In radical reforms dubbed “employer-friendly”, HM Govt has proposed wide-ranging changes to UK employment laws. The most eye-catching is the suggested doubling of the time in post needed to claim unfair dismissal. Jenny Wotherspoon asks what this means for employers in the advertising and marketing sectors.
Topic: Unfair dismissal
Who: Department for Business Innovation and Skills ("BIS")
When: January 2011
Law stated as at: 1 February 2011
On 27 January 2011, the Department for Business Innovation and Skills ("BIS") launched a consultation on wide ranging proposals to reform the Employment Tribunal system.
The proposals have been widely publicised as "employer friendly", with a focus on reducing the number of claims, speeding up the Tribunal process and "weeding out" weak or vexatious claims. Jenny Wotherspoon assesses the proposals and asks whether they could lead to further headaches for employers?
What does this mean for employers in the marketing and advertising sectors?
Unfair dismissal service requirement
The most controversial element of the consultation relates to the proposal to increase the qualifying period for unfair dismissal claims from 1 to 2 years. The Government believes such a move will enable businesses to "feel more confident about hiring people" and estimates this will result in between 3,700-4,700 fewer unfair dismissal claims per year. However, as most employers know, there is no length of service requirement for an employee to bring a claim for discrimination and it is not unusual for employees to circumvent the 1 year service requirement by bringing spurious claims of this nature. It remains to be seen whether the proposals to strengthen the Tribunal's ability to strike out weak claims (see below) will be robust enough to address this practice.
The other proposals include:
- Requiring employees and employers to contribute towards the cost of running Employment Tribunals by paying fees. The consultation document does not provide any detail as to how this fee system would operate in practice and further consultation is expected on this in the coming months.
- Requiring all claims to be submitted to the conciliation service, Acas, before the case proceeds to the Employment Tribunal to allow Acas a period of up to a month to offer conciliation. This is intended to enable potential claimants to have a clear understanding of the issues in their claim, such as how long a case might take, and what damages a Tribunal might award.
- Requiring claimants to provide a draft schedule of loss (setting out the damages they are seeking and how they are calculated) when proceedings are commenced. It is anticipated that this will allow employers to have enough information at the outset to make an informed decision about whether to fight the claim or consider an early settlement.
- Widening the Tribunal's power to strike out weak or vexatious proceedings at an earlier stage in proceedings and broadening the circumstances in which a claimant can be ordered to pay a deposit in order to continue with their claim. Under the current rules a deposit can only be ordered where the claim has "little reasonable prospect of success". It is proposed that this test will be widened and that Tribunals will be given more detailed guidance as to the factors to be taken into account when assessing whether a claim is weak.
- Increasing the Tribunal's power to award costs in weak/unreasonable claims from £10,000 to £20,000. However, there is no intention to change the general rule that the parties should bear their own costs in most cases.
The above changes are welcome news for employers and should, to some extent, reduce the number of claims and lead to a more efficient Tribunal system. However, in addition to these favourable developments, the Government is also proposing to introduce automatic financial penalties for employers who are found to have breached employment legislation, on top of the ordinary compensation already payable. It is proposed that these penalties would be equivalent to 50% of the total award of damages made to the claimant, and would be payable to the Exchequer (subject to a cap of £5,000). It is anticipated that employers would receive a discount for prompt payment.
Such proposals are likely to face strong opposition from employers, not least because the question of whether an employer has breached employment legislation is often assessed on whether they have acted reasonably; a test which is far from clear cut. Furthermore, there is a risk that the threat of such penalties could be used as a means for unscrupulous claimants to seek to negotiate higher settlement payments.
A full copy of the consultation document can be found here.
The consultation closes on 20 April 2011. Osborne Clarke is working on a draft response to the consultation paper and we will be canvassing opinions from our clients in the marketing and advertising sectors as part of this process. If you would like to take part, please contact Jenny Wotherspoon.