SINCE coming to power in May 2010, the
coalition government has been on a mission to
change existing employment laws, the aim
being to give confidence back to business
owners in the UK.
The government sought to achieve this through
the cutting of “red tape” that it hoped would
encourage business owners to take on new
employees
without fear of
expensive
obligations and
legal liabilities.
One of the
most high-
profile changes
which has
already been introduced is an increase in the length
of service (from one to two years) required by an
employee to be protected against unfair dismissal.
This increase affects any employee who started
employment after 6th April 2012. The government
hopes that this change will reduce the potential
number of unfair dismissal claims.
In turn, this should encourage employers to
take on more new employees, safe in the knowledge
that it will theoretically be quick and easy to dismiss
them at any point within the first two years of their
employment without fear of being sued for unfair
dismissal.
This is subject to certain exceptions, however,
such as dismissal for a discriminatory reason or in
connection with whistleblowing, trade union activities or health and safety duties, and so it is not
as straightforward as it might initially seem to
dismiss an employee in the first two years of his or
her employment without fear of reprisals.
Subsequently, the government has outlined a
number of further changes it proposes to
introduce. Two of the proposals that are of most relevance to small and medium sized business
owners are to do
with (1) protected
conversations and
settlement
agreements and (2)
employment
tribunal fees.
Protected
conversations and settlement agreements
A long-established method of settling employment
disputes outside of legal proceedings (with which
many employers will be familiar) is under a
“compromise agreement”.
Under such agreements,
employees usually waive their right
to take legal action against the
employer in return for a payment.
Provided these agreements meet
certain requirements, they will be
effective in settling the majority of
legal claims that an employee may
have.
They have, therefore, become a very popular
way of dealing with employment disputes,
especially where an employer is keen to avoid the
expense or negative publicity connected with
employment tribunal proceedings.
In light of their potential to save significant
costs for employers and the tribunal system by
reducing the number of claims, the government
wants to encourage the wider use of these
agreements and its first proposal to achieve this is
to rebrand them as “settlement agreements”.
The change in name appears simply to be an
attempt to make the agreements more appealing to
employers or employees who may otherwise be
discouraged by the idea of compromising.
The second proposal is to give employers
greater freedom to pursue settlement outside of
legal proceedings, by ensuring that conversations
about settlement cannot be used in evidence in any
future claim brought by the employee. This would
prevent any disadvantage being caused to an
employer who has tried to deal with an
employment problem by way of a settlement
agreement.
To assist employers in entering into these
conversations, the government proposes that ACAS
(the independent conciliation service which deals with employment disputes) will
publish template agreements, as well
as guidance on how to value
financially the claims the employee
may have.
The government’s proposals
should increase employer confidence
in the use of settlement agreements
(and therefore at least partially achieve the government’s cost-saving aims).
However, the proposals will not offer blanket
protection to employers as the protection will only
apply in unfair dismissal disputes.
This means that any conversations about
discrimination complaints, for example, would not be protected. It is also proposed that
there will be no protection where the
employer behaves improperly during
such conversations.
It is not clear what constitutes
“improper behaviour”. It is envisaged
that the most likely allegation of
improper behaviour that may arise
will be that the employer has said
something discriminatory during one
of these conversations, such as
suggesting that an older employee
should retire.
Employers should therefore be
very careful when dealing with
situations in which “protected
characteristics” such as age, race, sex
or disability are involved.
It may also be useful to take
detailed notes of conversations to
defend any suggestion of improper
behaviour.
The government plans to
introduce these changes at some point
during 2013, although a precise date is
not yet known. Unfortunately, some
think that the changes will not
significantly lower the number of
claims that end up before an employment tribunal as the
government hopes.
It will be interesting to assess the
full impact once the tribunal
publishes its first set of annual
statistics following the change.
Employment tribunal fees
Another proposal that has gained wide
publicity is the government’s plan to
implement a system of fees for
bringing claims in the employment
tribunal.
At present, unlike in the county and
high courts, it costs nothing for an
individual to submit a claim in the
employment tribunal.
Not only does this place the burden
of the costs of the tribunal system on
the taxpayer, it also means that
disgruntled individuals are able to
submit their claims quickly and easily
with little or no costs consequences,
which can result in a large number of
weak or purely speculative claims being
brought.
This situation is exacerbated by the
fact that the tribunal only makes an
order for a losing party to pay the costs of the successful party as an exception
rather than as the rule.
The proposal is, therefore, for a
system of fees to be introduced,
calculated according to the type of
claim brought. A fee would be payable
by the individual when the claim is
submitted and a further fee would be
payable should the claim progress to a
final hearing. If an individual were
ultimately successful, the tribunal
would have the power to order the
employer to reimburse the fees to the
individual.
The aim is ultimately to discourage
weak, speculative claims (and therefore
prevent the employer from being
exposed to the costs of
defending such claims).
In doing so, it is
hoped that those
considering bringing a
claim will carry out a
realistic assessment of
the strengths and
weaknesses and the
potential value of their
claim before they bring
it.
In doing so, the
employment tribunal will
also be able to pass
some of the costs of
the tribunal system onto
those who use it.
When these proposals were first
discussed, there was a concern that the
fees would deny access to justice to
those who were unable to afford it. In
response, it is proposed that those who
are unemployed or on low incomes will
be exempt from the fees.
As a result, it is likely that the
introduction of fees will have only a
minimal impact as, of course, the
majority of individuals bringing claims
will be out of work (i.e. in unfair
dismissal claims and other claims
arising out of termination of their
employment) and would therefore be
exempt from the fees.
Contrary to the government’s aims,
these individuals would not be
discouraged from bringing their claims, even if the claims have little prospect
of success. As a result, the change may
not have the significant impact that the
government is hoping for. Employers
should beware.
The employment tribunal fee
system is expected to be introduced
some time towards the end of the year.
In summary
Although employers in this difficult
economic climate should welcome the
government’s aims, it is unlikely that
the changes will enable the
government to achieve its aims of
reducing the number of tribunal
claims and the burden on employers overnight. Further
changes are likely to
be needed.
We will not know
the full impact of the
current proposals until
the employment
tribunal’s annual
statistics are published
and, even then, it may
be a number of years
before the full effects
are felt.
That said, it is
clear that the government wants to remove some of the
fear of employment law for small to medium sized businesses and to
increase their confidence in taking on
new employees. The changes are
unlikely to do enough to achieve those
aims, at least not immediately. Further
changes will be necessary.
One previously proposed change,
which has since been abandoned, was
the concept of a no-fault dismissal,
which would have made it easier for
employers to dismiss employees in
certain circumstances. This would
likely have had a more significant
impact than those changes that are
being introduced.
It will be interesting to see whether
the government has any other
proposals lined up as it continues on
its mission to reform employment law.
