The Enterprise and Regulatory Reform Bill is currently proceeding through the House of Commons.
It contains yet more measures to reform the Employment Tribunal system but thankfully does not include the idea of compensated no fault dismissal and the Government has now confirmed that they will not be proceeding with that proposal.
The various relevant provisions in the Bill relate to the following:
- Mandatory pre-claim conciliation procedure for all employment tribunal claims
- New powers for the secretary of state to limit or increase compensation awards in unfair dismissal claims.
- Certain claims to be dealt with by legal officers rather than Employment Judges
- Employment Appeals to be heard by a Judge alone
- Financial penalties for employers
- Settlement agreements to replace compromise agreements
There is very little detail in the Bill about how this is intended to work in practice. Whilst in theory there is nothing wrong with attempting to settle potential claims at an early stage, one worry we have always had with this is proposal is whether the conciliation service will have sufficient resources for mandatory conciliation to work. The Government states it will be able to sufficiently resource ACAS through the savings made as a result of having fewer cases proceeding to the Tribunal, but this seems a circular argument, and is hardly reassuring.
The Bill provides that the time during which conciliation takes place shall not count towards the normal time limits to submit an employment tribunal claim (at present there is a 3 month time limit for most claims), and where the time limit is about to expire this is extended to one month after the end of the conciliation period.
There was no consultation on this at all prior to it appearing in the Bill and it seems obvious that the intention is to lower rather than increase the current limit. Last year the median unfair dismissal award was £4591.00 and in only 5% of cases was £30,000 or more awarded so at first glance there seems no obvious reason to lower the current maximum unfair dismissal award of £72,300. Any reduction will have the most impact on higher paid employees, whose losses as a result of an unfair dismissal tend to be higher. However in some cases where an average paid worker loses the benefit of a final salary pension scheme, losses can be substantial and if an arbitrary lower cap is placed on compensation then this could lead to real hardship and unfairness.
No detail is given in the Bill about what sort of claim they will deal with or how this will work in practice but it is intended that they will deal with more straight forward claims such as claims for notice or holiday pay.
Employment Appeal Tribunal
The 3 member panel is already a thing of the past for unfair dismissal claims in the employment tribunal and it is now proposed that most appeals to the employment appeal tribunal also be dealt with by a sole judge.
Whilst the maximum compensation for an unfairly dismissed worker is to be reduced, an employer who has been found to have acted unfairly may have to pay a penalty to the Government. If an employee is successful in a claim to the Employment Tribunal, as well as ordering the employer to pay the claimant financial compensation, the tribunal will have power to impose a penalty on the employer of 50% of the award made. The fine will be imposed if there are “aggravating features” and will be subject to a minimum payment of £100 and a maximum of £5000. There is provision for 50% discount if payment is made within 21 days. There is as yet no definition of what is meant by “aggravating features” but the Government clearly hopes that if an employer believes there may be a risk of losing a claim and having to pay a penalty as well as an award that this may lead to more claims being settled without the need for a tribunal hearing.
Settlement Agreements (previously known as compromise agreements)
At present there is nothing to stop an employer entering into a compromise agreement with an employee on termination of their employment. However the Government seems to think that not all employers know about such agreements and/or they are difficult to use in practice.
It says it will provide guidance on the use of the new settlement agreements as well as draft letters and model agreements to encourage their use. Whether all the specific provisions required before a compromise agreement is legally binding will still apply remains to be seen.
A new clause has also been added to state that if negotiations do not result in a termination by agreement, an employment tribunal may not take into account any offer or discussions held about a proposed termination on agreed terms when considering any subsequent unfair dismissal claim. This is subject to an exception where anything said or done was improper, and if left in its current form this wording will no doubt give rise to lots of arguments about whether conduct was indeed proper or improper.
I will comment further in this blog as the Bill progresses through its various Parliamentary stages.
Congratulations to anyone who is due to start a new job on or after 6th April 2012- but the bad news is that, unlike those who are already in employment, you will have to be employed for 2 full years before you have the right not to be unfairly dismissed. The new rules are not retrospective. They do not affect employees who started their job before 6th April this year who still need only one year’s continuous service before they have the right to make an unfair dismissal claim.
The Government has said that it wants businesses to feel more confident in hiring people and it estimates that this change will lead to about 2000 fewer unfair dismissal claims each year. It also believes that employers are more likely to take on new employees if they are not faced with the possibility of an unfair dismissal claim after just a year, but it has not estimated how many jobs will be created because of this new measure. The answer may be not very many given that a recent survey found that fear of unfair dismissal claims is not in the list of top ten reasons given by employers for not taking on more staff. We will just have to wait and see.
