Employment tribunal reforms

Summary

• A range of reforms is to be made to the employment tribunal system. Among the areas covered in the government’s response to its January 2011 Resolving Workplace Disputes consultation are the following (summarised and commented upon below):
  • promoting and extending the use of workplace mediation
  • amending the law on compromise agreements
  • increasing the role of ACAS in early conciliation
  • increasing the maximum amount for cost and deposit orders
  • dispensing with lay members in unfair dismissal claims
  • introducing financial penalties for employers who breach the law
  • undertaking a fundamental review of the employment tribunal rules
  • publishing the median value of awards and time taken to reach a tribunal hearing on the ET1 and ET3 forms
  • introducing a ‘rapid resolution’ scheme for simpler claims
• December 2011 saw the publiction of a consultation document on charging fees to applicants in tribunal proceedings.
• The government has also unveiled various changes to employment law more generally.

• The responses to the consultation highlighted areas that were particularly suitable for mediation, including bullying, discrimination and diversity, and issues of ‘fairness’. The responses noted that mediation was only effective before the occurrence of discipline and grievance procedures, termination of employment or litigation. A lack of awareness and the financial cost of mediation were also raised as potential barriers to using mediation.
• The government will undertake a ‘long-term reform programme’ to increase the use of mediation to resolve disputes. It proposes to work with the private sector to share knowledge of mediation with smaller businesses.

• Claimants will be required to submit details of their claim to ACAS at first, at which point they will be offered the option of early conciliation. If it is refused by either party, or is unsuccessful, the claimant will be able to make their tribunal claim. The period for early conciliation will end after one month.
• Claimants will have a period of one month in which to submit their tribunal claim following the completion of early conciliation. This will ‘stop the clock’ on tribunal limitation periods where early conciliation is entered close to the end of that limitation period.
• Parties in all claims will be offered early conciliation, apart from where statutory time limits preclude it. Early conciliation will be offered in multiple claims, regardless of the size of the group.
• ACAS conciliators will be able to extend the conciliation period by a further 2 weeks where there is a reasonable prospect of settlement and with the parties' agreement.
• ACAS will have a duty to conciliate pre-claim, rather than a power.
• A shortened claim form will be introduced to allow ACAS to receive key details at the early conciliation stage.
• ACAS will retain its duty to provide post-claim conciliation.
• Whether ACAS will be funded to meet this increased work load remains to be seen. The government’s view is that the savings achieved by reducing tribunal claims, as a result of early conciliation, can be directed towards ACAS to bridge the funding gap. While ACAS claims that it has a good record on pre-claim conciliation, such a process is currently voluntary and both sides will, by definition, be more predisposed to reaching an agreement. Will this be the case where pre-claim conciliation is compulsory?

• Employment judges are now allowed to hear unfair dismissal cases alone, i.e. the lay members can be dispensed with. This has been adopted despite little support for it being shown in the responses to the original consultation. It seems the government is persuaded that the potential cost savings are too great to ignore.
• A fundamental aspect of unfair dismissal law is that, in assessing fairness or otherwise of dismissal, a tribunal must consider the possible range of employer responses. Many believe that the non-legal (lay) members play a vital role in this by, among other things, reflecting industry practice. It is also argued that this move could lead to more appeals as parties may find it easier to accept the views of a panel of three than a judge alone.
• Witness statements (where provided) will be taken as read, unless a judge or tribunal directs otherwise. Witness statements have increasingly been 'taken as read' following EAT guidance in 2011 that this should be the practice. This change means that this is now the default position, although either of the parties will still be able to make an application for the tribunal to exercise its discretion to allow witnesses to read their statement aloud.  While this change has advantages in terms of speeding up hearings, what about the perception of the litigants themselves? Not actually having one's voice heard may make people think that they're not 'having their say' and lead to dissatisfaction.

• The maximum limit for deposit orders, under which a party is required to pay a deposit as a condition of being allowed to continue with the case, has been increased from £500 to £1,000. The maximum limit on costs awards has been increased from £10,000 to £20,000.  In practice the increase to both these maximum limits is unlikely to have much practical effect. They are relatively rare, and it is even rarer for employment judges to make use of the maximum permitted.
• Tribunals have the power to direct parties to bear the costs of witnesses’ attendance, where a witness has attended pursuant to a witness order; and that the party ultimately losing a case should reimburse the successful party for any such costs already paid out.
• Plans to extend the current ability of tribunals to strike out unmeritorious claims have been shelved pending the Underhill review of tribunal rules, as have other possible reforms of case management first canvassed in the original consultation.

