Employment law: three changes for SMEs

This week sees the Coalition government’s enthusiastic introduction of three significant legislative changes to employment law rights and the employment tribunal system:

1. Settlement discussions

From July 29, most offers made by employers or discussions initiated by employers, with a view to terminating an employees employment will be banned from being referred to by employees in employment tribunal claims for unfair dismissal.

Previously, these conversations could only be off the record (without prejudice), if there was a genuine dispute between an employee and their employers, which might lead to employment litigation.

While some employers have been waiting for this opportunity to opt out of their internal dispute procedures, to rid themselves of troublesome employees. This just adds to the uncertainty about the stability of employment, after the spectre of redundancies over the last few years.

2. Unfair dismissal awards

From the same date, compensatory unfair dismissal awards (for loss of earnings) are to be capped at the lower of either 12 months pay or ?74,200 (the current capped limit).

While the government is keen to point out that it is addressing a perceived problem of escalating awards in favour of employees by providing more certainty for employers and employees over the maximum compensation that can be awarded in favour of employees.

The government’s own statistics (Department for Business) show that less than a quarter of employee claims are successful. More claims are resolved by ACAS conciliation, withdrawn or are unsuccessful.

3. Tribunal fees

It will now cost an employee £1,200 to get their claim of unfair dismissal or discrimination processed by and heard at an employment tribunal.

The smaller fee of £250 is to start the claim, followed by the larger ?950 to secure a tribunal hearing will add to the employees” costs to try to obtain redress. This is unless they are unemployed or have insurance cover or funding from their union.

If they win, there is a fair chance that their former employers will have to refund the fees incurred. The general public will now pay for some of the tribunal costs, but this is already subject to judicial review challenge, because of concerns about inhibiting access to justice.

Nick Hobden is a partner and head of the employment team at Thomson Snell & Passmore.

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