UK News

Enterprise and Regulatory Reform Bill

July 2012

The Government has tabled a Bill which is designed to implement a number of employment reforms on which it has been consulting since elected to office.

The proposals

There are six main changes, each of which, the Government say, is designed to speed up resolution of disputes and remove unnecessary restrictions on business.

Compulsory conciliation

The Bill provides that in future claims may only be brought in the Employment Tribunal if the matter has first been referred to ACAS with a view to a conciliated resolution. An ACAS officer will have to provide a certificate stating that a conciliated solution is not possible before the Claimant can lodge a claim. The Government is optimistic that this will reduce the workload of Employment Tribunals very significantly – as much as a 35% reduction. If so, this is to be welcomed but oddly there appears to be no perceived need on the Government's part for increased resourcing for ACAS. From a practitioner's point of view this must raise eyebrows – our perception is that ACAS' resources are stretched already and to add significantly to their workload without increasing funding suggests that the scheme will be under severe pressure.

Changes to compensation limits

Under the former Labour government the maximum level for the compensatory award in unfair dismissal cases was increased from £12,000 to £50,000 to take account of inflation over a 20 year period. The level has since been increased annually to reflect further inflation and now stands at £72,300. The Bill proposes a power to set the limit at between one and three years' median earnings (approximately £26,000 to £78,000) or alternatively 52 weeks pay with a minimum of one year's median earnings. The rationale behind this is not clear as the link with inflation will be indirectly preserved by using median earnings as a base factor. Of greater controversy is a proposal to have different maximum awards, dependent on the size of the employer.

Financial penalties for employers

Where a Tribunal upholds a claim and finds that there are "aggravating factors" in the way that an employer has behaved it may impose a penalty in future of up to £5,000 on the employer. The term is not further defined so there will be some uncertainty as to its meaning until case law offers some guidance. Interestingly, no sliding scale of award is proposed according to employer size. The penalty will not be paid to the successful employee, however, but to the state, presumably to make the employer pay for the cost of a hearing that should not have taken place.

Legal Officers

It is proposed that some pre hearing matters may be dealt with by "legal officers" - civil servants who have some legal qualification - so long as both parties consent. Precisely what scope they will have has yet to be defined.

Whistleblowing

The Government had expressed some concern over the decision in Parkins v Sodexho, a case where an employee successfully argued that a grievance he brought over an alleged breach of procedure by his line manager amounted to a protected disclosure and so within the "whistleblowing" provisions in the Public Interest Disclosure Act 1998. The significance of this is that, in whistleblowing cases, compensation is not capped at a maximum but is open-ended, which has a major effect on the negotiating process if parties are seeking to settle. In future a claimant must be able to show that the disclosure not only satisfies the existing requirements of the legislation but also is a "matter of public interest". Again this is not yet defined and so its scope will need to be defined by future case law.

Settlement discussions

For some time there has been concern over a decision of the Court of Appeal concerning discussions initiated by an employer about the employee leaving the company on an agreed basis. In that case (BNP Paribas v Mezzotero) it was decided that no legal privilege attached to such a discussion if there was no pre-existing dispute, the significance being that an employee could rely on the employer raising the issue as justification for resigning and claiming constructive dismissal.

The Bill attempts to create a structure which allows discussions like this to take place and to have protection against disclosure in proceedings. Although the drafting is at present somewhat tortuous, the aim is for an environment to be created where employers can raise the possibility that the employee should leave the company on agreed terms without fear that, if negotiations do not result in a positive outcome, the employee is able to rely on the conversation as grounds for bringing a claim.

Commentary

Although many will sympathise with the Government's wish to speed up and simplify workplace related claims, whether or not it will achieve that through this Bill as currently drafted looks uncertain. There is sure to be much debate as the Bill moves through the parliamentary process and we will report further with any new developments.

Resources

The Bill as originally published

Parkins v Sodexho

BNP Paribas v Mezzotero

For further information or to discuss the issues raised, please contact David Widdowson or Emma Clark on +44 (0)20 7051 5711.