What national statistics do show is that there are approximately 2.5 million employees in the UK who have between 1 and 2 years’ service. The workers in that position next year will have far less employment protection than any employee who started work before 6th April.
There has been a 2 year qualifying period before- it was raised to 2 years in 1985 by Margaret Thatcher’s Government and only reduced back down to one year when Labour came into power. Last time an unsuccessful challenge was made against the increase on the basis that a longer qualifying period discriminated against women. This time the Government accepts that the increase in qualifying period will have a disproportionate effect on younger workers but believes this is just a fact of life and that the increase is a proportionate means of achieving a legitimate aim. However, if this view is challenged by trades unions claiming that the increase to two years amounts to age discrimination, this will lead to a lot of stayed claims clogging up the Tribunal system- hardly an obvious improvement – whilst the Government attempts to justify the increase through the Courts.
If you are dismissed and do not have sufficient service to claim unfair dismissal, all may not be lost. You may still have the right to claim that you have been automatically unfairly dismissed or that you suffered discrimination because of a protected characteristic, but this may be hard to prove, and it is never a good idea to just assume that the reason you were dismissed was because you happen to be gay/ black/ disabled. You will need some evidence of discrimination if your claim is to have any chance of success.
At the moment we already receive a lot of enquiries from employees who believe they have been dismissed unfairly, often just short of one full year’s service, and whom we have to advise that they do not have the right to make an unfair dismissal claim. In the future we have no doubt that we will receive calls from employees who believe they have done a good job but are dismissed by their employer just before they have completed 2 years service.
The Employment Tribunal and EAT statistics published for last year show that 382,400 tribunal claims were made in the year ending March 2011. Of these 29% were resolved through an ACAS settlement and the tribunal gave a final order in favour of the claimants in respect of 18% of all claims made – either following a full hearing or because the employer did not defend the claim.
Of the 49300 claims that reached a full hearing last year 57% were successful. So although making a claim against your employer can be a daunting prospect, and employers and their representatives may try to make this difficult for you, this shouldn’t dissuade you from bringing a legitimate complaint- whether it be for unfair dismissal, discrimination or some other claim. There are risks and costs involved in all litigation which is why many claims are settled before a Tribunal hearing is reached, and again this is borne out by the statistics.
However what the statistics don’t show is how many settlements and Tribunal awards are actually paid by the employer. It is hard enough to bring and win an unfair dismissal claim, but often winning the claim is the easy part. Some unscrupulous former employers go into liquidation, or start trading under a different name to try to avoid payment of tribunal judgments.
If an employer is insolvent, the Government may pay a small part of the judgment through the Insolvency Service, but the vast majority of any award is likely to be unenforceable.
Ministry of Justice research in 2009 found that 39% of recent tribunal awards had not been paid at all and a further 8% had only been paid in part. As a result of this research a so called fast track enforcement scheme was introduced in April 2010 to allow successful claimants to enforce Tribunal awards and settlements through the High Court Enforcement Office.
The idea of the scheme was to simplify and speed up the enforcement process. Judgments no longer have to be registered with the County Court and if you have an unsatisfied judgment or settlement you just need to complete a simple application form and pay a court fee of £60 to start off the process. If the enforcement is completely successful you will be paid back the court fee together with the full tribunal award and interest. On behalf of our clients we needed to make use of this scheme on several occasions last year- with mixed results.
Sometimes the Sheriff manages to obtain immediate payment in full. In other cases the employer will agree a payment plan to pay the debt in instalments.
The High Court Enforcement Office that we use has also reported delays in paperwork mean that the scheme is not as fast as originally envisaged, giving rogue employers plenty of time to find ways to evade payment.
The Ministry of Justice advised that in the first year since it was introduced successful claimants have tried to enforce 1495 unpaid Employment Tribunal awards using the fast track enforcement scheme, resulting in 42.5% of these awards being fully recovered. This percentage may improve but so far the results are worse than the results of the research in 2009 when it was found that 53% of judgments had been fully paid. They did not state in how many cases no recovery has been made at all.
So although using a High Court Enforcement Officer is likely to be the best method to try to enforce an unpaid settlement or judgment, in our experience and on the Ministry of Justice’s own figures, there is still a long way to go before there is a completely effective enforcement process.
Some seven months after the close of the consultation, and having already made several announcements relating to employment tribunal reform, the Government has finally given a formal response to the comments received on the Resolution of Workplace Disputes consultation.
The main changes announced to take effect from April 2012 are as follows:
- As already widely publicised the Government intends to increase the time an employee has to work for an employer before having the right to claim unfair dismissal from one year to two years. This is despite the fact that the majority of people who took part in the consultation were against this idea.
