IN THE PIPELINE...

Employment Law Reform - Government announces package proposals

The Secretary of State for Business Vince Cable has today announced further details of proposals to reform employment law.

The proposals have all been outlined by the Government before but today's announcement provides more detail of the plans to:

• reduce the maximum compensation for unfair dismissal;

• make it easier for employers and employees to settle employment disputes; and

• amend the employment tribunal rules of procedure.

The Government has also formally confirmed that it will not be taking forward the Beecroft proposals for compensated no-fault dismissals in respect of micro-businesses. Only 53 of the 163 respondents were in favour of the proposals. The majority considered that they would act as a disincentive to hiring, create a two-tier workforce and make micro-businesses uncompetitive.

Ending the employment relationship: consultation

The Government has published a consultation paper 'Ending the employment relationship' which seeks views on proposals to reduce the cap on unfair dismissal compensation and make it easier to settle employment disputes.

Reducing the cap on unfair dismissal compensation

The maximum compensatory award for unfair dismissal ('Cap') which can be awarded by an employment tribunal is set by statute, currently at £72,300. The draft Enterprise and Regulatory Reform Bill ('Bill') contains a power enabling the Secretary of State may by order made by statutory instrument vary the Cap to be either (a) a specified amount, or (b) a specified number (not less than 52) multiplied by a week's pay of the individual, or the lower of those amounts. However, under the Bill the Cap may not be less than median annual earnings (currently £25,882), or more than three times median annual earnings.

Facilitating the use of settlement agreements

The Bill provides compromise agreements to be re-named settlement agreements. The consultation paper provides more detail of the Government's proposal to introduce a measure in the Bill which will mean that offers of settlement are not admissible as evidence in unfair dismissal cases. This will be supported by a statutory code of practice, to be drafted by ACAS, which will explain how the protection will work in practice. The code will encompass the following principles:

• the inadmissibility in evidence will relate only to unfair dismissal claims;

• either party may propose settlement;

• the reason for being offered settlement should be made clear;

• settlement offers should be made in writing and set out clearly what is being offered and the next steps if the individual chooses not to accept;

• it will not be necessary for the employer to have followed a procedure before offering settlement;

• if settlement is not handled correctly, there is a risk this may give rise to a breach of the implied term of trust and confidence;

• if 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 to respond;

• the Code will give specific examples of 'improper behaviour' (which will remove the protection);

• no undue pressure should be put on a party to accept the offer; and

• the employer should not make discriminatory comments or act in a discriminatory way when making an offer of settlement.

It is proposed that the code of practice will include draft letters and a suggested template settlement agreement, supported by guidance. The Government is seeking views on whether it would be beneficial for guidance to suggest a guideline tariff for settlement offers.

The Government is not proposing to remove any of the conditions regulating settlement agreements, such as the requirement for independent legal advice.

The consultation closes in 10 weeks.

Changes to tribunal rules

In July this year the former President of the Employment Appeal Tribunal Mr Justice Underhill delivered his report to Government on his fundamental review of the employment tribunal rules. The Government has now published a consultation paper "Employment tribunal rules: review by Mr Justice Underhill" seeking views on the proposals. The new rules would give judges more flexibility to manage cases and deal with weak claims. The consultation closes on 23 November.

Consultation on TUPE

The Government has also published its response to the call for evidence on amendment to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and has committed to consult on specific proposals before the end of the year.