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7 March 2014

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Important Employment Law Reform by Sarah Young

Posted by: Gill Gange

The Enterprise and Regulatory Reform Act 2013 (“the Act”) represents a key part of the Government’s employment law review which is aimed at reducing regulation and boosting economic recovery. The Act received royal assent on 25th April 2013 and a number of its provisions have already come into force including the introduction of per-termination discussions last summer. Two important developments however will come into effect on 6th April 2014; ACAS early conciliation and financial penalties for employers in the Tribunal. This feature focuses on these two key developments as well as the annual increase in compensation limits.

ACAS Early Conciliation

The introduction of early conciliation is designed to increase efficiency in the Tribunal system by imposing a duty on the parties to attempt to settle any employment dispute before a claim is issued. The new system will be available for the parties to use from 6th April 2014 and will become mandatory for all claims presented on or after 6th May 2014.

Briefly, this will involve a 4 step procedure which the parties are required to follow before a Tribunal claim can be issued:-

• Step 1 – the prospective Claimant will need to send a completed early conciliation form to ACAS confirming their name, address and contact number as well as the prospective Respondent’s name, address and telephone number. Perhaps surprisingly, prospective Claimants will not however have to provide any information on the nature of their claim(s).

• Step 2 – an early conciliation support officer (“ECSO”) will be appointed who will contact the prospective Claimant to confirm they want to proceed and will then pass the case onto a conciliator. If the ECSO cannot contact the prospective Claimant or they do contact them and they confirm they do not want to proceed with conciliation, the ECSO will issue an early conciliation certificate (“ECC”) confirming that they have complied with their early conciliation obligations. The prospective Claimant will then be able to issue their claim in the Tribunal.

• Step 3 – in the event a prospective Claimant confirms they do want to proceed with early conciliation, a conciliator appointed to the file will then contact the prospective Claimant and prospective Respondent with a view to trying to broker a settlement. In that situation the conciliator will have one month within which to secure a settlement. This period can be extended by up to a further two weeks where the conciliator believes there are reasonable prospects of securing settlement within that period.

• Step 4 – if the conciliator is unable to secure settlement, they will issue a ECC confirming that the prospective Claimant has complied with their early conciliation obligations. The prospective Claimant will then be free to issue a claim in the Tribunal. If settlement is reached, the terms will be recorded in either a COT3 agreement or settlement agreement and an ECC may still be issued.

In order to ensure Claimants do not miss the limitation date for issuing certain claims, the early conciliation process will effectively “stop the clock” so that they can issue the claim at the end of the conciliation process or else extend limitation by an additional one month period.

How much impact early ACAS conciliation will ultimately have remains to be seen. It seems to us however that with the introduction of Tribunal fees last summer, Respondents are likely to be unwilling to engage in settlement discussions at such an early stage and may prefer to wait and see whether the Claimant is serious about issuing proceedings before they consider settlement.

Financial Penalties for Losing Employers

The Act gives Tribunals the power to impose financial penalties on employers who lose at Tribunal. Penalties will not be imposed automatically and Tribunals will consider whether an employer’s breach has one or more “aggravating features”. The power will apply in cases presented on or after 6th April 2014.

The penalties Tribunals can impose will be between £100.00 and £5,000.00 and where a financial award has been made in the proceedings, the penalty will be 50% of the amount of that award. When a non-financial award is made the Tribunal will ascribe a monetary value to it. The penalty will be reduced by 50% if it is paid within 21 days.

At this stage, it is not clear what will amount to “aggravating features” although Government guidance suggests it will be unreasonable behaviour on the part of the employer for example where there has been some negligence or malice involved.

Employment lawyers have expressed concern at the introduction of financial penalties as there is a risk the prospect of a fine may put some employers under pressure to settle unmeritorious claims.

Increase in Compensation Limits

From 6th April 2014 a week’s pay for the purpose of calculating redundancy payments or unfair dismissal awards will rise from £450.00 to £464.00. Likewise, the maximum unfair dismissal compensatory award will rise from £74,200.00 to £76,574.00.

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