This summer is full of employment law changes. We have summarised some of the key changes below, with an explanation of how these changes may affect employers.

From 25 June 2013

Unfair dismissal

The qualifying period for unfair dismissal (1 or 2 years depending on whether the employment started before or after 1.4.12) will not apply where the main reason for dismissal is the employee’s political opinions or affiliation. Where employers are considering dismissing individuals with less than 1 or 2 years’ service then if the employee may be able to argue that the dismissal is connected to their political opinions or affiliation, the safest thing to do would be to follow a procedure, and assume the employee does have unfair dismissal rights. This includes employees in their probationary period.

Tribunal Procedures and Orders

There will be changes to Tribunal procedure and the orders a Tribunal can make. Largely these changes will not affect employers directly as they generally relate to case management in the Tribunal and therefore will be of most significance to employment law practitioners.

Whistleblowing

The following changes are now in place:

• A disclosure will only be a “qualifying disclosure” if the worker reasonably believes the disclosure is “in the public interest.” There is currently no guidance to say what is and what is not “in the public interest” and there will be uncertainty whilst this definition is tested by case law. Some practitioners are speculating that the test will mean that the subject matter of the disclosure will have to affect more than just the person making the disclosure – we will have to see if case law bears this out.
• There will no longer automatically be a requirement for the disclosure to be made in “good faith” although if it is not, compensation can be reduced.
• There will be liability for employers and personal liability for co-workers who victimise a whistleblower by causing detriment to the whistleblower. The act of a worker in subjecting a whistleblower to a detriment will now be treated as having been done by the employer, so for example an employee complaining about treatment by a line manager would argue the employer was liable. The employer will have a defence if they took all reasonable steps to prevent the treatment.

From 29 July 2013

One of the most significant changes for both employers and employees is the introduction of fees in the employment tribunals.

From 29 July 2013, those bringing claims or making applications to the Tribunal will have to pay fees. Employees taking claims will have to pay two fees – one on issuing the claim, and one on proceeding to hearing. Employers will also have to pay fees if they bring a counter claim. There will also be fees for making applications to the Tribunal (including applications for judicial mediation, setting aside a default judgment and applications to dismiss a claim). Such fees will be paid by the party making the application.

Tribunal judges will have the power to order the unsuccessful party to reimburse fees paid by the successful party, although this will not be automatic. There will also be anomalies where, for example, a claimant employee succeeds in only part of the claim such as winning a claim for unfair dismissal, but not a claim for discrimination, or wins the claim but has the compensation reduced for contributory conduct. The Tribunals recognise these will be difficult to resolve and will probably do so on a case by case basis so we will have to wait as the case law develops.

As in the ordinary civil courts, where employees can prove that they cannot afford to pay any or part of the fees, they may be entitled to a full or partial fee remission.

For employees bringing a Tribunal claim, there will be two levels of fees:

1. simpler cases (such as claims for unpaid wages or a redundancy payment) will cost £160 to issue the claim and £230 for the hearing fee at Tribunal.
2. more complex cases (such as unfair dismissal or discrimination) will cost £250 to issue the claim and £950 for the hearing.

Judicial mediation will cost £600 and will be payable by the employer.

Going forward, we would expect parties to try to recover fees paid from the other side where they are successful.

Fees may also be factored into settlement negotiations – on the one hand settlement amounts claimed by employees may increase to account for the fees that have been paid so employers may wish to settle before such fees are incurred. On the other hand employers may want to wait to see if an employee actually brings a claim and pays the required fee, and/or if the employee is prepared to pay a hearing fee to pursue the claim before starting settlement negotiations.

Summer 2013

Unfair Dismissal Compensation Limit Changes

One of the biggest changes coming into force is that the government will vary the unfair dismissal compensatory award limit.

Currently, the limit is £74,200. Going forward, the compensatory award will be capped at the lower of one year’s gross pay (excluding pension contributions, benefits in kind and discretionary bonuses) and the statutory limit set by the Government each year (currently £74,200). This is a significant change and may considerably reduce an employer’s potential maximum liability, particularly where employees earn much less than £74,200.

