The Coalition Government’s stated objective of reforming and simplifying employment law, and reducing red tape for businesses, is gathering pace, says Lynda Macdonald, freelance employment law trainer, consultant and author. There are various important developments — some currently subject to ongoing consultation and some at a more advanced stage — aimed at amending, abolishing or otherwise reforming employment legislation. This article aims to explore these developments.

Termination of employment — unfair dismissal claims

The Government has confirmed that it will raise the qualifying period of service required to bring a claim for unfair dismissal to tribunal from one to two years. The increased period of service will apply in respect of employees dismissed on or after 6 April 2012.

The stated aim of this proposal is to reduce the number of so-called vexatious claims being brought to tribunal. This is despite the fact that no concrete evidence exists to suggest that tribunals are troubled by large numbers of vexatious claims.

Tribunal fees

The Government has also confirmed that fees will be introduced for making claims to employment tribunals — most likely with effect from April 2013. There is to be a consultation during 2012 over the exact amounts of the fees and the payment arrangements. It has been suggested that there will be an initial fee of between £150 and £250 charged for lodging a claim, then a further £1000 to pay if the case proceeds to a hearing. Another option is to charge more to claimants who are seeking an award in excess of £30,000. If the claimant succeeds in his or her claim, the money will be refunded, but if he or she loses, it will be forfeited.

It is proposed that no fees will be charged to claimants who cannot afford to pay; if this part of the proposal is carried through to implementation, it would mean that those recently dismissed (and who have not secured new employment) would, in all likelihood, be exempted from paying.

Equal pay audits

There is a proposal to permit employment tribunals to order employers who lose equal pay claims to undertake and publish equal pay audits.

Other proposals to reform employment tribunals

Radical plans are under way with a view to reforming the employment tribunal system. The main aim is to reduce the overall number of claims brought to tribunal and the cost of running the system. Over and above the plan to raise the qualifying period of service for unfair dismissal claims from one to two years, further proposals are expected to be implemented in April 2012, including the following.

  • The category of cases that can be heard by an employment judge sitting alone is to be extended to include straightforward unfair dismissal cases (ie those where the claim is for unfair dismissal only and in which there is no material dispute over the facts).

  • Witness statements will be allowed to stand as evidence without them having to be read aloud at the hearing. This will reduce the amount of time spent hearing evidence.

  • The maximum level of deposit that a tribunal may order as a condition of continuing with a claim is to be increased from £500 to £1000.

  • The cap on costs/expenses awards and preparation time orders that tribunals may impose will rise from £10,000 to £20,000.

  • The payment of expenses to parties and witnesses in respect of their attendance at tribunal hearings is to be stopped. Instead tribunals will have new powers to order the party calling a witness to pay the witness’s costs in circumstances where a witness order has been issued. The party that loses the case will then have to reimburse the successful party for any such costs already paid out.

  • There is to be an independent review of the employment tribunal rules of procedure to address concerns that tribunals are not operating efficiently. The aim will be to develop and recommend a revised procedural code by the end of April 2012 to enable more effective and efficient management and disposal of cases.

Other proposals are in the pipeline for the longer term, but the above represents a summary of those expected to be introduced in 2012.

Protected conversations

The Government has stated that it will consult on the possible introduction of “protected conversations” aimed at allowing employers to have off-the-record discussions with employees (at the request of either party) about issues such as under-performance or retirement — without having to worry that these could lead to legal proceedings in an employment tribunal. Where the employer and employee agree to hold a protected conversation, this would mean that nothing said in the conversation would be admissible in tribunal proceedings.

Equality

The Government has carried out a consultation on the possibility of removing section 40 (sub-sections 2–4) of the Equality Act 2010. Under these sections, an employer can be held liable for the harassment of one of its employees carried out by a third party (eg a customer or supplier) in circumstances where the employer knew that the employee had been harassed on at least two previous occasions by a third party and had failed to take reasonable steps to put a stop to the behaviour that was causing offence.

The Government has also announced that it intends to clarify section 147 of the Equality Act 2010 to deal with the uncertainty as to the validity of compromise agreements covering discrimination issues.

Right to request flexible working

The Government has confirmed its intention to extend the right to request flexible working to all employees, ie not only those who have children aged 16 or under or who care for dependant adults. The six-month qualifying period of service will remain in place. It is also proposed to abolish the statutory procedure for dealing with requests and replace it with a duty to consider requests “reasonably”, together with a new code of practice. The current eight business reasons that employers may use to reject requests are, however, to be retained.

