More Reforms To Employment Law Announced

The Business Secretary, Vince Cable has today announced further changes to employment laws which are designed to benefit small businesses. But what effect are these likely to have on you the employee?

The Department for Business, Innovation and Skills state that ‘today’s package comes in response to calls from business to simplify and speed up the process of ending the employment relationship when it breaks down, for the benefit of both employers and employees.’ However, when you look at the changes it does seem to be swayed towards making things easy for the employer at the cost of the employee’s rights.

The key reforms that the consultations will focus on are:

Settlement Agreements

It is proposed that there is a standard format for dealing with settlement agreements with the aim that employers can approach employees to end their employment without having to go through a process.

The consultation will look at how this will be put into practice, including a code of practice, guidance and templates for employers to use.

Our understanding is that if the employer follows this procedure and you do not want to accept the offer, and the employer then subsequently dismisses you, you will not be able to refer to the settlement discussions in your claim for unfair dismissal, for example.


Reducing the cap on compensation for unfair dismissal

Currently there is a maximum amount of compensation that can be awarded if successful with a claim for unfair dismissal and this is £72,300.

The consultation will look to reducing this with two options being proposed, the first to limit compensation to 12 months’ pay and the second to have a new reduced financial limit.

This would significantly reduce an employer’s potential liability for unfair dismissal and is likely to increase the instance of employers taking the risk and just dismissing employees unfairly.

Further to this when you consider that the average compensation awarded in the Employment Tribunal for unfair dismissal in 2011 was £8,925[1] it is difficult to see why there is a need to reduce the cap to the further detriment of employees.


Streamlining of Employment Tribunal

This would involve changes to the process within the Tribunal that could see weaker cases being dismissed more easily and reducing the number of preliminary hearings.

If this change is implemented fairly and effectively it would greatly assist employees and employers in speeding up the Tribunal process, thus greatly reducing stress.

Any changes however should take into account that there are a large number of employees who are unrepresented in the Tribunal and whose claim may be valid but, who have been unable to articulate it properly in their claim form because they do not understand the law or procedure.


Changes to the Transfer of Undertakings (TUPE) rule

The proposals being considered are designed to make it easier to understand and deal with employment rights when employees transfer from one business to another, for example when services such as cleaning are transferred from one contractor to another.

The whole process under TUPE is complex so any changes to simplify are welcomed, as long as it is not at the expense of eroding employee rights.


Compensated no fault dismissal for micro-firms

The idea behind this proposal is that small firms would be free to dismiss employees by giving a prescribed amount of compensation, thus waiving any procedures or employment rights.

Good news for employees is that the Government have decided not to take this proposal forward.

[1] Ministry of Justice & HM Courts & Tribunals Service – Employment Tribunals and EAT Statistics, 2010-11 – 1 April 2010 to 31 March 2011

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