News & Views

Employment tribunal reforms – simplification or more bureaucracy?

BY Richard Woods
Employment law
BG Purple

Details of proposed changes designed to improve the employment tribunal system have been revealed, aimed at helping make Britain one of the most enterprise-friendly countries in the world.

The proposals unveiled in the Enterprise and Regulatory Reform Bill include:-

  • introducing a mandatory period of conciliation through ACAS in advance of an employment tribunal claim being lodged;
  • ‘Rapid Resolution’ procedures where legal officers will decide on more straightforward employment tribunal claims such as holiday pay quickly and at less cost to both parties
  • Renaming compromise agreements – they will be called settlement agreements – to help improve understanding of their purpose, to settle disputes to the satisfaction of both parties.
  • Employment appeal tribunal cases to be heard by a judge alone, following the direction of employment tribunals
  • Powers for the Secretary of State to increase or decrease the maximum award of compensation for unfair dismissal, which is currently £72,300, through secondary legislation.
  • Introducing a penalty for employers of up to 50 per cent of any financial award where there are ‘aggravating features’ with scope for a 50 per cent discount if paid within 21 days.

In announcing the proposed reforms, the Department of Business, Innovation and Skills expressed the hope that removing the fear of employment tribunals will encourage businesses to take on more staff.

However the proposals, unveiled by Business Secretary Vince Cable have already met with major concerns on a number of counts.  There are fears the mandatory pre-conciliation requirement will lead to a repetition of the problems encountered with the now repealed statutory dispute resolution procedures, introduced to simplify the process but causing more disputes about the procedures themselves in addition to the employment disputes they were designed to resolve.

There are also fears the limit of compensation awards for unfair dismissals may vary between employers of different descriptions, possibly by size.  It is not clear how size would be determined.  It may be on the basis of the number of employees, turnover, profit or a combination of factors.  However rather than simplifying matters, it would add another unnecessary layer of complexity to tribunal proceedings with the likelihood of confusion, uncertainty and inequity looming large.

The penalty payable by employers for ‘aggravating features’  may create  further pressure for an employer to settle for a higher amount than they would normally settle, fearing that they may face a financial penalty otherwise.  This penalty will be paid to the government, not the worker. This creates yet another layer of unnecessary complexity and bureaucracy with compensation being payable to both the employee and the government, rather than just the employee.

At present they are merely proposals.  The Bill will now begin its passage through Parliament.  We at Law at Work will be closely monitoring its progress and keeping clients updated of its potential impact over the coming months. Interesting times lie ahead. In the meantime, if you have any concerns you wish to discuss, contact your legal manager.

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