I have been reading around some changes that I understand are due to be made to the Employment Tribunal system. There is some talk, for example, about claims having to be sent to ACAS before they are submitted to the Tribunal and parties having to engage in pre-claim conciliation is that true? What are the changes in relation to settling disputes and does this impact on the way we tend to settle disputes now (i.e. engage in “Without Prejudice” negotiations with the claimants and/or their lawyers)?
The proposals you are referring to are set out in the much anticipated consultation document published in January 2011, “Resolving Workplace Disputes”. The consultation is due to close on 20 April 2011. The HRLaw team is conducting a survey on this, so it’s a good chance to air your views on the proposals.
The Government proposals include, as you quite rightly mention, changes to the way in which claims are submitted to the Tribunal, certain other changes aimed at facilitating early settlement and also some more controversial changes, such as increasing the qualifying period of service for unfair dismissal protection to two years (currently one year) and imposing financial penalties on employers.
The Government is also interested in the extent to which parties use mediation a way of resolving workplace disputes and there are a number of questions in the consultation document seeking information in this regard. It is unclear whether further proposals for reform will be suggested as a result of the answers received to those questions, it seems logical to expect that there will be.
The proposals for change in the consultation document do not, however, affect the well established “Without Prejudice” rule and the ability of the parties to engage in such discussions before and after a claim has been brought before the Tribunal without the risk of the contents of those discussions being made public in the course of litigation.
The proposals which may affect the settlement of claims going forward if they are brought into force are briefly set out below:
1. Submitting claims to ACAS
The proposal is that there will be a requirement for all claims to be submitted to ACAS (the Advisory, Conciliation and Arbitration Service) in the first instance, rather than to the Tribunal. ACAS would then have a limited period of time the current proposal is one month to offer the parties pre-claim conciliation in order to agree a settlement. Although the parties will be under no obligation to engage in pre-claim conciliation (they can refuse to do so), the one month period would nevertheless give ACAS an opportunity to offer guidance and information to claimants on the merits of the claim they are intending to bring. This may not have much of an impact if the individual in question is determined to have his/her “day in court”, but may nevertheless serve to make individuals think twice about pursuing claims if they are informed by an independent third party (ACAS) that the merits of their claim are weak.
2. Provision of more information in the claim form (Form ET1)
Specifically, it is proposed that the new Form ET1 contains a Statement/Schedule of Loss that claimants would be expected to complete where they are seeking monetary compensation. This would mean claimants would need to think carefully about how much they think their claim is worth at the outset. It would also give companies an opportunity to see what the claimant believes they should be awarded and on what basis at an early stage. Based on that information, companies can then form a view as to whether they are minded to settle the matter and, if so, for how much.
3. Formalising offers to settle
There is a procedure under the Civil Procedure Rules (which govern how cases are run in the civil courts) involving what are referred to as “Part 36 offers”. Those are essentially formal offers to settle a matter where there could be costs implications on the a claimant who does not accept such an offer and then loses their claim or, even if they win, are awarded an amount that is less than the formal offer made. Because the costs regime in the Tribunal is such that each party generally bears their own costs regardless of the outcome and there is no proposal to change this it is not possible to import that procedure into the Tribunal system as it is.
The proposal is that a new rule is introduced to the Tribunal’s Rules of Procedure under which either party may make a formal settlement offer similar to the Part 36 regime however, details of the offer would be lodged formally with the Tribunal as well as being sent to the other side. The rewards and penalties for rejecting or making such offers would be issued in the form of reductions or increases to an awards of compensation made following the hearing. If no award of compensation is made and the claimant in the case had rejected a reasonable formal offer to settle, the current thinking is that the Tribunal would then consider whether a costs award should be made on the basis that the claimant had pursued their case “vexatiously, abusively, disruptively, or otherwise unreasonably”, or in a way that was “misconceived” (the criteria that exists under the current costs regime in the Tribunal).
This proposal may be particularly helpful for employers faced with claims in which it is felt the claimant is claiming excessive amounts in compensation. Companies could make reasonable offers to settle based on a reasonable estimate of what the claimant may be awarded if they were to win at an early stage of the proceedings in an attempt to avoid incurring further expense in fighting the claim. The claimant would then be under pressure to accept that offer or to at least give it serious consideration or risk having any compensation awarded to them reduced if they do not achieve a better result than that offer through litigation, or worse still, a costs order being made against them.