Government has now consulted on the majority of the Tribunal reforms, but despite its own timetable, some of the responses have not yet been published, giving businesses less time to prepare for change. So what can we expect, asks Glenn Hayes, Employment Partner at national law firm, Irwin Mitchell.
Resolving disputes without the need to embark on the adversarial system of the Employment Tribunals ought to be a “win-win” situation. But there are two main themes emerging from the reforms, which can be broadly categorised as “carrots” and “sticks”. Using alternative methods to resolve disputes at an early stage; including settlement discussions, pre-claim conciliation and mediation are the “the carrots”. Making changes to the Tribunal system itself, so that it becomes a “forum of last resort”, including; introducing fees, imposing additional penalties for employers who lose claims, and enabling the Tribunal itself to get rid of weak claims or defences at an early stage and to robustly manage those claims that do survive, are “the sticks”.
Last year the Government considered introducing “protected conversations” as a means of helping employers to have difficult conversations with their employees about a whole range of issues, without fear of their discussions being used against them in an Employment Tribunal. That idea was abandoned because of perceived problems and instead, more limited “settlement discussions” will be introduced.
The idea is that employers can use the structure of a settlement discussion to discuss poor performance or misconduct issues, as an alternative to going through a lengthy process. Provided certain procedural safeguards are followed (set out in a statutory ACAS Code currently in draft format), the offer of settlement will not be able to be referred to in any subsequent unfair dismissal claim, or constructive dismissal claim, where the employee has resigned as a result of a settlement offer being made. At least that is the theory, although the reality is likely to be more complex.
For example, Claimants already misunderstand the legal concept of a “without prejudice” offer and will often attempt to refer to settlement discussions in their ET1 or in evidence. A Tribunal will ignore this when determining the claim, but employers are likely to be worried that this may impact on their credibility. Also, the protected nature of the settlement discussion will be lost if there is fraud, “undue influence” or other improper behaviour, such as discrimination. It has been left to ACAS to provide some clarity about what is meant by these terms, its draft guidance suggesting that “undue influence” will be where: The employer does not allow the employee a minimum period to consider an offer (currently seven days) or; where the employer reduces the value of a financial offer during this minimum period. Similarly, an employer who states that the employee will be dismissed if he/she rejects the offer will also be guilty of exerting undue pressure, which will also be proven where an employee threatens to undermine an organisation’s reputation, unless it agrees a financial settlement.
Whilst the idea of having a conversation of this nature might be appealing, there are huge risks to doing so. If the settlement discussion comes “out of the blue” the employee may think that there is more behind the proposal and this may encourage the employee to look for evidence of discrimination. Businesses will have to weigh up the risks. If they decide to use this mechanism, they will need to decide who can instigate the conversation, and provide training about what they can/cannot say. Many may prefer to leave this to their HR department to avoid their managers making embarrassing and potentially costly mistakes. Put simply, and contrary to the rhetoric, settlement discussions are not a shortcut, the employer must have the difficult conversations with the employee first. Where the conversation does lead to an agreement, it will be recorded in a “Settlement Agreement” a Compromise Agreement in all but name. It will be subject to the same safeguards as currently exist for Compromise Agreements and will need to be signed off by an advisor. Other alternatives are also available to resolve disputes. Workplace and employment mediation is available at a cost (usually to the employer) and ACAS already offer pre-claim conciliation (“PCC”).
Whilst the Government can point to good success rates for those parties that do participate in alternative resolution, few do so. That may change. From April 2014, employees who wish to bring most claims in the Employment Tribunal will be required to consider PCC before they will be allowed to issue a claim. Before the ordinary limitation period expires, employees will be required to send to ACAS “prescribed information”, which is limited to a requirement to provide the name, address and contact details of the parties, but not the nature of the complaint.
This is the only mandatory step an employee has to undertake and once he/she has done so, either party can simply refuse to take part in conciliation by making this explicit, or by ignoring ACAS attempts to contact them. This will result in a certificate being issued (which will contain a unique reference number) stating that the PCC has been unsuccessful. Armed with this, an employee can then proceed to bring a claim. The Government believes that PCC will reduce the number of claims being issued by 25 percent. That seems optimistic, at least in the short term. Employers may decide to wait and see if the employee is serious about issuing a claim (and stumping up the fee) before they consider settlement. Even if the parties are keen to explore settlement early, it can be difficult to understand the strengths and weaknesses of their respective cases before evidence has been exchanged. Even then, it is depressingly common for parties to remain bullish until they get to the door of the Tribunal where the real prospect of being subjected to cross examination can concentrate minds and make deals possible. This will require a culture change, so it becomes less about winning or losing, and more about reaching an amicable and reasonable settlement. The success of PCC may be enhanced if ACAS were able to give an explicit opinion on the merits of the claim and defence, particularly where one or both sides are unrepresented, something that is not currently available. If PCC is not used, or is unsuccessful, both sides potentially face financial penalties at Tribunal. From the summer, employees will have to pay a fee to issue a claim, and a further fee once the case is set down for a hearing. Most claims (including those for unfair dismissal and discrimination) will attract an issue fee of £250 and hearing fee of £950. This is likely to deter those employees with weak or spurious claims from issuing, particularly as they will lose their money if their claim is struck out by a Judge during the sift stage. That is to be welcomed. However, this will impact on lower paid employees with genuine claims who may not be able to raise the fee or risk losing it. Fee remissions will be available to Claimants receiving certain benefits and to those on low incomes, but the mechanism for applying for these is complex and it is unclear how many employees will be able to benefit from these. Although there is no provision for a successful Claimant to automatically recover these fees, the Tribunal will have the power, and is likely, to order the employer to pay these, in addition to any compensation awarded. Even if the claim is settled before the hearing, Claimants are likely to add these fees to the settlement amount they wish to achieve. Employers also face financial penalties if they lose the claim. Originally the Government said that penalties would automatically be made against the unsuccessful employer. However, as a result of consultation, this has been watered down.
Tribunals will have discretion to impose penalties of between £100 and £5,000, where the employer’s behaviour has one or more “aggravating features”. Little guidance is available to help explain what is meant by this. The Government has suggested that a Tribunal may find aggravating features where the action was deliberate or committed with malice, or where the employer has repeatedly breached the employment right in issue. It also suggested that larger organisations are more likely to be penalised than smaller ones as employers with a dedicated HR team will be expected to get things right, presumably on the basis that they should know better. It is inevitable that businesses will only understand this concept once cases are reported, something that is likely to take some months after its implementation in the spring of 2014. A recent amendment will require the Tribunal to take into consideration an employer’s ability to pay, a move likely to impact more on larger employers considered to have deeper pockets. The money raised from imposing penalties will be payable to the Exchequer and will not be a bounty paid to the successful Claimant. Changes have already been made to unfair dismissal eligibility (now requiring two years’ service for employees commencing employment from 6 April 2012). The Government intends to limit the amount that a successful employee can achieve by capping the compensatory award at the lower of 52 weeks pay (which will not include pensions, benefits in kind or bonuses) or the overall cap of £74,200. This is likely to reduce awards and lower expectations. Whether it makes settlement easier, remains to be seen. The risk in making these changes is that employees may try and “bolster” their claims by adding discrimination claims, where compensation is unlimited, in the hope that this will improve their chances of negotiating a better deal, claims that are more complex and expensive to defend.
