‘From employment protection to employer protection’ – update on the changes to employment law

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1 Government’s Approach to Employment Law:

David Cameron 10.11.2011: “One business man said he did not have the time or the money to go through the hassle of removing people in the UK – so he hires in the US’. Another said “I don’t care if the UK’s processes are more flexible than most European countries. That’s like saying we’re better than Italy at cricket. The real competition is the US and Asia. That is why I want to deregulate and cut back on bureaucracy”.

Vince Cable 23.11.2011: “What we are doing here is hacking through the excessive red tape and regulation that prevents too many businesses from creating new jobs in the first place” with “ambitious plans to deregulate and modernise employment relations”. Yet within the same speech he accepted that “the UK has one of the most effective and lightly regulated labour markets among developed economies”.

Liam Fox 22.02.2012: “To restore competitiveness we must begin by deregulating the labour market. Political objections must be overridden. It is too difficult to hire and fire and too expensive to take on new employees. It is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical”.

 

2 The Facts

Whilst the Government is pushing for deregulation of employment rights as a means to improve the economy, the economic data do not seem to support their political argument.

According to the World Bank’s ‘Doing Business’ rankings, the UK ranks 7th in the world for business ‘ease of operating’ out of 183 countries, behind only, in order, Singapore, Hong Kong, New Zealand, the US, Denmark and Norway.

Additionally, the OECD’s ‘employment protection index’ measures the procedures and costs involved in dismissing and hiring workers and employees. On this index, which covers the 21 largest economies, the UK ranks 3rd in terms of the lowest levels of employment protection behind only Canada, which comes 2nd, and the US which comes 1st. Therefore, the OECD believes that the UK currently is the 3rd least regulated and cheapest labour market.

In terms of unemployment levels, 2 of the most regulated and costly labour markets, Germany and the Netherlands, currently have much higher levels of employment protection than the UK but have seen a much smaller rise in unemployment.

Another argument used by the Government refers to the rising number of Employment Tribunal (ET) cases. Whilst that was certainly true at the height of the recession in 2009/2010, the number of ET cases has fallen significantly with the latest annual statistics covering the entire period from April 2011 to March 2012 (note this was before the first wave of the Government’s changes were brought in in April 2012 – see below) showing a fall of 15% in new claims overall and a fall of 19% in new ‘multiple’ claims (such as equal pay).

So, the facts appear to suggest that there is no economic benefit to deregulating employment rights and that ET claims have been falling sharply.

 

3 First Wave of Employment Changes now brought in

From 15th February 2012 the maximum deposit order which can be ordered by an ET (where a case has been identified at a Pre-Hearing Review (PHR) as having less than 50% prospects of success) increased from £500 to £1,000.

From 6th April 2012 the 1 year qualifying period for ‘normal’ Unfair Dismissal protection increased to 2 years (also applies to the right to request written reasons for dismissal) meaning that anyone who started a new job on or after 6th April 2012 will take two years to gain Unfair Dismissal rights.

The ET increased its power to make costs orders against a party, with the level increasing from £10,000 to £20,000 from 6th April 2012.

From 6th April 2012 ETs have treated all witness statements as ‘read’ rather than requiring a witness to read aloud the statement within an ET Hearing. Our view is that this may not harm witnesses who have the benefit of legal representation (where they have had legal assistance in the drafting of the statement) but for individuals who represent themselves, their witness statement may not be sufficiently detailed – and by not allowing them to read their statement aloud (and clarify it) this may mean that the individual misses putting relevant matters to the ET.

From 6th April 2012 Judges began sitting alone in Unfair Dismissal cases, losing the longstanding benefit of the ‘industrial jury’ of lay members except in what are likely to be only exceptional cases. A recent survey showed that the majority of ET Judges believed that lay members contributed significantly to the fairness of ET Hearings. After decades of the ‘industrial jury’ being key in Unfair Dismissal cases that jury is now lost with most such cases being heard by a Judge alone.

From 6th April 2012 witness expenses were withdrawn. This hits Claimants harder than Respondents as most Respondents’ witnesses are managers and, of course, remain employed by the Respondent who in reality will always be meeting their travel and attendance costs.

 

4 Second Wave of Changes likely to be brought in later this year or 2013-2014

ACAS early conciliation will be compulsory for all parties before commencing an Employment Tribunal claim, without any additional funding given to ACAS. This is contained in the Enterprise and Regulatory Reform Bill (TERRB). Also, it will mean time limits may be extended whilst ACAS early conciliation takes place. The detail of this is to be set out in yet to be published Regulations.

The creation of an Independent Assessment Service (IAS) to assess sick employees once an employee has been signed off for 4 weeks, taking the decision out of the hands of the employee’s General Practitioner (who is not considered to be responsible enough) and passing it to independent medical advisors.

