Summer of Change for Employment Law

Gareth Davies from Davies and Partners

Gareth Davies from Davies and Partners - Credit: Archant

Gareth Davies from Davies and Partners explains about the Summer of Change for Employment Law

This summer brings a whole series of changes in employment law, in particular unfair dismissal. The changes have been brought in to reduce the number of claims that are being lodged in an Employment Tribunal and to encourage companies, in particular small businesses, to recruit and grow their businesses and reduce the risk of employee litigation.

Many employers have highlighted difficulties they’ve had in managing employees whose performance is falling below expected standards. Their fear of litigation appears to be restraining them from having discussions with employees, who may no longer share the same business values.

Following the changes in the summer, it will possible for an employer to have a discussion with an employee about their leaving the organisation and their terms of exiting. Such discussions under the existing law could be very problematic. The new changes state that such discussions cannot be used as evidence in an Employment Tribunal. Assuming such discussions lead to a satisfactory outcome, then an employer can wrap up the arrangement in what is called a Settlement Agreement which will set out the terms of payment to the employee when they are released from their employment, and the employer should have no fear of further litigation following this.

In addition, the Government has brought in a series of procedural changes that are designed to reduce the number of claims and burden on business. They have simplified the rules of procedure in an Employment Tribunal which has made it easier for employment judges to weed out weaker claims.

In addition, the Government has recently increased the qualifying period from 1 to 2 years service before an employee can be eligible to bring a claim for constructive dismissal. It is estimated that this will reduce the number of tribunal claims by around 20%. Furthermore, a claimant will have to notify ACAS of their intention to bring a claim, which will create an opportunity for conciliation and the possibility for a settlement. If the conciliation does not produce a satisfactory outcome, then the claimant will have to pay a fee to lodge a claim for unfair dismissal which is set at £230. If the matter is not resolved within a few weeks before the hearing date, the claimant will have to pay a listing fee of £930.

In the event that a claimant is successful, the Government has revised the amount of compensation that can be awarded by an Employment Tribunal in unfair dismissal cases the current cap of £74,000 will remain in place but there will be a lower cap of 52 weeks wages for those who earn less than £74,000 per year. In respect of discrimination claims there is no cap on an award of compensation that a Tribunal can award.

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In a further measure, the Government has also tried to develop employee shareholding as a means of providing growth and enterprise for business through the introduction of changes to company law and employment law whereby employees can be given shares in the company from between £2,000 and £50,000, which will be exempt from Capital Gains Tax. The sting in the tale is that the employee will lose the right to be able to bring unfair dismissal claims and claim redundancy payments. They will also lose the right to apply for flexible working and the right to time off for training.

At the consultation stage of this particular piece of legislation, employer groups were less than enthusiastic about this change as many felt that this was going to complicate their employment law and company processes rather than simplify them. It remains to be seen what the take-up rate will be.