In November 2011 the Government announced its intention to proceed with a series of measures to:
- encourage the early resolution of disputes in the workplace;
- deliver a more efficient and streamlined Employment Tribunal system for all users, and
- give employers more confidence to hire new staff – supporting growth.
2013 saw a number of changes to the Employment Tribunal system as changes set out in the Employment law 2013: progress on reform were introduced through the Enterprise and Regulatory Reform Act.
in July 2013 Compromise Agreements became Settlement Agreements and the additional protection to parties for discussions around Settlement Agreements were introduced. At the same time Employment Tribunal fees were introduced and there were changes to the ‘cap’ for unfair dismissal awards.
The first raft of changes were perhaps weighted in favour of employers as they made it more costly for employees to issue a claim thus increasing the pressure to settle or not issue at all.
The second stage of the reforms are due to be introduced on 6th April this year. These will include ‘early conciliation’ (see earlier article Early Conciliation - What is this? ) but also the ability of Employment Tribunals to impose financial penalties on employers who lose in the employment tribunal.
Employers who lose at tribunal may be penalised for breaching employment law and may be ordered to pay a financial penalty of 50% of any financial award, with a minimum threshold of £100 and a maximum cap of £5,000. There will be 50% reduction of the penalty if it is paid within 21 days.
The Tribunal will have a discretion in when to impose the penalty and will do so where there are ‘aggravating factors’. The factors are not set out but may include breaches that are:
Factors such as being a small business, a new business or one with limited human resources can weigh against this discretion being exercised.
Unlike the uplift of up to 25% which can be made where an employer does not follow the ACAS Code of Practice which is paid to the successful employee, the financial penalty amount is set at 50% and is paid to the Consolidated Fund (the government's general bank account in the Bank of England).
The first round of changes could be seen as discouraging employees from issuing claims and addressing the commonly held belief among some parties that employees will ‘ have a go as they have nothing to lose’ before fees were introduced. The planned second round of changes could then be seen as encouraging employers to settle as the costs of going all the way, perhaps to discourage other employees from issuing claims, can be considerably increased should they lose particularly if they have also breached the ACAS code and have to repay the fees that the employee has paid to issue the claim and for the hearing.
These are the sticks and carrots that are being used to drive claims away from Tribunal and towards settlement. The question for the next year is will this be successful and if so, will it be at the expense of justice for Claimants and Respondents?
Director Employment Department