Monday 29th April 2013 at 1:23pm

Employment Law in the Midst of the Deluge

What is the point of employment law? Should you try to work out an answer to the question through the changes which the Coalition government has been making in 2012 and 2013, the first thing you would conclude is that the law exists to rewrite industrial relations to the benefit of employers at the expense of workers.

No “reform” illustrates this better than the changes which are being made to dismissal procedures, starting from this summer, to prevent a tribunal from enquiring about the conversations between employer and employee in the run-up to dismissal. Where an employer proposes that an employee should consent to their own dismissal, this will be deemed a “protected conversation”. If the negotiations break down and the employee maintains afterwards that the employer said something crucial to their dismissal that shines a bright light on the unfairness of all that followed and all that came before, the Tribunal will not be entitled to enquire what it was that the employer said. The proposal is in fact even worse than this makes it sound. The “protection” only operates in one direction. Should the employer want to rely on his own words later – for example, because he made a cash offer to the worker, which the worker failed to beat in subsequent litigation – this will not be protected. The employer can tell the Tribunal, and the Tribunal could perfectly easily take this into account when deciding for example who should pay the costs of the litigation.

Me for New Left Project. More here.

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Monday 8th October 2012 at 6:00am

Employment law reform: making justice unaffordable for workers

The Employment Reform and Regulatory Reform Bill, currently before Parliament, contains a series of measures which are likely to make life harder for every worker.

Press coverage has focussed on plans to reduce the maximum compensatory award that an employee can be awarded for unfair dismissal from around £72,000 to around £26,000. Few claimants win the maximum award, but it is an important benchmark in high value cases. These claims usually settle, because employers do not want evidence of bullying, etc, to be in the public domain. So this is all about reducing the financial liability of employers who behave unreasonably.

Two further provisions have slipped under the press’ radar. One is the idea, similar to the “cooling off” period in strike ballots, that workers who bring claims should first submit a claim to the conciliation system Acas. In place of the present, relatively simple rule that a claim should be submitted within 3 months of the act about which the worker complaints, the government has come up with new formula that in future a worker will have 3 months plus some, but not all, the time the claim is with Acas. Unless the provision is reformed before the Bill is passed, every employer will have an interest in fighting tribunal battles not about the substance of the claim but just about whether the claim was put in on time.

The other novelty is the government’s plans to introduce “protected conversations”, where a manager, on reaching a preliminary view that a worker could be dismissed, would invite the worker to a meeting where they would be told that, if they agree to resign, they would receive some modest compensation. The conversation is “protected” in that whatever the manager tells the worker, the worker will not be allowed to report later in Tribunal proceedings. This is a system which is ripe for abuse; for example when a worker explains that they have no desire to go without a fight, and the manager starts abusing or threatening them.

The proposals are silent as to whether employers would be required to allow trade union reps to attend protected conversations. They are also silent as to whether lawyers would need to be involved before an agreement reached during a protected conversation could be binding. My best reading of the legislation is that the government is not bold enough to do away with these deeply-entrenched rights, but rogue employers will use this silence to take back whatever they can.

Not in the Bill, but providing the context to it, is the government’s plan to introduce from summer 2013 hearing and issuing fees in the Tribunal ranging from £400 in unlawful deduction of wages cases, £1200 in unfair dismissal and £1600 in discrimination claims. Workers will pay the fees; employers will pay nothing. These fees represent roughly 25% of a claimant’s likely award, in theory they could be claimed back on winning the claim, save that Tribunal awards are poorly enforced and only around 40% of employers pay Tribunal awards in full.

Fees are also a threat to unions. Around 2% of employees are dismissed in any year. If you take a union like the RMT with around 75,000 members, that’s 1,500 people. If each was to bring an unfair dismissal claim, with the union’s backing, that would require the union to pay £1.8 million a year, merely to get the same limited access to Tribunals that workers have now. This is equivalent to around 25% of the union’s entire national budget. No union could cover the “hit” that fees will represent without to some extent cutting back on the number of cases they fund.

