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New employment laws announced

Posted on 17th September 2012
New legislation

The coalition government has spent a lot of its time focused on reforming UK employment law (aka "red tape") in the hope that employers will find increased confidence and recruit more staff apparently safe in the knowledge they can dismiss more easily!

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Simon Quantrill Simon
Managing Partner Telephone: 01473 688100

This article gives details of the announcements made by Business Secretary, Vince Cable, on Friday 14 September including his two consultation papers, explains how the use of compromise agreements is going to be increased and reports on the results of two calls for evidence, covering no-default dismissals and TUPE.

No fault dismissals

The idea of no fault dismissals (in any form or for size of employer) has been completely and formally dropped by government. Thank goodness is what we say! This decision results from the call from evidence. In contrast to what the Beecroft report suggested, when asked, the vast majority of businesses did not want nor saw the benefit of no fault dismissals. It seems most employers have a social conscience, which is a good attribute to have.

Improved Acas Code of Practice

Government plans to work with Acas to improve the Code of Practice on Disciplinary and Grievance Procedures including the development of an "interactive tool" to help small employers. The Code will also re-introduce the distinction between disciplinary issues and capability problems. Many contributors to the call of evidence, including Quantrills Solicitors, highlighted this distinction and how each are invariably dealt with differently by employers, especially when capability issues are caused by health or personal reasons.

It is funny though how employment law keeps revisiting itself. When the 2009 version of the Code of Practice was revised the separate procedure for dealing with capability issues was removed in order to simplify and shorten the Code. In practice this dumbing down was of little help to employers or employees.

Unfair dismissal compensation

No fault dismissals may be history; but Vince Cable is keen to see the cap on unfair dismissal compensation reduced. In his consultation document Ending the employment relationship he seeks views on the different options proposed:

To limit the cap:

  • between one and three times the median annual earnings (currently £25,882 to £77,646); or
  • a number of weeks' pay (not less than 52 weeks); or
  • the lower of these two figures.
It is proposed that the Secretary of State would have the discretion to limit the compensation award which could differ for different types of employer. Any limit will apply to unfair dismissal cases only.

The consultation ends on 23 November 2012.

Compromise agreements (soon to be called settlement agreements)

It remains the stated aim of government to encourage greater use of compromise agreements to ensure more dismissals end on agreed terms. Of all the employment law reforms this potentially will help employers the most, provided they act cautiously and ensure offers of settlement are realistic.

A key reform, to help employers reach agreed terms with employees, remains the notion of the "protected conversation". The consultation document Ending the employment relationship, however, discusses the problems highlighted with the introduction of regulations that try to make clear when and how an employer could hold a protected conversation. Fears of it being a "field day for lawyers" are stressed! One idea is for an Acas code of practice to be published. Its main features could be:

  • An explanation of the types of "improper" behaviour which would not be protected;
  • Confirmation that any offers to settle would be inadmissible as evidence to the Employment Tribunal in relation to unfair dismissal cases only;
  • Either party may propose settlement;
  • The reason for being offered the settlement should be made clear;
  • Settlement offers should be made in writing and set out clearly what is being offered (e.g. settlement sum and if appropriate agreed reference) as well as what the next steps are if the individual chooses not to accept the offer;
  • It would not be necessary for an employer to have followed any particular procedure prior to offering settlement;
  • The Code would make clear that if an employer handles settlement in the wrong way (i.e. not as explained in the Code) there is a risk that this will give rise to a breach of the implied term of trust and confidence and allow the employee to resign and claim constructive dismissal;
  • Where an individual refuses settlement, the employer must go through a fair process before deciding whether to terminate the relationship;
  • Individuals should be given a clear, reasonable period of time to respond;
  • No undue pressure should be put on a party to accept the offer of settlement;
  • As closely as possible, the approach should reflect current practice in without prejudice negotiations which many employers and legal professionals are already familiar with;
  • The employer should not make discriminatory comments or act in a discriminatory way when making an offer of settlement.
It is also proposed that the Code would contain optional model template agreements and model letters. A "guideline tariff" to help parties set the severance payment is also suggested.

To participate in the consultation your reply needs to be in by 23 November 2012.

To read a full copy of the consultation document click here.

TUPE 2006

Depending on your point of view, you will be disappointed or not surprised to learn that the government has decided (it would appear) against trying to introduce radical changes to our TUPE regulations - to do so would probably involve the UK leaving the EU first!

The key proposal emanating from the November 2011 call for evidence on the Effectiveness of Transfer of Undertakings (Protection of Employment) Regulations 2006 is that there will now be a period of "policy design". Various ideas will be considered including whether the "service provision change" should be retained or repealed; whether liability for employees should pass entirely to the transferee (the new employer) as now, or be held jointly and severally by both the old and new employer; and whether employee liability information should be provided earlier to the new employer.


Another mixed bag. It is sensible to lose the idea of no fault dismissals. Helping employers reach negotiated settlements must be good but at the same time our social conscience worries about the benefits of reducing the cap on unfair dismissal compensation.

We will publish more analysis in due course.

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