- Unfair dismissal claims can be heard by a Judge sitting alone rather than the current panel of 3 members which makes up most Tribunals. This is being brought in as a pure cost saving measure despite the fact that again most people who responded to the consultation disagreed with the proposal.
Other proposals which the Government has outlined include:
- A fundamental review of Tribunal procedures and rules.
- Tribunal fees – the Government is clearly intent on introducing fees. In the initial consultation document it said that it would consult about this in Spring 2011. That consultation did not take place and the Government has now announced that fees of some kind will be introduced. No consultation document or firm proposals have yet been published.
- Early conciliation- Before any claim can be made to the employment tribunal, a claimant will have to lodge details of the claim with ACAS to see if it can be resolved without the need for tribunal proceedings. There will be a standard form to complete to submit the claim to ACAS. The normal 3 month time limit for submitting a claim to the Tribunal will still apply in most cases but new rules will be brought in to detail how the time for ACAS conciliation will interact with the time limits for bringing a claim.
- Employers are to be encouraged to make more use of compromise agreements to avoid employment tribunal proceedings. The Government proposes making changes as to how they operate with a view to making them simpler. One proposed change is to alter the name of a compromise agreement to a settlement agreement which seems unlikely to make much difference to the process!
- Allowing “protected conversations” between employers and employees which could then not be referred to in any subsequent Tribunal proceedings. Quite how this will work in practice remains to be seen. If there is a genuine dispute between the employer and employee then an employer is already entitled to speak to the employee on a “without prejudice” basis and where employers are unhappy with an employee’s performance, there should already be disciplinary and capability procedures in place to deal with this, so why employers should be able to say something to an employee which the employee is not allowed to repeat seems very unfair.
- A “rapid resolution scheme” as a cheaper and quicker alternative to the employment tribunal for straightforward claims.
- Financial penalties for employers found to have breached employment rights.
- Reducing the minimum period for consultation on redundancy.
- Altering the regulations on Transfer of Undertakings
- Introduction of “no-fault dismissals” for micro businesses with less than ten employees and/or looking at simpler dismissal procedures for these employers.
The Government seems to have a firmly placed view that at the moment it is too difficult for employers to sack under-performing staff, but this is not our view, nor the view of the many employees for whom we act.
Vince Cable stated that the package of measures proposed by the Government was aimed “to improve the way businesses hire, manage and end relationships with employees, when this proves necessary”. There is much talk of employment procedures being too complicated for small businesses to follow and needing to be simpler, but surely it would be much easier for everyone (both employers and employees) to know where they stand rather than making frequent changes to the employment tribunal procedures? It was only in 2009 that the new ACAS Code of Practice on disciplinary and grievances procedures was introduced. Now we will be faced with more changes.
Whilst it remains to be seen how effective the proposals will be in creating jobs, it seems clear that these proposals will reduce employment protection for employees and make it much easier for employers to dismiss without consequence.
We are often contacted by people who are surprised to learn that in practice legal aid is not available for unfair dismissal or other employment tribunal claims and that the successful client still has to pay their own legal costs.
The most common form of funding in the employment tribunal cases which we deal with is the so called ‘no win no fee’ agreement.
If you do not have legal expenses insurance and are not a member of an organisation such as a trade union which might fund your case then you are left with two main options if you intend to make a claim in the employment tribunal.
The first is to deal with the case yourself. No doubt many people do this successfully but the law and procedure are complex and it is common to feel the need for professional help.
It is likely then that you will look for a no win no fee agreement to avoid the risk of losing your claim and still having a bill to pay There is a third option which is to pay costs on a private fee paying basis. In some cases this is the best choice for funding but in most circumstances it would prove far too expensive which is why no win no fee is so commonly the preferred option.
Regulations limit the solicitor’s fee to 35% (including VAT) of any sums which the claimant receives. Though there is nothing to stop a smaller fee being charged- in almost all cases it will be the maximum. The term ‘no win no fee’ in practice is true but in a technical way it is not quite correct. If the claim is not won there is still a 35% fee- 35% of nothing.
The same fee applies whether the claim is won at a full tribunal hearing or whether agreement is reached on settlement at any stage.
At first sight it might appear unfair that the same percentage is charged regardless of the strength of the case, regardless of its value and regardless of whether (as rarely happens) it is settled right at the very beginning or after two lengthy hearings (one to decide upon responsibility and one to decide upon value). There are two main reasons for this.
Firstly the reality is that the only way the system works is for good cases of relatively high value to subsidise the time spent reviewing potential cases and the inevitable proportion that do not go smoothly.
