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Employment law proposals to help economic growth: update

For those of you following my blog and/or keeping up with the rapid employment law proposals which are ultimately to assist business growth in today’s challenging economic conditions, may find this round up of this week’s events useful.

The Enterprise and Regulatory Reform Bill

The Enterprise and Regulatory Reform Bill, which was mentioned in the Queens speech this year, was laid out before parliament on the 23 May. It is essential for employers to keep up with the bill as it sets out a number of amendments to the current legislation.

The Bill sets out the following amendments:

1. A mandatory period of ACAS conciliation before presenting claims to an employment tribunal (guidance on this will be published in due course). I think this may help employment disputes to be resolved without any litigation.

2. Extension of limitation periods to bring a claim to the employment tribunal. This is to allow for pre-issue ACAS conciliation. Under current law the time limit to bring most claims is three months less one day (for equal pay and redundancy payment claims it is 6 months less one day), this provides very little time for parties to resolve disputes and usually results in employees bringing tribunal proceedings to protect their position.

3. Introduction of ‘legal officers’ to make decisions in certain cases if all parties agree in writing.

4. Employment Appeal Tribunal (EAT) cases to be heard by a judge alone, unless ordered otherwise. This is unlikely to be the case where a complex discrimination and/or whistleblowing case is heard (perhaps the tribunal needs to be renamed the ‘monobunal’).

5. Power for Secretary of State to limit unfair dismissal compensatory award to a maximum between the national median earnings and 3 x median earnings. It has been confirmed by the Department of Business, Innovation and Skills (DBIS) that they are working from a median average earnings figure of £26,000. That means (if the power is exercised) that the compensatory award will be capped at somewhere between £26,000 (one year’s earnings) and £78,000 (three years’ earnings). Alternatively, power for the Secretary of State to limit unfair dismissal compensatory award to one year’s earnings.

6. Power for a tribunal to impose a penalty on employers of 50% of any financial award, subject to a minimum of £100 and maximum of £5,000, where there are “aggravating features” (not defined), with a 50% discount for payment within 21 days. We will have to wait for case law as to how “aggravating features” is defined however I am of the opinion it is likely that the tribunals will consider how employers conduct themselves during litigation, particularly if the employee remains to be employed by them.

7. The definition of ‘qualifying disclosure’ in whistleblowing legislation is to be restricted to disclosures “in the public interest” (not defined). This may certainly help unwarranted claims from employees, particularly as cases concerning ‘qualifying disclosures’ are complex and lengthy lasting on average from 5-10 days.

8. ‘Compromise agreements’ to be renamed ‘settlement agreements’. I do not think that this is likely to have any real practical effect.

For those of you who are interested in reading the bill here’s a link – http://www.publications.parliament.uk/pa/bills/cbill/2012-2013/0007/13007.pdf.

The Beecroft Report

This report which was commissioned by the DBIS is very controversial and has been released early due to it being leaked to the Daily Mail earlier this week. The report sets out the following recommendations:

1. Compensated no fault dismissal; Mr Beecroft recommends that businesses with up to 10 employees should be allowed to dismiss employees even when they are not at fault, providing a set amount of compensation is paid. This would mean that the employee would not be entitled to bring a claim for ‘unfair dismissal’ however may still bring a claim for discrimination and ‘protected disclosures’.

He goes further and proposes that the law of unfair dismissal should be scrapped from UK legislation altogether! You can all imagine that this caused a lot of concern from trade unions and employment lawyers. Vince Cable, the business secretary, suggests the support for the proposal was minimal and through his interaction with businesses this was not a big concern. Businesses were more concerned about finances being a barrier to growth.

Personally I do not think that the unfair dismissal laws will be scrapped from UK legislation and neither do I think it causes businesses that much concern. For new employers and business owners it is important that they educate themselves in respect to what the law is and how it should be applied to their business. This will ultimately help them run their business.

2. Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE); Mr Beecroft proposes the following recommends:

(a) The EU should be lobbied to change the TUPE Directive so that it does not apply to a business that is in administration.

(b) If UK law cannot be changed to incorporate harmonisation of the terms and conditions of transferred workers and original employees after one year, again the EU should be lobbied to amend the Directive.

(c) UK law should be changed so that a transferring employer can make employees redundant before they transfer to the new company if they would otherwise have been made redundant immediately after the transfer for valid economic, technical, or organisational (ETO) reasons.

(d) A more detailed explanation of the meaning of the ETO exemption, based on case law, should be made available to employers. I think this would be very useful as employers find TUPE very difficult to understand.

(e) The service provider provisions of the TUPE Regulations should be repealed and replaced with a better way of identifying whether or not a transfer is subject to TUPE.

The DBIS are currently running a consultation on this so watch this stop I will be updating you in due course! Personally I wonder whether further amendments to TUPE may cause further confusion as to their implementation.

3. Collective redundancy consultations; Mr Beecroft has recommended that the consultation period for collective redundancies should be reduced in some instances.

Currently statute sets out that employers who wish to make between 20 and 99 employees redundant within a 90-day period must consult for 30 days. This rises to 90 days if they wish to make 100 or more employees redundant. Beecroft argued in his report that this “penalises larger business” and imposes an extra cost of 60 days’ wages on any business wanting to make more than 100 people redundant.

He proposes that the consultation period for collective redundancies should be 30 days, regardless of the number of employees the organisation wishes to make redundant. He also argued that if the company is in a formal insolvency process this should be reduced further, possibly to five days.

There is some sense in this recommendation as companies under severe financial difficulties, unsurprisingly find it difficult to undertake the consultation required of them and sometimes this can lead to premature redundancies.

The Government has already launched a call for evidence on the rules governing statutory consultations on collective redundancies, looking in particular at the consequences of reducing the 90-day consultation period to 60, 45 or 30 days. The call for evidence closed at the end of January and the Government has not yet published its response to the consultation, so let’s see what they say!

4. Third party harassment under the Equality Act 2010; the provisions place a burden on an employer to ensure that third parties do not harass their employees. The Beecroft report suggests that these provisions should be revoked from the act on the basis that an employer cannot control the actions of third parties towards its employees.

In response, the Government launched a consultation of the third-party harassment provisions earlier this month.

5. Reform to employment tribunals; The Beecroft report set out a number of measures to improve the employment tribunal process. However, Cable has stated that recent moves to simplify employment tribunals were not as a result of Beecroft’s recommendations.

The suggestions in this area were very similar to the ones the government is looking at, for example he suggested that tribunals should charge fees for bringing claims.

Phew I think I have included a comprehensive guide to this week’s reforms, I hope everyone finds them an interesting read and if anyone has any questions please do not hesitate to contact me on samira.cakali@scesolicitors.co.ukor alternatively why not write a comment.

I look forward to hearing your views on whether the proposed reforms will ultimately help businesses grow.

Samira Cakali

Samira Cakali is a pragmatic and approachable solicitor advocate with extensive contentious and non-contentious experience in the fields of employment law as well as civil litigation, within a range of commercial businesses from SME’s to multinationals as well as senior executives.

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