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Reform of employment law regulation: a mixed blessing?

01 April 2011

Reform of employment law regulation: a mixed blessing?

On 27 January 2011, the Government published a consultation paper entitled: ‘Resolving workplace disputes’ relating to the proposals to reform employment regulation in England, Wales and Scotland.

The consultation is part of the Government’s wider plans to encourage economic growth in the current testing economic times. The proposed changes aim, in part, to address the concerns raised by the business community about the current system of employment regulation where disputes occur. One of the perceived failings of the current system is that claimants with weak claims are often allowed to proceed to full hearings – forcing businesses to direct substantial resources – both in terms of management time and costs – to defend themselves.

The consultation paper includes the following key proposals:

Increase to qualification period for unfair dismissal claims

As many readers will know, under the current law an employee must, in most cases, have worked for their employer for a minimum of one year before they can bring a claim for unfair dismissal at an Employment Tribunal. The consultation includes a proposal to increase this period to two years. The Government appear to recognise that this step will not greatly reduce the number of Tribunal claims made - the consultation estimates a decrease of between 3,700 to 4,700 claims per year. However, this proposal appears to be aimed at encouraging small businesses, who would be particularly vulnerable to claims, to take on new staff without fear of a Tribunal claim if the relationship doesn’t work.

Pre-claim conciliation (‘PCC’)

Under the proposals, any individual wishing to bring a claim in the Tribunal would be required first to submit key details of their claim to Acas, using a shortened version of the current ET1 form. Acas would then have a ‘statutory period of time’ to attempt to settle the dispute – the consultation proposes that this period be a month. This would represent a substantial change from the current system, where Acas have a power to conciliate prior to claims being issued, but have no duty to do so.

Although the parties in dispute will not be obliged to engage in conciliation during the statutory period, they will be provided with information including the median value of awards made in other, similar claims, and the average length of time for cases to proceed to full hearing.
If conciliation is successful, Acas will be able to arrange for a COT3 – a legally binding settlement – to be signed and completed, validly settling the claimant’s potential claims and bringing the dispute to an end.

Where conciliation is not successful within the statutory period, Acas will provide written confirmation to claimants that the PCC stage has been concluded. The claimant will then be able to submit their ET1 to the Tribunal, together with a copy of the Acas certification.

Employment tribunal fees

Currently, there is no fee when issuing proceedings at a Tribunal. The consultation includes a proposal to introduce a fee, payable by ‘service users’ of the Tribunal. Although the wording in the consultation paper indicates that both claimants and respondents will be obliged to pay a fee, the consultation does not include any specific proposals on the likely amount of the fee.  Instead, the Government propose to consult in detail on this proposal over the coming months. The aim of this proposal is to try and prevent the vexatious type of claim that has little or no prospect of success.

Financial penalties

The Government proposes to introduce financial penalties on employers who are found by a Tribunal to have failed in their legal obligations towards an employee. Under the proposal the Tribunal would, of course, still have the power to make a financial award to a successful claimant. However, the Tribunal would have an additional power to impose a financial penalty on an employer, payable to the Exchequer. Under the proposal, the value of the financial penalty would be half the amount of the total award made to the claimant, with an upper limit of £5,000. Employers would be encouraged to pay the financial penalty quickly, with a reduction of 50% of the financial penalty available to those who paid within 21 days.

This proposal is likely to be extremely unpopular with the business community, who may
feel that the Government are ‘giving’ with one hand under some proposals, but effectively ‘taking back’ the potential benefits under this proposal.

The consultation closes on 20 April 2011 and employers are urged to respond with their views. The timescale for implementation of the changes – in whatever form these finally take - is of course currently unclear, and will ultimately depend on parliamentary time.

For further information contact Sian Stubberfield on 01227 763939.

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