The second reason is that all cases are risky. The case is taken on and the fee is set before all the facts are known and before all the documents are seen. Few if any claims have an outcome which is clear from the beginning. Sometimes claims are successful but the sum awarded is small- it is even possible to ‘win’ but to be awarded no money at all- though this is most unusual. There is also the risk that the employer will try to evade payment. This happens all too often. We have had several cases recently where companies have ceased trading either during the course of proceedings or after tribunal awards have been made against them.
Occasionally there will be a need for payments to be made to others- for example for medical reports or for medical records (as you might expect this is most common in disability discrimination claims). The client is normally responsible for these win or lose.
Another factor which needs to be dealt with in a no win no fee agreement is the possibility that things will not go to plan and for one reason or another the client and solicitor part company before the case is finished. An agreement will always include machinery to deal with such an event.
There is also the possibility that a claim will be successful but the outcome will not be a straightforward monetary award. This is quite unusual. The most common example is where a dismissed employee is re-instated in their old job. Provision is made in the agreement for the client to make a payment calculated by reference to a claim of notional value should they be fortunate enough to be given their job back.
Despite being the commonest way of funding for those with no external source of funds a no win no fee agreement is really the last resort. Even so apart from the obvious and significant drawback that a successful claimant receives only 65% of their compensation- in most cases the no win no fee agreement provides a satisfactory and trouble free way to fund a claim.
The government has embarked on a consultation on resolution of workplace disputes (go to http://www.bis.gov.uk/assets/biscore/employment-matters/docs/r/11-511-resolving-workplace-disputes-consultation.pdf ‘Resolving Workplace Disputes- A Consultation’ URN11/511) which is likely to lead to far reaching reforms of the employment tribunal system.
The consultation proposes numerous changes to the administration of employment law under a dozen or so major headings. The proposals are aimed at saving government money, making life easier for employers and making life more difficult for employees.
There is nothing wrong with the government saving money without affecting justice. Many of the proposals look like they will do that.
But any employee who has issued an employment tribunal claim will be dismayed that the government seems to think it was too easy for them- and too hard for their employer.
Statistics are said to show that legions of fairly and squarely dismissed employees are romping away with thousands of pounds each from their ex-employer because it is too difficult for the employer to resist the claim. Of course the statistics show no such thing. Partly because the statisticians do not gather such information. Partly because it is not true.
Not content with the huge imbalance of resources that usually applies between an employer and an employee and the restrictive interpretation placed on the law by the tribunals- the government now wants dismissed employees to pay for the privilege of being unfairly dismissed.
It is plainly wrong to charge a fee to someone who has just been thrown out of work (perhaps because of outrageous conduct on the part of their employer) and has been left with no income- and perhaps with a family to look after.
Short time limits which apply in the tribunal system- first intended to speed up access to justice- will have the opposite effect of denying justice by requiring a payment from claimants when their finances are weakest.
It is no answer to say that the fee will be refundable at the successful conclusion of a claim. Many people with strong grounds for a claim will be prevented by the fee from making a claim at all- regardless of how much they might receive in the end.
By way of adding insult to injury there is a proposal to levy ‘Financial Penalties’ against an employer who breaches an employee’s rights. The sums awarded would be paid to the government not to the claimant. To do this in addition to charging fees is like asking an assault victim to pay for his assailant to be taken to court.
I have written to my MP to make these points and to ask him to oppose any such changes being made. If you agree with me then I suggest you write to your MP. If you want to copy what I have written in this blog and send it to your MP – that is fine. I waive my copyright on this edition of my blog. You can do what you like with it.
To be honest it is never going to be a great day out even though some tribunals are in beautiful buildings which you might enjoy visiting in different circumstances.
There are two things which can make the day better. The first is simple and obvious- it is winning your claim.
The second is fairly obvious too. It is being prepared and includes having an idea what will happen at the tribunal. We do most of the preparation for our clients but we cannot prepare them mentally. That is mainly for the clients themselves.
If you know how your hearing will proceed it will not mean that you win the case- but it might help.
Almost all employment tribunal hearings are in public so if you can it is well worth going to a tribunal to watch a hearing before your own case is due to be heard. Ideally you will be able to watch a case similar to your own but most types of case are dealt with in a similar way so it does not matter too much. Unless you want to spend a lot of time at the tribunal it is best to pick one that is not expected to last too long because the steps are the same regardless of how long the case lasts.
Whether or not you go to see a hearing before your case it is also worth reading up on what happens so we have produced a guide to what you can expect. You can find it in the Employee Guides section of the web-site: An employee’s guide to employment tribunal hearings