The introduction of fees is bitterly unpopular with lawyers and judges. A serious union campaign against fees would have a real chance of success, but the details of fees has been in the public domain for 4 months now and there are far too few signs of one starting any time soon.

Finally, while a successful strike may stop a dismissal, barely one in 500 successful unfair dismissal claims ends in an order reinstating a claimant. Even while we campaign against the Coalition’s attacks, there is an argument for socialists to win as to what are the most effective means in fighting for workplace justice.

(originally published in Socialist Review, October 2012; edited in this online version)

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Friday 13th July 2012 at 4:10pm

Fees; some tinkering at the edges but the worst wrongs remain

The government published today its response to the public consultation on Employment Tribunal fees. The story has reached the news, together with the government’s planned introduction date of “summer 2013″ (which, if nothing else, contradicts the general practice in employment law of only making new changes from April or October of any year).

The government’s ostensible justification for fees has shifted to some extent. At one time the primary reason given for fees was that they would reduce the number of weak claims, but obviously this was wrong – they will reduce the total number of claims (60% of which overall are of course won by claimants), but there is no real reason to think that the axe will fall harder on the claims. Now, the primary justification for fees is austerity; fees are necessary to make the system pay for itself, or more accurately start paying for itself. The government accepts that the proposed fees are too low to achieve that, and has structured into its proposals plans to increase fees hereafter.

The majority of those responding to the Consultation opposed fees in principle and fees only for claimants (the document reports that the for most of the proposals around 67% of those responding were against); but the Coalition proposes to press on regardless.

Daniel Barnett has published this summary of the amount of fees, which is a valuable simplification of several tables in the document:

“level 1 claims (the very straightforward ones such as unlawful deductions – there is a very long list in the Response Document) – £160 issue fee; £230 hearing fee

level 2 claims (pretty much everything else) – £250 issue fee; £950 hearing fee

Employment Appeal Tribunal – £400 appeal fee; £1,200 hearing fee

there are several other fees, eg £60 for an application to dismiss following settlement and £600 for judicial mediation”

Without having checked back against the original consultation paper, these fees do just seem a little lower to me than those in the consultation document, for which I suppose we should all be grateful.

Also, the government has dropped its discriminatory and nasty plan to nudge discrimination claimants in particular towards agreeing a capped award at the outset in return for a slightly lower fee.

Save for those modest changes, fees are to be introduced without concession.

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Monday 30th April 2012 at 6:00am

Trials & tribulations

This month we witnessed the first steps in the coalition’s plans for the reform of the tribunal system. New employees taken on after 6 April 2012 only qualify for protection against unfair dismissal after being continuously employed for two years (up from the previous one year). Simple unfair dismissal claims will be reserved to one employment judge rather than the present tribunal with two lay panel members. The maximum costs that may be ordered by a tribunal will rise from £10,000 to £20,000. Due to follow, over succeeding months, are a watering down of employers’ obligations on transfers of employment and in redundancy situations.

Dramatic change

The government’s most dramatic change to the tribunal system will be the introduction of issuing and hearing fees for claimants, ie workers, but not for respondents, ie companies. The proposed fees for an unlawful deduction of wages claim will be of the order of £400, rising to £1,500 for a discrimination claim.

The ground for these “reforms” has been prepared by a press campaign to the effect that most employment tribunal claims are dubious, weak or vexatious, that the average cost to an employer of defending a tribunal claim is £125,000 per claim (British Chambers of Commerce (BCC)), and that seen as a whole the tribunal system is as bleak as “Dante’s vision of the inferno” (the Financial Times).

But the majority of tribunal claims that make it to a contested hearing succeed (roughly 60% in 2010–11). Meanwhile, a careful check of the BCC document in which the figure of £125,000 per claim appeared shows that it was the guess of a single personnel manager. The median awards for unfair dismissal and discrimination claims are a rather more miserly £4,500 and £7,000 respectively.

The press criticism of employment tribunals has distracted us from deeper problems with the system, which are likely to be aggravated by the coalition’s planned changes. Here I will focus on two of them.

