms part of the Government's Employment Law Review and Red Tape Challenge, intended to reduce
Vince Cable announced a further package of employment law reforms on Friday. The announcement forms part of the Government's Employment Law Review and Red Tape Challenge, intended to reduce regulatory burdens on businesses. Will the Government's proposals have a real positive impact on businesses or do they just make it easier for unscrupulous employers to exploit workers?
Settlement agreements - Settling employment disputes out of court is not a new idea but the Government wants to make it easier for employers and employees to have open discussion about ending the employment relationship. A consultation has been announced seeking views on a new ACAS code of practice on settlement agreements and an example settlement agreement, guidance notes and "model letters" have been published. But will this make it easier for settlements to be agreed and avoid further litigation? The example settlement agreement runs to 12 pages and will still need to be tailored to minimise exposure to claims. Employees are also still required to take legal advice for the agreement to be valid.
No fault dismissals - The Government has formally announced that it will not be taking forward its controversial proposal for "compensated no fault dismissals". It will however be working with ACAS to make their guidance more accessible to small businesses.
Reducing unfair dismissal compensation - The Government considers that the current cap on compensation for unfair dismissal claims (£72,300) may lead to unrealistic perceptions among both employees and employers about the level of tribunal awards. It therefore wants to examine the option of a cap on individual awards of 12 months' pay (where this is less than the overall cap) and also consider whether the current overall cap is set at an appropriate level. The Enterprise and Regulatory Reform Bill contains a power which would allow the cap to be varied within a range of full-time annual median earnings (currently £25,882) and three times full-time annual median earnings (currently £77,646). Whilst reducing the level of the cap may go some way to help change perceptions, it will also make it cheaper for employers to dismiss employees unreasonably. It may also lead to more vexatious discrimination claims, which have uncapped compensation and are more costly for employers to defend. To try and combat an increase in such claims, the Government has made other proposals to make it easier for judges to strike out hopeless claims. However, there are issues with these proposals (see further below). Some would argue that more rigorous application of cost rules may be the best deterrent for frivolous claims.
Streamlining Employment Tribunals - A further consultation has been announced proposing various changes to the Employment Tribunal Rules (following Mr Justice Underhill's review in July 2012). These include proposals to allow judges to dismiss weak cases on a "paper sift" stage and reducing the number of preliminary hearings by combining pre-hearing reviews and case management discussions. How effective this initial paper sift would be depends on how robustly it is applied. In many cases the parties disagree about what actually happened and it may sometimes be necessary for a Tribunal to hear the evidence before determining whether a claim has any merit.
TUPE - Following a call for evidence, the Government has indicated that it intends to consult on potential changes to TUPE, including whether the provisions relating to "service provision changes" should be repealed or retained. Businesses have expressed concern about extra business costs caused by a larger number of transactions falling within TUPE. It seems somewhat ironic that the Government is potentially considering repealing provisions that were introduced to give businesses greater certainty about the application of TUPE.
Settlement agreements - Settling employment disputes out of court is not a new idea but the Government wants to make it easier for employers and employees to have open discussion about ending the employment relationship. A consultation has been announced seeking views on a new ACAS code of practice on settlement agreements and an example settlement agreement, guidance notes and "model letters" have been published. But will this make it easier for settlements to be agreed and avoid further litigation? The example settlement agreement runs to 12 pages and will still need to be tailored to minimise exposure to claims. Employees are also still required to take legal advice for the agreement to be valid.
No fault dismissals - The Government has formally announced that it will not be taking forward its controversial proposal for "compensated no fault dismissals". It will however be working with ACAS to make their guidance more accessible to small businesses.
Reducing unfair dismissal compensation - The Government considers that the current cap on compensation for unfair dismissal claims (£72,300) may lead to unrealistic perceptions among both employees and employers about the level of tribunal awards. It therefore wants to examine the option of a cap on individual awards of 12 months' pay (where this is less than the overall cap) and also consider whether the current overall cap is set at an appropriate level. The Enterprise and Regulatory Reform Bill contains a power which would allow the cap to be varied within a range of full-time annual median earnings (currently £25,882) and three times full-time annual median earnings (currently £77,646). Whilst reducing the level of the cap may go some way to help change perceptions, it will also make it cheaper for employers to dismiss employees unreasonably. It may also lead to more vexatious discrimination claims, which have uncapped compensation and are more costly for employers to defend. To try and combat an increase in such claims, the Government has made other proposals to make it easier for judges to strike out hopeless claims. However, there are issues with these proposals (see further below). Some would argue that more rigorous application of cost rules may be the best deterrent for frivolous claims.
Streamlining Employment Tribunals - A further consultation has been announced proposing various changes to the Employment Tribunal Rules (following Mr Justice Underhill's review in July 2012). These include proposals to allow judges to dismiss weak cases on a "paper sift" stage and reducing the number of preliminary hearings by combining pre-hearing reviews and case management discussions. How effective this initial paper sift would be depends on how robustly it is applied. In many cases the parties disagree about what actually happened and it may sometimes be necessary for a Tribunal to hear the evidence before determining whether a claim has any merit.
TUPE - Following a call for evidence, the Government has indicated that it intends to consult on potential changes to TUPE, including whether the provisions relating to "service provision changes" should be repealed or retained. Businesses have expressed concern about extra business costs caused by a larger number of transactions falling within TUPE. It seems somewhat ironic that the Government is potentially considering repealing provisions that were introduced to give businesses greater certainty about the application of TUPE.