Employment Law Changes for the Year Ahead

2012 is set to bring what observers have described as “the biggest shakeup of employment law in decades.”

In November last year Business Secretary Vince Cable announced significant reforms to employment law. All taken together, these are considered likely to water down the rights of employees and grant employers more flexibility to hire and fire staff.

One of the significant changes is that from 6 April 2012 the qualifying period for unfair dismissal claims will be increased from one year to two years. Employers will generally be able to dismiss employees within the first two years of employment without the risk of facing unfair dismissal claims. This is with the exception of certain claims including those relating to discrimination. As such, the new rules may actually encourage employees to threaten or bring such claims (which require no minimum years of service) against their employer. BIS have confirmed, subject to Parliamentary approval, that the change will apply to employees who commence employment on or after 6 April 2012. Existing employees of a business will still gain unfair dismissal rights after one year of service, whether or not this period falls after 6 April 2012.

Other changes being introduced this April include:

  • An increase in deposit orders (which a tribunal can order a party to pay as a condition of continuing with a claim or response) from £500 to £1,000.
  • The limit of costs awards to be increased from £10,000 to £20,000.
  • Witness statements to be taken as read and no longer required to be read aloud in any hearing unless a judge directs otherwise.
  • The withdrawal of state-funded expenses and witness expenses being reimbursed by the unsuccessful party.
  • Judges to sit alone in unfair dismissal claims without the need for lay members, unless a judge directs otherwise.

The government has also committed to introducing the following changes in the near future:

  • A requirement for all claims to be raised with ACAS in the first instance before proceeding to an Employment Tribunal. It is hoped that this change in procedure will encourage early conciliation and thus reduce the number of claims being heard by the Employment Tribunal. Where a claim is initially lodged with ACAS this will suspend the time required for lodging claims in the Employment Tribunal.
  • Discretion to be given to judges to levy a financial penalty on employers that are unsuccessful in a claim raised against them. The penalty is expected to be half of the total amount awarded to a claimant subject to a minimum of £100 and a maximum of £5,000.
  • Introduction of fees for bringing a claim to the Employment Tribunal. It has been proposed that the fees should range between £150 and £1,750 and should be determined on a sliding scale based on the type or value of the claim. It is expected that the unsuccessful party will generally be ordered to meet the fees of the tribunal. The fees are intended to deter vexatious claims being brought to a tribunal but the proposal has received criticisms that the fees will reflect an individual’s ability to pay rather than the merits of a claim.

Adding to these reforms, the government has also proposed some other significant amendments to employment law for further review. These include:

  • Introduction of “compensated no fault dismissals” for micro-businesses (with fewer than 10 employees). In effect, this will allow employers to dismiss employees by making a fixed compensatory payment to an employee on termination without the risk of an unfair dismissal claim.
  • Introduction of a “rapid resolution scheme” to deal with more straightforward claims quickly and cheaply.
  • Abolishing the protected disclosure given to employees for whistleblowing, where such whistleblowing activity relates to a breach of their employment contract.
  • Introduction of “protected conversations”, designed to allow employers to have frank discussions with employees “off the record” without the risk of these being used against them in any claim.
  • Simplification of compromise agreements, to be renamed as “settlement agreements”.
  • Simplifying TUPE.
  • “Slimming down” dismissal procedures by potentially amending the ACAS Code.
  • Reducing the collective redundancy consultation period.

Although Vince Cable explained that the intention behind these reforms was to allow businesses to grow and to help small businesses “feel confident to take on staff”, many of these changes are considered to tip the balance in favour of employers by reducing the protection to employees. It remains to be seen whether any of the new measures or proposed new measures will help to stimulate growth and expansion.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.