Legal Insight: Employment tribunal proposals - Beware the silent killersby
The government recently announced proposals to streamline employment law and the employment tribunal system, which could roughly be split into three categories: flag waving, old wine in new bottles and silent killers.
The proposals themselves stem from the view that there has been significant growth in the number of complex employment tribunal claims, which are inhibiting employers from either engaging or dismissing unsatisfactory staff. The press release that supported the new measures states that they followed calls to simplify and speed up the process of ending the employment relationship when it breaks down. But what evidence is there that employment will increase if the regulatory regime is loosened? According to the OECD, the UK has the third least regulated employment market (after the USA and Canada). A recent government survey also indicated that constraints on the ability to dismiss were not one of the major reasons that employers were failing to expand. Moreover, the number of employment tribunal claims fell over the last year by 15%. Significant change Therefore, it could be argued that the current system, far from seeing uncontrolled growth, has been stable, and that perhaps the government is taking advantage of the current economic situation to dismantle employment laws that have been in place for many years, and which generally (but not always) operate in a reasonable way. It should also be noted that of all claims brought before employment tribunals, employers are successful in only 37% of hearings, which suggests that perhaps there are fewer unmeritorious claims than could be supposed. So what are the changes being proposed? According to details provided by the government, they comprise:
- Support for settlement agreements to help end employment relationships in a fair and consensual way
- A reduction on the cap on compensation for unfair dismissal claims
- Streamlining employment tribunals by making it easier for judges to dismiss weak cases
- Improving guidance for small businesses on Acas’ code of practice on discipline and grievance.
The government is also looking for responses to its call for evidence on the TUPE rules. But significant changes are already underway. From April 2012, new employees have had to build up two years’ service before being entitled to make a claim for unfair dismissal and, from 2013, a new fee regime is being introduced into the employment tribunal system for the first time. Alongside those measures, claimants to ETs will also be required to go to Acas prior to lodging their claim in order to attempt a settlement before they can proceed with litigation. Flag waving Some old chestnuts, which I respectfully doubt will either see the light of day or make much difference if included, are the proposals to seek evidence on TUPE rules (which are unpopular with employers and very problematic). Change here is outside the powers of the UK government and would likely require a new European Union directive, which may be hard to achieve. Similarly, making it easier to enter into compromise agreements on termination of an employment contract by providing templates is of little consequence – the issue is not the availability of the documents themselves, but the risk of proposing such an arrangement, which would remain. Old wine in new bottles Over the last 25 years, there have been many attempts to make the tribunal system easier to navigate. Since the mid-90’s, tribunals have, in a general sense, become more legalistic and complex as the amounts at stake increased, which has led to the presence of more lawyers acting for both parties. But while the proposed changes will certainly add clarity when dealing with such cases, they will only have a marginal impact on the number of cases brought. In many instances – for example, a proposed power to limit oral evidence – tribunals already have discretion to direct proceedings even if they do not exercise it. But employment judges ‘on the ground’ are often very resistant to limiting evidence, imposing cost orders or generally doing anything that prevents claimants from being able to fully ventilate their case. There is absolutely nothing to suggest that more rule changes will alter the culture within the tribunal system that allows this situation. Silent killers The most important proposed change is to reduce the unfair dismissal compensation limit to either one year’s pay or a new lower limit than the current £72,300. This would have a very significant impact outside of the employment tribunal system. If employers knew that the maximum award for unfair dismissal was only a year’s pay, in many cases they may decide to avoid length capability or conduct proceedings and, instead, offer a compromise agreement early for close to a year’s pay. For an employee faced with such an offer, the prospect of litigation to obtain slightly more compensation may be unattractive, especially given the requirement to pay fees to progress a case. Although there is no qualifying period for discrimination claims and, due to a lack of EU law in the area, no prospect of any compensation cap on such claims, it seems likely that any general reduction in compensation will feed through to expectations. This means that lower settlements will become the norm. While the basis for making the changes seems unclear, there is no doubt as to the direction that the government is taking: fewer and less valuable rights for employees and a disdain for allowing disputes to be resolved in tribunal proceedings. Whether this is a good thing remains to be seen. However, those with long memories will recollect that the reason for introducing unfair dismissal rights in the first place was to reduce industrial action over dismissals. If those rights are unpicked, it may provide the basis for a return to collective disputes resolution and end up being a recruiting sergeant for the trade unions.