Lack of reinstatement

First, it is unjust that the vast majority of tribunal claimants who are dismissed will never be reinstated. Of the 10,000 unfair dismissal claims heard by the tribunal in 2010–11, only eight concluded with orders reinstating or re-engaging the claimant.

A reinstated claimant returns to colleagues she knows, and to a work environment in which she has the credit (in most cases) of good service prior to dismissal. Her salary is maintained at its old level and her prospects for the future are protected. A claimant who wins her claim but is not reinstated finds herself at the mercy of a job market, in which it always takes longer than hoped to find suitable work.

Employers know that tribunals will not reinstate successful claimants, and refuse to reinstate employees where an employee is dismissed and the employee appeals the dismissal. In the mid-1960s, in the industries which kept records, workers who raised internal appeals against dismissal succeeded in between one third and one fifth of all cases. Today, the success rate of internal dismissal appeals is undocumented, but experience suggests it is unlikely to be more than one or two per cent.

Our leading employment judge Elias LJ recently remarked in the Court of Appeal (of cases where an employee is suspended from work to enable allegations of misconduct to be investigated): “It would be an interesting piece of social research to discover to what extent those conducting disciplinary hearings subconsciously start from the assumption that the employee suspended in this way is guilty and look for evidence to confirm it” (Crawford & Anor v Suffolk Mental Health Partnership NHS Trust [2012] EWCA Civ 138, [2012] All ER (D) 132 (Feb)).

The fundamental cause of the declining independence of workplace structures of discipline and grievance is the certainty that once a worker is dismissed, they will not return. The interest of those remaining in the workplace rests, therefore, in convincing themselves that a dismissal is fair, irrespective of its actual merits.

Low awards

Second, the level of tribunal awards is appallingly low. The average wage in the UK is around £24,000; the average time between dismissal and a tribunal hearing is roughly one year; and the clear majority of tribunal claimants remain unemployed at the time of their hearing. Putting all these factors together, the average award should presumably therefore be of the order of £24,000. But the median unfair dismissal award was just £4,591 in 2010–11.

The gap between loss and remedy results from overlapping rules which give tribunals multiple grounds on which to reduce an award beneath the claimant’s actual loss, plus artificial limits on the weekly wage which can be compensated.

Among the coalition’s proposals for fees is the idea that where a worker agrees in advance to limit their claim to a maximum of £30,000 they should pay lower fees. In other words, “reform” will aggravate one of the worst aspects of the present system.

Much indeed needs to be changed; but the proposed reforms are going the wrong way about it.

David Renton is the author of Struck Out: Why Employment Tribunals fail workers and what can be done, published by Pluto Press & a barrister at Garden Court chambers. E-mail: davidr@gclaw.co.uk Website: www.gardencourtchambers.co.uk

(This article was first published in New Law Journal “Trials & tribulations”, NLJ 27 April 2012, p 557.)

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Wednesday 4th April 2012 at 6:40am

An unfair dismissal of workers’ rights

The coalition’s plans to reform employment law take effect in earnest this month.

The whole point of the legislation is to stop workers bringing their claims to tribunal.

Before I was a barrister, I worked for two years in an inner-London law centre.

A large proportion of our clients were people whose employers had simply declined to pay them any wages at all.

The bosses knew that after a month or so the worker would give up and look elsewhere for work.

Most workers, nervous about throwing good money after bad, did not sue their employer. Some did, and most of them succeeded in obtaining compensation.

Under the new system, these claims would never be brought.

What claimant, owed £500 or £1,000, would risk spending £400 in suing their employer, knowing that the employer might refuse to engage with proceedings or declare themselves insolvent to frustrate the claim?

The ground for these “reforms” has been softened by a dishonest press campaign to the effect that most tribunal claimants lose, that the average cost to an employer of defending a tribunal claim runs into six figures and that the tribunal system is, according to the Financial Times, as bleak as “Dante’s vision of the inferno.”

