Publications

Are you keeping pace? Beecroft, Employment Consultations and the Enterprise and Regulatory Reform Bill

24 May 2012

Recent days have seen a number of Government announcements and press comments on potential employment law reforms of interest to employers.  Key for employers is to cut through the speculation and debate and understand where we are now:

The Bill: Enterprise and Regulatory Reform Bill

Yesterday saw the publication of the Enterprise and Regulatory Reform Bill.  This is not yet law and will now need to pass through the House of Commons and the House of Lords.  It will also be supplemented by a number of supporting statutory regulations.

For employers, key points in the Bill include:

• A requirement for compulsory conciliation by ACAS before a claimant can start proceedings in the Employment Tribunal.  The limitation periods in which a claim must be brought in the Employment Tribunal are extended to allow for this pre-claim conciliation.
• Potential changes to the unfair dismissal compensatory limit.  The Bill includes a power for the Secretary of State to limit the unfair dismissal compensatory award, which currently stands at £72,300, to:
  
  (a) a specified amount which is between the national median earnings and three times median earnings.  The Office for National Statistics published on 25 November 2011 that the gross annual earnings for full-time employees in April 2011 was £26,200. If based on that figure, the compensatory award could be between £26,200 and £78,600; or
  
  (b) a specified number of weeks' pay; or
  
  (c) the lower of (a) or (b).
  
  The Bill expressly provides that where the unfair dismissal award is limited on the basis of (a), different limits may be specified "in relation to employers of different descriptions".  In reality, it seems that employers will essentially need to wait and see what this provision may mean for them in light of how the Secretary of State exercises his powers.  However, in light of the Government's stated aims of encouraging growth, the emphasis is likely to be on lowering the limit, particularly for smaller businesses.
• A power for an Employment Tribunal to impose a penalty on an employer of up to 50% of any financial award, subject to a minimum of £100 and a maximum of £5,000 where there are "aggravating features".  This penalty is discounted by 50% if paid within 21 days.  Aggravating features is not defined and will create an added element of uncertainty for employers.
• That a "qualifying disclosure" for the purposes of the whistleblowing legislation is restricted to disclosures "in the public interest".  This seeks to close the loophole whereby a simple breach of contract by an employer might technically attract whistleblowing protection.
• For compromise agreements to be renamed settlement agreements. The Department for Business, Innovation and Skills (BIS) press release indicates that this is "part of a broader package to simplify and increase the use of such agreements to resolve workplace disputes, particularly for small businesses".  There have previously been suggestions that a simple form of standard wording will be provided.

The accompanying BIS press release also refers to the Bill providing:

• A "rapid resolution scheme" for resolving "more straightforward" disputes such as holiday pay "quickly and at less cost to both parties".  There are no further details on this save that the Bill provides for legal officers, as opposed to employment judges, to determine some types of employment tribunal claim or any claim where the parties consent.
• For shareholders of UK quoted companies to have a binding vote on directors' pay.  Further detail on this will be provided once the Government has considered its responses to the recent consultation on enhanced shareholder voting rights.

The Consultations: Changes to the Equality Act 2010

Last week, in response to the Red Tape Challenge, the Government launched two consultations on changes to the Equality Act 2010 which include:

• The repeal of provisions making an employer liability for third party harassment on the basis that employees are already adequately protected at common law and existing statutory provisions.
• The repeal of provisions enabling an Employment Tribunal to make recommendations that apply to all an employer's staff.
• The repeal of the statutory questionnaire procedure in discrimination claims.

The consultations close on 7 August 2012.

The Report: Beecroft

On Monday the Government finally published the "Beecroft" report, leaked back in 2011.  As when it was leaked, the report has generated immense media interest recommending, amongst other things, the introduction of "compensated no-fault dismissal" for all businesses and exemptions from unfair dismissal law for small businesses with less than 10 employees. The potential introduction of compensated no-fault dismissals for small businesses are currently the subject of a Government call for evidence which closes on 8 June 2012.  Subject to the outcome of this call for evidence for small businesses, it may be that this report has to an extent been overtaken by the Enterprise and Regulatory Reform Bill which introduces new powers to lower the compensation limit for unfair dismissal claims.

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These materials are written and provided for general information purposes only. They are not intended and should not be used as a substitute for taking legal advice. Specific legal advice should be taken before acting on any of the topics covered.