After several hours in which today’s employment law proposals seemed to be simply “more of the same”, the Department for Business Innovation and Skills has put out a press release announcing consultations on some important changes to the following areas of individual employment law:
•unfair dismissal compensatory awards
The consultation on settlement agreements has gone up on the BIS webiste, here. It contains a model settlement agreement that could be used by parties, which of course remains subject to finalisation. There are two points which struck me:
First, a rare piece of good news, the model settlement letter says clearly on its face that workers would have union representation when invited to protected conversations.
Second, the government proposes “Guideline tariffs” (an idea taken with refinements from Beecroft) for settlement. IE where a worker is identified as up for dismissal the employer could offer them (say) £3,000, and that would be a general, national baseline for settlement. In lots of ways this isn’t a bad idea – if adopted in Beecroft’s original formula, it would have been something like 9 months wages – which works out as around 3 x what a worker actually gets from a hearing. The government hasn’t set a figure, and they have a much better idea than Beecroft of what claimants win in the ET, and in any event I suspect they will back off from this proposals after the consultation (even the tone of this part of the document is exporatory rather than definite). The practical difficulty is really this – as in the example I gave at i) above – a potential claim may be worth very little (eg if the worker is dismissed for gross misconduct) or a lot (redundancy), and either way it will vary dramatically according to the worker’s length of service and salary. Just seeing this from the point of view of policy developers – not a perspective which leaving me feeling very comfortable – to make a guideline amount credible it needs to be one that enough (maybe only 40%) of employers and employees found useful. But every happy work relationship is happy in the same way; and every employment breakdown is different. Trying to squish together the settlement value of millions of claims into a single round figure doesn’t work. A ratio (say, 9 or even 6 months salary) might work. But a sheer number (£3k/£5k/£10k) would just be too far off in too many cases. Most employers would gravitate away from it, and it would be disregarded by too many workers to suit its purpose.
The same BIS document also sets out proposals for the future of the unfair dismissal compensatory award. The reduction in the compensatory award has been government policy since May and is clause 13 of the Enterprise and Regulatory Reform Bill which has had its second reading in the House of Commons. At present, the Bill gives government the power to change by statutory instrument the amount of the compensatory award to a figure of between 1 and 3 times median earnings. In the consultation document, the government proposes introducing either a new limit of one year’s earnings (£26k) or another figure, unspecified. It is pretty clear that the government has set up the consultation with the hope that answers come back supporting £26k, instead of the current maximum award of £72k, and you can be certain that, whatever the people responding to the consultation say, this is what the government will do.
While for the large majority of Tribunal claimants this change will make no difference at all, for a significant minority it will be positively catastrophic. The reason for these two experiences is that most Tribunal claims (especially most unfair dismissals claims) are heard in around 10 months from the claim form, and (whoever wins) only around 5% are appealed. For those that take longer, it can be very very very much longer – often the problem is that employers have applied for prelliminary hearings, sometimes these applications succeed, whether they do or not you can get appeals on preliminary as well as final decisions, and ultimately a small minority of cases (but the high-profile ones) end up sticking in the court system for 3,4,5 or more years. These are the claimants who would be penalised by rules limiting compensation to 3 years’ wages: if they didn’t find a job, they could be dramatically out of pocket.
Streamlining Tribunals has been a shared ambition of both New Labour and Tory politicians for nearly a decade. The theme of this blog is that the idea is not in itself objectionable – if that happened for example because managers treated workers better, or because workers used other means (industrial action) better chosen to acheive justice at work. But merely making it harder to bring claims will inevitably result in pressure elsewhere.
Today’s announcement is of “a consultation starting today including proposals on how judges could dismiss weak cases more easily and reduce the number of preliminary hearings”. (Logic suggests that these are incompatible desires – you can’t reduce the number of claims, except by increasing the number of preliminary stages).
The context is Mr Justice Underhill‘s plans for Employment Tribunals about which I posted in July. In practice, the government now invites comments on these changes. It is clarified that the proposed “sift” of Tribunal claims should be restricted to circumstances where there is an administrative defecit in the claim.
There is a proposal that Judges should be given a new power to strike out a claim at any time. In practice, this joins together with another Underhill proposal that in place of the present two kinds of preliminary hearing (CMDs, where cases can’t be struck out and PHRs, where there can) there should be a single category of preliminary hearing.
The government asks about giving Judges powers to limit evidence (which they do already), and the government consults – almost plaintively – to ask if anything can be done to remove the present practice that costs are only awarded in 0.5% of cases.
(One answer would of course be to remove the no costs principle in the Tribunals; the government has not done this, presumably from an awareness that it would open the floodgates to a much larger number of no-win no-fee claims).
In a nutshell, what is being announced is not new policies as such but two further consultations, each of which will bring us slightly closer to a world of diminished rights for workers.