But contrary to what you might read in the right-wing press, most tribunal claims that make it to a hearing succeed.

Far from costing employers a fortune, the median awards for dismissal and discrimination claims are just £4,500 and £7,000.

The coalition’s changes take attention away from far deeper problems with the system, which are crying out for genuine reform.

One major problem is that the system invariably compensates suffering with money.

The majority of tribunal claimants are unemployed at the time of their claim, so the most valuable remedy for them, especially in today’s job market, would be reinstatement.

Yet of the 40,000-plus unfair dismissal claims before the tribunal in 2010-11, only eight resulted in orders reinstating or re-engaging the claimant.

The fact that reinstatement is seldom used as a legal remedy has had a pernicious effect on how employers behave when employees complain about their decisions, including decisions to dismiss.

Forty years ago, in the industries which kept records, the success rate for internal appeals of dismissal was between a third and a fifth of all cases. Today, no-one is keeping any figures as to what happens when workers complain to their employer about a dismissal.

But the day-to-day experience of employment representatives is that this is an almost unknown remedy. Perhaps 1 or 2 per cent of people complaining to their employer about dismissal are reinstated.

The reluctance of tribunals to order reinstatement contributes to the rise of an aggressive management culture, where junior managers are promoted not for the quality of their judgement but their ability to toe the line.

A second key problem with the present system is that tribunal awards are low.

The average UK wage is around £24,000, the average time between dismissal and hearing is around a year and the vast majority of tribunal claimants remain unemployed at their hearing.

So you would expect that the average award for an unfairly dismissed worker should be of the order of £24,000. But the median compensation award for unfair dismissal was just £4,591 in 2010-11.

This “compensation gap” is a product of a legal culture based on the English common law’s deep reluctance to compensate workers for their losses – an approach found as readily in the awards for accidents at work as in ordinary employment law.

The employment tribunal system is in dire need of reform, but the changes needed are the exact opposite to the ones being introduced by the coalition.

[This article was originally published in the Monday issue of the Morning Star newspaper]

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Monday 5th March 2012 at 9:00am

Charging Fees in Employment Tribunals (2)

In my last post, I said that I would respond here to the government’s proposals that claimants should in future bear the entire cost of starting Tribunals claims; and that if claimants underestimate the potential value of their claims they should be stopped from receiving the full value of the claims later.

Who should pay?
The consultation document suggests that workers should pay the costs of Tribunal claims, for the following reasons:

“When a claim commences it can only be the claimant who initially pays the fee. The employment tribunals incur cost as soon as the claim form is submitted. The respondent is not formally aware of the proceedings until the tribunal sends notification and therefore cannot be asked to pay the initial fee. A claim received without the correct fee, (or proof of eligibility for a remission considered in section 5), will not be properly made and will not be accepted.”

The government goes on to acknowledge that only asking one side to pay fees is a lop-sided proposal – in that only side bears the initial cost – but this is to be remedied by asking the losing party (whoever that is) to pay the costs at the end. If that is the employer, the employer will compensate the worker in due course.

This proposal is unjust for three main reasons:

First, the majority of workers in the UK work for companies that employ more than 50 people. The majority of claimants are unemployed workers. (Generally, those with grievances who remain in work don’t bring Tribunal claims, for the obvious reason that they don’t want to be sacked). The typical Tribunal claim involves a company whose spare income outweighs the spare income of the claimant many times over. In two of the three main types of Tribunal claims (i.e. wages and dismissal claims) workers “win” in half of all cases or more. In other words: the proposal front-loads the financial risk of litigation onto the party least well equipped to bear that risk, and without even the justification that they are most likely to lose.

Second, the rationale for charging claimants rather than respondents is administrative efficiency. But it is simple nonsense to write that respondents can’t be asked to pay the initial fee as they don’t know there is a claim until they see it. Of course they don’t. But there is no good reason to charge the initial fee on the receipt of the claimant’s ET1 form: it could just as easily be charged on receipt of the respondent’s ET3 form.