If an employer is considering dismissing an employee who earns less than £74,200, it may be worth waiting until this change is brought into force. The date has not yet been announced but we understand that it will be sometime this summer.

In reality only a small proportion of unfair dismissal claims achieve compensation of £74,200 at Tribunal, but this reduction will make a big difference to the starting point for settlement negotiations.

Exit Discussions

The introduction of “protected conversations” which was previously under discussion has been shelved. However, under a revised proposal, pre-termination negotiations may become inadmissible in unfair dismissal proceedings. The basic position will be that an offer made or discussion held with an employee with a view to terminating employment on terms to be agreed cannot be taken into account as evidence by the employment tribunal in a subsequent unfair dismissal case. Having said this, there will be some significant exceptions to this rule – including where there has been discrimination and where there has been “improper behaviour”. It is likely that many employees will argue that there has been improper behaviour and therefore the conversations can be heard by the Tribunal after all.

Until case law has developed on this point we would strongly recommend that employers assume that everything they say to an employee may be heard by the Tribunal.

ACAS has issued a draft code of practice on settlement agreements, intended to give guidance on settlement discussions and their admissibility in Tribunals. This draft code is likely to become statutory guidance this summer. See from page 11 onwards for the current draft code of practice http://www.acas.org.uk/media/pdf/n/o/Acas-response-to-Settlement-Agreements-Code-June-2013.pdf

From 1 September 2013

From September 2013, the much debated new employee shareholder employment status will come into effect.

An employer and employee will be able to agree that, in consideration of the individual becoming an “employee shareholder”, the company will issue a minimum of £2,000 worth of shares to the individual, with any gains made on the first £50,000 of shares being exempt from capital gains tax.

An employee shareholder will have the same rights as an employee with the following exceptions:

• No right to request time off for study or training.
• No right to make a flexible working request – except for employee shareholders returning from parental leave, which will be allowed to make a formal request for flexible working only in the first 14 days in which they return to work.
• No right not to be unfairly dismissed (except in health and safety cases, automatically unfair cases, or cases where the dismissal is discriminatory under the Equality Act 2010).
• No right to a statutory redundancy payment.
• The employee must give 16 weeks’ notice if they want to return early from statutory maternity, adoption or additional paternity leave (rather than the usual 8 weeks’ for employees).

The House of Lords rejected the new legislation until the following conditions were included:

• Protections from dismissal or other detriment for existing employees who refuse to become employee shareholders.
• Jobseeker’s allowance cannot be withdrawn if an employee shareholder job is refused.
• An offer of employee shareholder status must include a statement explaining the employment rights that would be sacrificed and the rights attaching to the shares.
• The individual must receive advice about the offer from an independent solicitor, barrister, legal executive, union official or advice centre. The employer must meet reasonable costs incurred in receiving this advice, regardless of whether the offer is accepted.
• Individuals agreeing to the offer will be entitled to a seven-day “cooling off” period from the day legal advice is received.

Given the complexity of the conditions and process set out above, it is unlikely that employee shareholders will take the place of many “normal” employee-employer relationships. However, they may be more appropriate in the context of an individual who has a real influence on the profitability of the company – perhaps in the case of directors who would usually expect a shareholding in any case. It will be interesting to see the take up of this new status as it has not been a hugely popular concept to date.

Scully Twiss’ Recommendations:

• Don’t assume your conversations will be “off the record” due to the new concept of “pre-termination negotiations”  and continue to exercise caution in any such pre-termination discussions
• Consider delaying dismissals of employees with unfair dismissal rights who earn less than £74,200, to after the new compensatory award limits come into force this summer
• Review your whistleblowing policies to check they comply with the changes
• Consider whether you have any employees/new vacancies where a shareholder employee status would be more appropriate
• Make any necessary Tribunal applications before the fees apply from 29 July 2013
• Consider whether your settlement tactics may change as a result of Tribunal fees being introduced
• Don’t forget to keep up to date with when the new pensions regulations will start to affect your business here http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx

Scully Twiss Employment Law Seminar

We will be holding an employment law seminar on 15 October 2013 to discuss many of these changes in more detail. Further details are available from our Practice Manager, Cassie Eager, at ce@scullytwiss.com