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Concrete proposals for employment law changes - our analysis11th Jun 2012

by on 11th Jun 2012


Neil AndrewsThe employment law section of The Enterprise & Regulatory Reform Bill laid before Parliament on 23 May 2012 reveals how the government seeks to facilitate easier resolution of disputes at work: via the introduction of a mandatory period of “pre- claim” ACAS conciliation.

The Bill also sets out a number of additional government employment proposals which include the following:

  • a reduction of the “loss of earnings” award for unfair dismissal by at least 65%;
  • restricting whistleblowing legislation so that disclosures by whistleblowers will have to be “in the public interest” before the whistleblower is protected from retaliation by their employer;
  • Imposing a financial penalty of up to £5,000 (payable to the state not the employee) on employer Respondents where they have lost their claim where they are “aggravating features.”

Let’s look at these in turn:-

Dispute Resolution - ACAS conciliation scheme

Whilst not all the details of this conciliation scheme have been published - they will be fleshed out in “secondly” legislation if the Bill is passed - the Bill sets out the general roadmap:-

  • Prior to filing an Employment Tribunal claim, the prospective claimant must submit “prescribed” information to ACAS.
  • The assigned ACAS conciliation officer will “endeavour to promote a settlement between the parties.”
  • The time limit for lodging the claim will be extended/paused (by as yet an unspecified amount) to allow for ACAS conciliation.
  • If ACAS fails to achieve a settlement it will issue the parties with a certificate which will trigger the claimant’s right to issue Tribunal proceedings and will start the “time limit” clock again.

Our view: Whilst we don’t doubt the importance of alternative dispute resolution, we are concerned that all this stopping and starting of the “time limit” clock - dependent  on the specific mechanics of the prospective claimant’s submission to ACAS of “prescribed” information at the start of the process, and the sending of an ACAS certificate to the prospective claimant at the end - may lead to more rather than less litigation in much the same way as we saw after the introduction of the (now abolished) 2004 statutory dispute resolution regulations.

The scheme would, of course, also place considerable extra demands on ACAS and were it introduced it would remain to be seen whether ACAS capacity would be overstretched by the new demands.

Unfair dismissal compensation

The Bill proposes to give the relevant minister powers to restrict the compensatory award of unfair dismissal claims to around £26,000 (the estimated median annual earnings in the UK) down from the current maximum of £72,300.

Our view: This would be a huge change - a welcome pro-employer move in this tough business climate on the one hand, but on the other, an erosion of rights in particular of reasonably well paid employees and employees who (through no fault of their own) take considerably more than 12 months to obtain alternative employment after being unfairly dismissed.


The Bill contains a provision to restrict whistleblowing legislation so that protected  disclosures are only those that are “in the public interest”.  Currently, an employee can seek protection as a “whistleblower”, for example, because they have told their employer (in good faith) that they are in breach of their legal obligations.

Our view:  This proposed change may be welcome news for some employers, particularly those who consider the current law - which extends to an employee’s right to treat their employer’s breach of their own employment contract as an act of whistleblowing - goes too far. However, for employees it means disincentivising them to stand up for serious wrong-doing in the workplace.

We should note that there was no prior consultation in relation to this proposal which has naturally angered some groups.

Financial Penalties

The Bill proposes that Tribunals can impose a financial penalty on employer Respondents (where they have lost their claim) of up to 50% of any financial award where they are “aggravating features” starting at £100 and going up to a maximum of £5000. The penalty, like parking offences, is reduced by 50% for prompt payment.

Our view:  Whilst business groups see this as hitting employers while they’re down, the provision is not - in financial terms - pro-claimant/employee either as the penalty goes to the state rather than the claimant/employee. This said, the disincentive to employers for conduct that causes employees harm must be welcome, to some limited extent, by employees and trade unions.

Further proposals for change in pipeline

Whilst the proposed ACAS conciliation, unfair dismissal compensation and whistleblower changes are bold  - the Bill wasn’t quite as radical as it might have been - given concern from a broad section of civil society that the “no fault” dismissal idea advocated by Adrian Beecroft would be included: it wasn’t.

However, as the government continues to consider fees in the Employment Tribunals, changes to tribunal procedure rules and “no fault” dismissals for microbusiness (those employing 10 or fewer staff) it’s likely that more major employment law changes may lie ahead.

On the issue of  “no fault” dismissals (Mr Beecroft suggested that employers should be allowed to avoid all unfair dismissal liability for sacking a member of staff provided they paid that employee a defined level of compensation capped at £12,000 plus statutory notice), neither Mr Beecroft nor the government appear - to date - to have provided any evidence to support assertions that no-fault dismissals will increase recruitment and economic growth in the UK (other than to highlight that a few other countries use “no fault” dismissals) and an interesting article on this issue is found on the London School of Economics website: http://bit.ly/KRlK5Y.

Neil Andrews

This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.