Third: the government proposes to balance the unfairness of asking only claimants to pay the issuing fee by providing that if claimants win they will get the money back.

The difficulty here is that at present many employers don’t pay when they lose their cases. The reason they don’t pay is that Tribunal enforcement mechanisms have historically been very weak. The last research on the topic (Adams, Moore, Gore and Brown, Research into Enforcement of Employment Tribunal Awards in England and Wales (Ministry of Justice Research Services 9/09, May 2009) suggested that 47% of Respondents did not pay the Tribunal claim within 6 weeks of the decision (i.e. the point at which they become liable for interest) and 31% do not pay within 12 months – i.e. at all.

So under the government’s system, a worker bringing an unfair dismissal claim (for which the median eventual award is c£5000, and the prospects of winning are c50%) is expected to frontload the risk by paying total hearing and issuing fees of £1400 which even if they win they only have 70% chance of ever getting back.

i.e. to bring a claim, a worker should have to pay two thirds of its entire commercial value upfront.

Why should the poorest party in the hearing be forced to carry that sort of risk?

Capping Tribunal awards

The last part of the fees proposal on which I want to comment is that the Coalition proposes that in future when workers submit their claims, they should be required to decide whether their total claim shall be in excess of £30,000; if so, they will be required to pay a higher fee; where they do not pay that fee, this cap shall apply.

The proposal would be a dramatic change from the present system, under which Claimant representatives are given the opportunity to estimate the value of the claim, but by and large do not do so.

The reasons for this are nothing to do with the merits of a claim or the perfidy of Claimant representatives. They are rather because the two major determinants of the value of an unfair dismissal or a discrimination claim are (i) what the worker earned in their last employment, and (ii) how long it takes them to obtain a new job.

Invariably, even the best advised claimant knows (i) but not (ii).

Another factor here is that the claimant also does not know the date of the hearing. The unacknowledged, but general, practice of the Tribunal is to be much more ready to put a value on past rather than future losses.

The reason for this, again, is unstated but obvious. If a worker is dismissed on 1 January 2011 and their case is heard on 1 January 2012, the Tribunal can know for definite whether they have found work and can assess their efforts to date. If the worker then says it will take them another year to find a job, but in fact it takes them 6 months – or indeed 18 months – there is no real provision to disturb what was intended to be a final judgment.

The length of time it takes to get from initial claim to merits hearing can be (exceptionally, in a very simple unfair dismissal claim heard in a part of the country where the system is relatively efficient) as little as 6 months, it can on the other hand takes as much as 2 years (especially if there are preliminary hearings) and where there are appeals the time between hearing and remedy can be in excess of 5 years.

Where workers leave tribunals with awards of £40,000 or £50,000 this is their “real” loss. This is some (but never all) the money that they would have been paid had they remained in work.

To say to the Claimant at the start – here is a financial incentive to cap your claim at a value which may be less than half your real loss – is grotesque.

It is a very long way from justice.

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Friday 2nd March 2012 at 3:50pm

Charging Fees in Employment Tribunals (1)

Tuesday 6 March is the deadline for responses to the Ministry of Justice’s consultation on fees in the Employment Tribunal and at the EAT.

The first point to note is that the consultation will be about the amount of fees rather than the principle of fees. The government has not consulted on the principle of fee charging and has no plans to consult on it. This alone is probably the biggest single change to the Tribunal system since the unfair dismissal jurisdiction was introduced in 1971, and the government has no intention of asking whether fees should be introduced. The government’s assumption is of course that, if it did ask, an overwhelming majority of those responding would be opposed.

For my book, I looked back to the deliberations of the Donovan Commission which introduce the modern Tribunal system. It is noteworthy that while Donovan deliberated many of the key features of the present-day system it never occurred to Donovan or any of his Commissioners that fees should be charged for what they originally termed a “dismissals tribunal”.

The Commissioners sought to establish an “easily accessible, informal, speedy and inexpensive” Tribunal (Report of the Royal Commission on Trade Unions and Employers Associations 1965-1968 (Cmnd 3623), para 572).

