How does the Enterprise and Regulatory Reform Act affect employment law? (Part 1 of 3)

Year Published: 2013

This is the first in a series of insight articles (three in the series), focusing on the three main objectives of the Enterprise and Regulatory Reform Act.

The Enterprise and Regulatory Reform Act received Royal Assent on 25th April 2013. Many of the changes affect employment legislation and employers need to be aware of these changes. Some of the changes have a definitive introduction date, however others do not and the Government are expected to announce implementation timescales in the near future.

The Government had three main objectives when the bill was introduced back in May 2012 and these were:

  • To encourage the earliest resolution of disputes (Part 1)
  • To deliver a more efficient employment tribunal system for all (Part 2)
  • To give employers the confidence to hire new employees (Part 3)

The Act focuses on a number of areas in order to try and achieve the objectives they initially set.

To encourage the earliest resolution of disputes

Early conciliation

The Act has introduced a process of early conciliation which requires all prospective employment tribunal claimants to lodge the details of their claim with ACAS before any claim can be placed before the employment tribunal.

There is currently no detailed process regarding how this system will work. The initial proposals require a claimant to complete an early conciliation form which will be submitted to ACAS and processed by an early conciliation support officer at ACAS. It is expected that the claimant will be contacted within 24 hours of submitting this form to be advised of the conciliation process following which the case will be passed to a conciliation officer. The conciliation officer will contact both respondent and claimant with a view to brokering a settlement between them without the need to resolve the case through an employment tribunal. The officer will have one month to attempt to reach a settlement, this period can be extended by up to two weeks if both parties agree that settlement is a likely option.

The claimant can proceed to the employment tribunal if the parties either refuse to engage in settlement discussions or fail to reach a settlement. The claimant will be provided with a unique early settlement number and will be required to submit this number on their claim form.

As the above proposals require further legislation the draft Employment Tribunals (Early Conciliation: Exemptions and Rules of Procedure) Regulations 2013 have already been issued and this process is expected to be introduced in the Spring of 2014.

Settlement agreements

The act has renamed ‘compromise agreements’ and they will now be known as ‘settlement agreements’ in order to make their purpose clear.

ACAS will develop a code of practice and accompanying guidance on how settlement agreements should be used. The act states that the offer of a settlement agreement cannot be used as evidence in any claim of unfair dismissal unless there has been ‘improper behaviour’ by one of the parties in the negotiations of the settlement. As we outlined in our Law Alert of the 6th September 2012 ‘improper behaviour’ has still not been defined and it is now the job of ACAS to provide guidance within their code of practice as to what will fall within that definition.

Employers need to ensure that all policies and practiced relating to settlement agreements comply with the ACAS code of practice once it has been produced.

Financial penalties

The Act affords the right to an employment tribunal to impose a penalty against an employer of up to 50% of any award given if the breach of the employment right has aggravating features such as negligence or malice. It will not be imposed for genuine errors and serves as a punitive award for bad employment practices. The tribunal will be required to consider the employers ability to pay such a punitive award and allows for this to be reduced by 50% if the payment is made within 21 days. The punitive fine must be in the range of £100 to £5000.

Compensatory award

The maximum compensatory award that can be given in relation to a unfair dismissal claim will be limited to the smaller of the statutory maximum award which currently stands at £74,200 and the claimants annual salary. This is not the maximum award in a tribunal as claimants may also be eligible to receive a basic award, any outstanding payments such as holiday pay, bonuses and the above new punitive award.

The second and third in the series will be published in the near future.

For further information on this or any other employment matter, contact our employment team.

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