Employment law reform

As many clients will already be aware on the 14th September, Business Secretary Vince Clark made a number of announcements regarding The Enterprise Regulatory Reform Bill (ERRB) which is the government’s on-going programme of employment law reform. As many of our clients often comment, employment legislation seems to very much favour the employee and does not make managing employees easy.  In an attempt to redress this imbalance, two new consultation papers have been published, Ending the employment relationship and Employment Tribunal Rules. 

The first paper Ending the employment relationship, is essentially a two-part consultation dealing with both unfair dismissal compensation and measures to encourage the use of settlement agreements.

The proposal of the first paper is that the government would have the power to decide to lower the cap on Unfair Dismissal awards at an employment tribunal.  The current limit in an unfair dismissal claim is £72,300.   The leading option at the moment appears to be to cap compensation at the lower of year’s pay or a fixed overall cap (the decision as to the level of that cap forms part of the consultation papers).

The Government has also been keen to look at ways of reducing the number of employment tribunal claims; recently increasing the qualifying period to two years will assist this target being achieved, however in addition to reducing the number of claims they are also encouraging employment disputes to be settled rather than litigated.

The Government has previously said that it wants to encourage the greater use of compromise agreements, to enable an employment relationship to be ended on agreed terms.  However as some of our clients know the use of compromise agreements is not always as easy as it sounds,  hopefully the proposed reform will improve this process and make the use of such agreements less litigious.

The Enterprise Regulatory Reform Bill includes provisions which would rename compromise agreements as “settlement agreements”, and it will also give employers more freedom to have discussions with an employee about a proposed termination deal outside the context of an existing dispute (in other words, where the without prejudice rule would not apply), and not have those conversations used in evidence for a future unfair dismissal claim.  This latter point is often the reason why employers currently avoid starting conversations with their employees, for fear it could invite a constructive dismissal claim.

The second paper concentrates on the area of Employment Tribunals, there are a number of areas being reviewed, probably primarily of interest to Alcumus clients are the following two points:

  • The proposal for a “paper sift” stage incorporating a strike-out power
  • The proposal to combine pre-hearing reviews and case management discussions

For those employers unfortunate enough to have had a tribunal claim, you will be aware that it is a lengthy process and often made even more frustrating if the claim is either invalid or vexatious.  These proposals would be a welcome improvement and combined with the implementation of tribunal fees for raising a tribunal claim, hopefully may make the type of “nuisance” tribunal claims we see being significantly reduced.

For more detailed information on this subject, the Department for Business Innovation &  Skills published a press release which is available on this link: