Need to know guide to the latest changes to employment law

This year has seen a number of changes to employment law already. On 29 July 2013 a number of further changes were introduced which the HR Law team thinks will be positive for employers. This article provides a brief overview of this week’s key changes and what these changes will mean for employers in practice.

1.  Costs regime

How it will work:

• For claims issued on or after 29 July 2013, claimants will be required to pay a fee when issuing their claim and a further fee just before the hearing. Currently, claims are submitted without any fees.
• The amount of the fee payable will depend on the type of claim. The fee for straightforward (“Level 1”) claims (e.g. claims for breach of contract, unauthorised deductions from wages and holiday pay), will be £160 to issue the claim and £230 for the hearing. All other claims (“Level 2” claims) – which cover unfair dismissal, discrimination and whistle blowing claims – will be subject to a fee of £250 for issue and £950 for the hearing.
• The issue fee will be paid at the point the claim is submitted to the Tribunal and the hearing fee will become payable between four to six weeks before the hearing.
• There are also fees to pay when making certain applications in the course of proceedings (e.g. a £160 charge for an employer to bring a counterclaim for breach of contract).
• Tribunal Judges will have the discretion to order the unsuccessful party to reimburse the fees paid by the successful party.
• Many people on low incomes may not be required to pay the full fees.

What is the likely impact?

• The Government hopes that the new system will reduce the number of Employment Tribunal claims and hopefully the number of vexatious claims. Claimants should think twice before paying over £1,000 for a claim they think they will lose.
• It may also have an impact on any negotiations to settle claims. There may be an inclination by the employer to wait until an issue fee is paid to assess whether the potential claimant is serious about their claim, while Claimants will want to recover fees as part of any deal.
• The Government has stated that it is committed to reviewing the fee structure once implemented to assess its impact in order to consider if changes are needed.

2.  Pre-termination negotiations

How it will work:

• It is sometimes the case that an employer wants to propose a termination of employment on mutually- agreed terms before there is any legal dispute with the employee. It was in response to this problem that on 29 July 2013 the Government brought into force new law which seeks to give greater protection to employers against having these offers or discussions referred to in a Tribunal in certain unfair dismissal disputes.
• From 29 July 2013 employers will be able to enter into discussions with employees about the termination of their employment, even where there has not been any prior dispute, and these discussions will not be disclosable to an Employment Tribunal.
• This protection will only prevent what is stated in the settlement offer, or during discussions about it, from being inadmissible in ordinary unfair dismissal proceedings.
• The fact and content of such offer or discussions may be referred to in any other case, including: automatic unfair dismissal; discrimination; whistle blowing; and breach of contract.
• The protection is not afforded in unfair dismissal claims where there has been “improper behaviour”. The new ACAS Code of Practice suggests that “improper behaviour” covers matters such as discrimination, blackmail, criminal activity and putting undue pressure on a party to accept an offer (amongst other examples).
• Compromise agreements will be renamed settlement agreements.
• The ACAS Code of Practice on Settlement Agreements has been released and is available here.
• The new rules sit alongside the existing without prejudice rules.

How workable will this be in practice?

• There is a certain unreality to the idea that you can ring-fence what is proposed in a settlement agreement or said in a meeting from its consequences. Take the case of an employee who raises a grievance in relation to what was said in the settlement meeting. Any grievance arising out of the settlement discussion would be part of the factual matrix. Would the employee be allowed to refer to the grievance in evidence, but not tell the Tribunal what the grievance was about?
• It is arguable that this change in law will not give employers the certainty that they need for the development to have any meaningful effect. There is likely to be litigation about whether a settlement discussion falls within the new regime.
• Currently, many informal discussions take place in which employers suggest that employees should resign on favourable settlement terms, without trust and confidence arguments ever being raised. Similarly, many discussions which are labelled “without prejudice”, but which are not truly without prejudice in nature, occur without the employee ever challenging their validity. It is likely to remain the case that employers will in many cases continue to operate in this informal way, without matters ever being litigated. However, the existence of new rules with unpredictable consequences may give rise to greater recourse to lawyers, rather than less.

3.  Compensation cap

• For dismissals taking place on or after 29 July 2013, the unfair dismissal compensatory award will be capped at the lower of one year’s pay (excluding pension contributions, benefits in kind and discretionary bonuses) and the existing limit of £74,200.

What is the likely impact?

• It is hoped by the Government that the introduction of this new cap may lead to a more realistic perception by employees about the level of Employment Tribunal awards.

Watch this space…

More key employment law developments are set to come into force in 2013, including a new tier of employment status “employee shareholder”. A summary of the new employee shareholder status can be found here.

The articles featured on hrlaw.co.uk were correct at the time of publication and should not be relied on or treated as a substitute for legal advice relevant to particular circumstances. Please contact us if you require legal assistance on any employment issues.