Had the Commissioners encountered today’s system, with its many informal obstacles to claimants’ rights (including lawyers’ fees, the stress of litigation, and the diminished prospects of claimants obtaining any work thereafter) they would have been horrified and would have sought the reform of the system in the exact opposite direction to the changes now proposed by government.

The MOJ’s consultation seeks views on 3 key issues:

1) Should there be a separate issuing and hearing fee?
2) Should claimants bear the cost of starting the claim?
3) If claimants underestimate the potential value of their claim should they be stopped from receiving its full value later?

I’ll address the first of these issues here and engage with the others in a further post.

Separate issuing and hearing fees

At the start of the consultation document Jonathan Djanogly MP writes, “employers complain that, at its worst, the operation of the current system can be a one way bet against them, with parties inadequately incentivised to think through whether a formal claim really needs to be lodged, or whether it could be settled in other ways such as conciliation, mediation or informal discussions.”

The first point to notice is the phrase “employers complain…”. One rationale for this specific proposal, and for document as whole, is to alter the Tribunal system in ways which are intended to benefit employers at employee’s expense.

Second, although the proposal is cast as being about incentivising settlement; it will be noted that a large number of the other proposals in the document are likely to disincentivise settlement: for example, it is suggested that if the parties decide to mediate their claim and seek judicial assistance, they should pay £750 for a mediation service which is presently free.

Third, in a crude “game theory” approach to litigation, having separate issuing and hearing fees “might” incentivise settlement, in the sense that both parties will have a pecuniary interest in settling the case rather than proceeding to a full hearing.

But, the proposal needs to be considered in light of the absolute amounts that the coalition is proposing should be charged:

Wages claim: issuing fee £150, hearing fee £250
Dismissal claim: issuing fee £200, hearing fee £1200
Discrimination claim: issuing fee: £250, hearing fee £1250

I don’t know of any research on what awards wages claims typically attract (from the annual ET figures we can see only that a relatively high proportion of them succeed), but I would be amazed if much more than 50% of wages claims actually resulted in an award excess of £1000.

Many wages claims it should also be noted are brought against employers whose primary defence is along the lines of “I know you did the work, and I really should pay you, but I am strapped for cash” (whether the companies are in fact strapped, or not).

As a result, around 30% of employers don’t pay Tribunal awards (see Adams, Moore, Gore and Brown, Research into Enforcement of Employment Tribunal Awards in England and Wales (Ministry of Justice Research Services 9/09, May 2009, which is the most recent research on the subject. It was on the Ministry of Justice website until recently, but unfortunately appears to have been taken down).

So, rather than incentivising settlement, the real purpose of the dual fee (once the fees are set at this amount), is to disincentivise the claim itself. A rational economic calculator, sitting on a debt of c£1000, with c70% success at the Tribunal, and only around 70% chance of actually being paid even if the claim succeedds would think something like the following

“I am owed £1000. But when I consider that I only have a 70% chance of success at the hearing and a 70% chance of being paid if I win … I reckon that if I take my claim to the Tribunal it’s real value is as little as £500.”

“On those odds Fee 1 – the issuing fee – may just about be affordable – in that it “may” convince my employer that I’m serious and that they have to pay me something.”

“But Fee 2 – the hearing fee – is getting to the point where it would be ludicrous to gamble further. Even if I win at the end, and that will take time and effort, there is too much risk that I will end up with less money than I had at the beginning.”

It also has to be remembered that very many wages claims aren’t even for as much as £1000.

Certainly, when I worked at a London Law Centre, the typical wages claimant was something earning more like £200 per week, and the typical scenario giving rise to their claim was a failure to pay notice pay – ie the typical claim had a value of just (say) £200-£400 – at which point paying a hearing fee of £250 on top of an issuing fee of £150 would be still less attractive.

It is hard to resist the conclusion that the government’s purpose in introducing Tribunal fees is to say to those wretched employers who don’t pay their staff wages that they have the full authority of the Coalition in so doing.

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