Employment aspects of The Enterprise and Regulatory Reform Bill

Employment aspects of The Enterprise and Regulatory Reform Bill

By Shoosmiths.co.uk

The Enterprise and Regulatory Reform Bill was presented to Parliament on 23 May 2012. The Bill includes new employment law provisions including financial penalties for employers who lose employment tribunal cases and re-naming compromise agreements

The Enterprise and Regulatory Reform Bill (the Bill) reflects the Government’s aim to cut the costs of doing business and is intended to remove regulatory burdens that currently inhibit innovation.  The relevant employment law provisions include:

  • ACAS pre-claim conciliation

Prospective claimants will be required to contact ACAS before they can begin certain types of employment tribunal proceedings, so that parties can be offered conciliation to attempt to resolve their dispute within a prescribed period without it reaching the tribunal system.  Much of the detail of the early conciliation process, such as the information that must be sent to ACAS and the length of the prescribed period, will be set out in regulations.


  • Certain decisions without a need for a hearing

A “rapid resolution” scheme for certain simple or low value tribunal claims, where the parties consent in writing to the determination of their claim by a “legal officer” will be introduced so that these can be determined without the need for a hearing.


  • EAT hearings by a single judge

Cases in the Employment Appeal Tribunal (EAT) will be able to be heard by a judge sitting alone. However, a judge may direct that proceedings are to be heard by a judge and two or four appointed members.  The Secretary of State may specify that particular proceedings must be heard by a judge and a certain number of appointed members.


  • New limit on unfair dismissal compensatory award

The Secretary of State will be given the power to amend S.124 of the Employment Rights Act 1996 to change the maximum compensatory award for unfair dismissal.  However, it is not clear when or if that power will actually be used.  A change could be to introduce a set amount, a certain number of weeks’ pay or the lower of the two. However, any set amount cannot be lower than the median annual earnings (currently £26,000) or higher than three times the median annual earnings. Different amounts could be specified for different kinds of employer, e.g. a lower amount could be set for small businesses.


  • Additional financial penalties for employers who breach employment laws

Tribunals will be given a discretionary power to impose financial penalties (subject to a minimum of £100 and a maximum of £5,000) on employers where they are found to have breached a claimant’s employment rights and the tribunal considers that the employer’s behaviour had one or more “aggravating features” e.g. where the action was deliberate or committed with malice. Where compensation is awarded to the claimant, the penalty must be set at 50% of that amount.  However, if the employer pays the penalty within 21 days, it will be reduced by 50%.


  • Public interest test to be introduced in whistleblowing claims

There will be an additional test for a whistleblowing claim to succeed; a claimant will have to show that they believed that their disclosure was made in the public interest, and that this was reasonable in the circumstances. This amendment aims to overcome the effect of Parkins v Sodexho Ltd in which the EAT held that a whistleblowing claim could potentially be based on any disclosure relating to a breach by an employer of an employee’s contract of employment.


  • Annual adjustment of statutory payments

Relevant statutory limits (including the amount of a week’s pay used for statutory redundancy payments and the basic award for unfair dismissal) will still be linked to the change to the Retail Prices Index in the previous year, but the rounding calculation will be changed so that all limits are rounded up or down to the nearest pound.


  • Compromise agreements to be re-named settlement agreements

References to “compromise” agreements in employment legislation such as the Employment Rights Act will be replaced with “settlement” agreement as the Government believes this better reflects the purpose and intent of such agreements.


  • Changes to the Equality and Human Rights Commission

Changes will be made to the Commission’s remit by removing some of its powers and duties and by reducing the frequency with which it is required to report on progress in society (to every five years from every three years).


  • Shareholder votes on directors’ pay

The effect of the Bill is not, automatically to make directors’ remuneration subject to the outcome of a shareholder vote so companies will not have to have a binding vote on their directors’ remuneration report.  Instead companies will be able to change their articles of association in order to introduce a binding vote on remuneration.  Such a change will require the approval of shareholders of the company by means of a special resolution.


The changes set out in the Bill were all announced previously and many have been the subject of consultation in the Resolving Workplace Disputes consultation paper.  However, technically, the Bill could be subject to amendment as it passes through the Parliamentary process.  The second reading of the Bill will take place on 11 June 2012.

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