Introduction of ‘protected conversations’ allowing the employee and employer to discuss things frankly without those discussions being brought to the attention of an ET unless they are discriminatory. This is to be combined with the ‘simplification’ of the content of Compromise Agreements, also to be renamed Settlement Agreements, with a view to more employers dismissing employees by way of such Agreements.

‘Simplification’ of the Agency Workers Regulations 2011, aiming to make it easier for businesses and the recruitment sector in the use of and protection for agency workers.

Removal of the ‘gold plating’ of collective redundancy legislation with the possibility of a reduction in the compulsory period of consultation of 90 days (for 100 or more proposed dismissals) before dismissals occur to as little as 45 or even 30 days and the bringing in of a non-statutory code of practice, with consultation closing in September 2012, most likely with implementation in April 2013. Guidance will be published later in 2012 for consultation.

‘Simplification’ of TUPE with a likely reduction in post-transfer protection to employees’ terms and conditions of employment as well as the removal of the alleged ‘gold plating’ of TUPE, for example, removing service provision changes (SPC). This would mean that TUPE transfers will be less likely to be found to have occurred where the transfer concerns the awarding or loss of a service contract, reducing the protection to employees particularly in the distribution, cleaning, security and other commonly ‘contracted out’ service sectors.

The possible introduction of ‘no fault’ dismissals for micro-firms, those with 10 employees or less, although Vince Cable has denied this. However, in light of other changes to Unfair Dismissal, is ‘no fault’ dismissal coming in through the back door anyway?

Providing a power to change the cap on Unfair Dismissal (currently £72,300 for a compensatory award) to possibly a years’ pay or between 1 and 3 years’ median earnings or the lesser of those, which is expected to be implemented in 2013.

Revised ET procedure, currently being reviewed by the ex-EAT President, expected to be implemented in 2013.

Employment Appeal Tribunal (EAT) Judges will begin to hear cases alone as a default option, again without lay members, expected to be implemented in 2013.

The, as yet, undetailed further ‘streamlining’ of Unfair Dismissal law designed to make it easier for employers to dismiss employees.

The introduction of ET powers to levy financial penalties (payable to the State) on employers who breach employment rights where their behaviour has ‘aggravating features’ with a penalty of between £100 to £5,000 (reduced by 50% if paid within 21 days) expected to be implemented in 2013.

Introduction of a rapid resolution scheme for wages claims without going to an ET, expected to be implemented in 2013, possibly to be dealt with by non-Judge ‘legal officers’ without hearings taking place.

Removal of whistle-blowing protection concerning disputes about employees ‘blowing the whistle’ on contractual terms of employment.

Giving ETs the power to order equal pay audits where an employer has been found by an ET to have discriminated, with consultation to be started later in 2012. However, an employer would be spared where an audit had been done in the previous 3 years, the employer has ‘transparent’ pay practices or ‘the employer can show a good reason why it would not be useful’ – one wonders why if the ET has found that employer has discriminated, the employer should have 3 potential reasons to escape an audit?

Introduction of ‘portable’ Criminal Reference Bureau (CRB) checks possibly in early 2013.

Abolition of statutory Questionnaires (Equality Act 2010) as a means for an employee obtaining information from an employer.

Repealing the Equality Act 2010 provision which makes employers liable for harassment of staff by third parties, such as customers.

Removing an ET’s powers to make general recommendations to employers to stop discriminatory practices where there has been a finding of discrimination against them.

ET fees, which we believe the Government will definitely introduce as they have made it clear that the recent consultation was only about the way in which they would be introduced (not whether or not they should be). Currently, there are two proposals for fee charging, one for separate issue fees and hearing fees which could be implemented by April 2013, and the other for a global single fee, more likely in April 2014. Subject to which proposal is adopted, the currently proposed fees vary between £200 to £400 for a straightforward wages claim, £500 to £1,200 for an Unfair Dismissal claim and £600 to £1,750 for a discrimination or equal pay claim. Where there are ‘multiple’ claims the fee is multiplied meaning that some ‘multiple’ claims could incur fees of several thousands of pounds. Commentators have identified that the current proposals will have a significantly disproportionate impact on the lowest paid workers, disabled people, black and minority ethnic people and women who are pregnant and/or on maternity leave.

David Sorensen
Morrish Solicitors LLP
Leeds
0113 245 0733
david.sorensen@morrishsolicitors.com

4th July 2012

David Sorensen is a partner within the Employment Rights Team of Morrish Solicitors LLP. David regularly advises trade union and associations on employment law issues, as well as representing trade unions and associations and their members in Employment Tribunal and court proceedings. He has a wide-ranging caseload covering collective claims, industrial action matters and employment disputes such as unfair dismissal, discrimination and breach of contract matters.

 

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