• A consultation on simplifying compromise agreements will look at the following
  • whether and how to enable compromise agreements to cover all existing and future claims without the need for a full list of causes of action
  • how to draft a standard text and guidance for parties to use
  • clarifying the meaning of s. 147 of the Equality Act 2010 so that they can be used to settle discrimination claims (this has now been sorted out, see HR News item)
  • reviewing the advice and guidance on compromise agreements available to employers and employees
  • changing the title of ‘compromise agreement’ to ‘settlement agreement’.

• Currently, tribunal awards are not punitive: it is a question of compensating someone for the loss they have suffered, not penalising the employer for any mistakes it has made.
• The proposal is to give tribunals the power to penalise employers who have breached employment rights, where the employer’s behaviour in committing the breach has ‘aggravating’ features, e.g. where negligence or malice is involved. This would be in addition to any compensation awarded to a successful claimant.
• The monetary sum will be paid to the government rather than to the claimant.
• The financial penalty will be half the amount of the total award with a minimum threshold of £100 and an upper ceiling of £5,000. Where a non-financial award has been made, a tribunal can ascribe it a monetary value to enable a financial penalty to be made. The penalty would be reduced if there is prompt payment, by 50% if paid within 21 days.
• The government has listened to concerns that an automatic penalty (as originally proposed) could have punished inadvertent errors. Instead, it has decided to give employment judges the discretion to impose a fine depending on the circumstances..

• A consultation will look at whether and how a scheme could be introduced for the rapid resolution (within 3 months) of low-value, relatively straightforward claims (e.g. holiday pay) as an alternative to the tribunal process.

• Two options are proposed:

1. Option 1: fees of between £150 and £250 to issue a claim and of between £250 and £1,250 to proceed to a hearing, both to be borne by the claimant. The nature of the claim would determine whether the fee is at the higher, mid or lower end of the scale, for example, with unpaid wage claims at the lower end, unfair dismissal in the middle and discrimination, equal pay and whistleblowing claims at the top. Claims involving more than one type of complaint would attract the fee payable for the highest claim. Higher fees (of up to £7,500) would apply where multiple claims are involved. An employer would be required to pay for certain applications to the tribunal, for example, where it issues a counter-claim or applies for a dismissal following settlement, and these fees range from £60 to £750. Where either party wishes to appeal, the fees payable to the EAT would be higher still, with a £400 issue fee and a £1,200 hearing fee.
2. Option2: this would levy fees only at the issue stage. As with Option 1, the nature of the claim and number of people involved would inform the level of the fee to be paid, as well as the value of the claim. As such, single claims valued at £30,000 and above would be charged a £1,750 fee, with simpler claims starting at £200 and multiple claims attracting higher fees.

• In both options, the tribunal would be given the power to order the unsuccessful party to reimburse fees paid by the successful party - so the cost is ultimately borne by the party who caused the tribunal system to be used.
• For both options, additional fees will be levied for certain applications, e.g. request for written reasons - party who applies to pay between £100 and £250
• A system of fee waivers will be funded for those who cannot afford to pay.

• 6 April 2012 for:
  • witness statements to be taken as read
  • removal of witness expenses
  • clarification of the scope of compromise agreements under the Equality Act 2010
  • judges sitting alone in unfair dismissal cases (this applies to claims with a hearing date on or after 6 April, not just claims submitted on or after that date)
  • changes to limits for costs awards and deposit orders
• As and when Parliamentary time allows for, among other things:
  • early conciliation
  • financial penalties for employers
  • judges sitting alone in the EAT
• Tribunal fees: if Option 1 is chosen - 2013; if Option 2 - 2014. Government response to consultation due before Parliamentary summer recess (17 July 2012).

• Resolving Workplace Disputes: Government response to the January 2011 consultation.
• Charging Fees in Employment Tribunals and the Employment Appeal Tribunal.
• Employment Tribunals Act 1996 (Tribunal Composition) Order 2012.