More Employment Law Reforms

On 14 September 2012, Vince Cable, the Business Secretary, announced further consultations arising out of the coalition government’s continual employment law reforms. The government has throughout its time in office spent considerable time and effort reviewing the existing employment rights legislation with the aim to cut the ‘red tape’ and to encourage recruitment and boost employer confidence.

Two new consultation papers cover a reduction to the cap on unfair dismissal awards, proposed new employment tribunal rules following Mr Justice Underhill’s review and measures to encourage and simplify the use of compromise agreements.


Unfair Dismissal Reduction

This reform would give the Secretary of State the power to vary the statutory limit on the compensatory award in unfair dismissal claims. Under current proposals, the government would have wide powers to lower the cap. The leading option so far seems to be to cap compensation at whichever is lower of a year’s pay or a fixed overall cap.


Underhill’s review of Employment Tribunal Rules

In November 2011 the government asked Mr Justice Underhill, to undertake a thorough review of the Employment Tribunal’s Rules of Procedure (ET Rules). In July 2012 Mr Justice Underhill published his recommendations. The consultation paper, published on 14 September, seeks views on a number of issues arising from Mr Justice Underhill’s proposed draft ET Rules, including:

  1. Whether there are disadvantages to removing the £20,000 cap on the assessment of costs awards by a tribunal.
  2. How the problem of non-payment of tribunal awards could be addressed.
  3. The proposal to combine pre-hearing reviews and case management discussions.

The answers will be of particular interest to employment lawyers and their clients. For example, the proposal to combine pre-hearing reviews and case management discussions would save costs for both sides and the Tribunal itself. Many lawyers already make applications to the Tribunal to do this anyway which indicates its usefulness.


Encouraging the use of settlement agreements 

The coalition government has always preferred the method of compromise in regards to employment disputes, so that cases are settled outside of the Tribunals. This leads to reduced costs and arguably a more amicable separation of employer and employee. Mr Cable’s reforms will include provisions to rename compromise agreements as “settlement agreements”, and also give employers more freedom to have discussions with an employee about a proposed termination deal outside the context of an existing dispute.

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