Flexible parental leave

There are also substantial proposals to introduce a new system of “shared parental leave” (which will incorporate the existing right to unpaid parental leave), but these proposals are unlikely to take effect before 2015.

Default retirement age phase-out

Following the abolition — on 6 April 2011 — of the default retirement age, the transitional provisions introduced to phase the provisions out are still in train. The last date on which an employee can submit a request not to retire is 4 January 2012, and this date would only apply to someone who had been given the longest possible notice of retirement (12 months) on the latest possible date (5 April 2011).

Employers remain under a duty to consider any properly submitted request to remain in employment beyond a notified retirement date. Following a meeting with the employee, the employer may refuse the request and there is no requirement to provide a reason for the refusal or to justify it (although the employee has the right to appeal).

Where an employer agrees to allow the employee to stay on, this may be either for a defined temporary period or indefinitely. If an extension for a fixed period of six months or less is agreed, the employee can be compelled to retire on the agreed date without the need for the employer to follow any further procedure. If, however, the employer agrees to an extension of more than six months, it will not be possible to compel the employee to retire at any later date because the provisions allowing for this have been repealed.

Following abolition of the default retirement age provisions, it remains theoretically possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it. Objective justification means that the employer must, first, have a legitimate business aim underpinning a policy of compulsory retirement at a stated age and, second, be able to show that applying that policy is appropriate and necessary with a view to achieving the stated aim.

Working time (ie main working time rules, not mobile workers)

The Government is proposing to amend the Working Time Regulations 1998 following the European Court of Justice’s (ECJ’s) important decisions in Stringer v HM Revenue & Customs [2009] IRLR 214 (in which the ECJ ruled that statutory annual holiday continues to accrue during periods of sickness absence) and Pereda v Madrid Movilidad SA ECJ [2009] IRLR 959 (in which the ECJ held that where an employee is prevented from taking a period of scheduled annual holiday as a result of sickness, the employer must, on request, grant an equivalent period of holiday once the employee has recovered and returned to work, even if this is not until the next holiday year).

The current proposals (which are not yet finalised) are to permit employers to:

  • limit the amount of holiday leave that can be accrued during periods of sickness absence and/or carried over to the next holiday year to four weeks

  • insist that holiday leave which has not been taken due to sickness absence must, where possible, be taken (and paid for) during the current holiday year, rather than carried over to the next holiday year (this in effect means commuting a period of sick leave into paid holiday entitlement)

  • alternatively, require employees to defer holiday leave that has not been taken due to sickness absence until the next holiday year if postponement is justified by business needs

  • buy out the additional 1.6 weeks of statutory annual leave given by the UK Working Time Regulations (currently this may, by agreement, be carried forward, but not bought out, except on termination of employment)

  • require employees to carry forward the additional 1.6 weeks to the first half of the following holiday year, provided there is justification.

Additionally, the Government may choose to place a time limit on the carry-over of holiday leave lost due to sickness absence — this would be in line with European Court of Justice’s recent decision in KHS AG v Winfried Shulte [2011] Case C-214/10, in which the ECJ ruled that it was lawful to operate a policy under which the annual holiday entitlement of any employee who is off sick for consecutive holiday years expires 15 months after the end of the holiday year in which the holidays accrued.

Implementation of the changes is likely to be sometime in 2012.

Pensions

Under the Pensions Act 2011, new provisions requiring employers to auto-enrol their employees into either a company pension scheme or the Government-owned National Employment Savings Trust (NEST) will begin to be phased in from October 2012. The provisions will replace the stakeholder pension provision first introduced in October 2001.

Employers will, broadly, be required to contribute to their employees’ pensions and will need to operate payroll deductions in respect of employees’ contributions. There will be a waiting period of up to three months before new employees are automatically enrolled, and provision will be made to allow employees individually to opt out of the scheme if they wish.

The new provisions will be phased in according to the size of the employer, and the contribution levels will also be phased in over a five-year period. Initially, the provisions will be compulsory only for large employers. From October 2012, the minimum contributions (for employees earning a salary at least equivalent to the personal allowance applicable in respect of income tax liability) will be 1% of basic salary for employees and a further 1% from the employer. Eventually, contributions will be increased to 8% (including 3% from employers) by 2017.

There is no exemption for small businesses, but organisations with fewer than 50 employees will not be required to comply until May 2015.

Conclusion

The Coalition Government has stated that it will “make further changes to employment legislation to reduce the costs to businesses of compliance”. No doubt the current flurry of proposals for reform is set to continue.

Last reviewed 18 January 2012