Click here for Walbrook Law’s February 2016 Employment Bulletin.

Click here for Walbrook Law’s January 2016 Employment Bulletin.

Click here for Walbrook Law’s November 2015 employment bulletin.

On 5 March 2014, the government published three sets of draft regulations dealing with the significant proposed new regime in relation to shared parental leave and pay. The regulations are to be issued under the Children and Families Bill 2013-14, which is in the final stages of the parliamentary process. Shared parental leave and pay will apply to parents of babies due on or after 5 April 2015, or children placed for adoption on or after that date.

The regulations contain considerable detail about entitlement to shared leave and pay, the mechanics of requesting and taking leave, terms and conditions during leave and on return to work, redundancy, KIT days and protection from detriment and unfair dismissal. The government is seeking views on the draft regulations.

Walbrook Law will report back once the consultation process has concluded but the key proposed changes to be aware of for the time being are as follows:

• The draft regulations relate to the new system of shared parental leave and pay which has been in the pipeline for a number of years but is to become reality next year as one of the coalition government’s main employment law initiatives. Eligible employees will be entitled to a maximum of 52 weeks’ leave and 39 weeks’ statutory pay upon the birth or adoption of a child, which can be shared between the parents.

• The draft regulations give one or both parents the possibility of taking shared parental leave once a mother who is entitled to statutory maternity leave has curtailed that leave.

• They also allow for shared parental leave where the mother did not qualify for statutory maternity leave (because she is a worker, agency worker or self-employed) but has nevertheless had a period of not working during which she has received statutory maternity pay (SMP) or maternity allowance (MA), and which has now come to an end. In such cases, only the child’s father (or the mother’s husband/partner would qualify. The mother would not.

• The period available for shared parental leave is 52 weeks minus the period that the mother has spent on maternity leave or in receipt of SMP or MA. Similar provisions apply in cases of adoption.

• Shared parental leave is only available to employees who have 26 weeks’ continuous employment at the “relevant date”, which is the end of the 15th week before the EWC or the week they are notified of an adoption match . The employee is required to notify the employer in writing of the intention to take a period (or periods) of shared parental leave, and to include certain specified information and declarations. The employee may also be required to submit evidence of entitlement where requested by the employer.

• While the default position is that an employee is entitled to one continuous period of shared parental leave, employees may request several discontinuous periods of shared parental leave. In such cases the employer can agree to the request, propose alternative dates or refuse the request altogether, in which case the employee will be entitled to one continuous period of leave. Alternatively, the employee may withdraw the notice (presumably so that their spouse or partner may, if entitled, take leave at that time instead).

• The draft provisions as to notifications and requests are fairly complex. The employee may be required to give several different written notices to the employer, and may find it difficult to know exactly what to put in those notices without a working knowledge of the regulations, unless the employer (or the government) make available a comprehensive pack of forms for all the notices an employee may be required to give.

• The draft regulations set out provisions on terms and conditions during leave, the right to return to work, rights on redundancy, and protection from detriment and dismissal, all of which are very similar to the current provisions on maternity, adoption and paternity leave. There is also a schedule setting out special arrangements for leave where the child or one of the parents dies, or where the adoption placement is unsuccessful.

• The regulations will increase keeping in touch days (KIT days) to a maximum of 20 per employee during shared parental leave. As the government made clear in its previous response to consultation, the 20 KIT days for shared parental leave are additional to the ten maternity leave KIT days.

• When the mother is on maternity leave (or one adoptive parent is on adoption leave), neither parent can take shared parental leave unless the maternity or adoption leave is brought to an end early. The Draft Maternity and Adoption Leave (Curtailment of Statutory Rights to Leave) Regulations 2014 set out how that leave can be brought to an end by giving at least 8 weeks’ notice in a “leave curtailment notice”. They also set out the circumstances in which a leave curtailment notice can be withdrawn or revoked.

• The Draft Statutory Shared Parental Pay (General) Regulations 2014 set out the eligibility conditions for either parent to claim shared parental pay (SSPP) on the birth or adoption of a child, and the notifications that must be given to the employer in order to qualify. Aside from the additional complexity inherent in the shared parental leave scheme, the regulations reflect a similar regime to the current system for statutory maternity pay.

Whilst the actual take up of the new shared parental leave/pay regime remains to be seen, this will undoubtedly be a major change for employers to get to grips with from April 2015 and there will be numerous legal and logistical complexities to contend with regarding the process to be followed. Further details to follow on www.walbrooklaw.com as the draft regulations progress through the parliamentary process.

The government recently published its response to the consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Service provision changes to remain

Most striking is the government’s decision not to proceed with the proposed removal of the concept of service provision changes as enshrined in TUPE legislation by the new regulations that came into force in 2006 (replacing the previous 1981 regulations).

The proposed removal of these provisions in TUPE had surprised many commentators since most considered that these provisions had brought welcome clarity and certainty to the application of TUPE to outsourcing, insourcing and retendering (as opposed to business sale) situations. This had followed 25 years of convoluted case law in the ECJ and UK’s upper appellate courts regarding the application of the European Acquired Rights Directive and TUPE in the UK to such situations.

It therefore seemed ironic that the government proposed repealing the parts of TUPE dealing with service provision changes due to the perception that they imposed unnecessary burdens on businesses and created uncertainty. Fortunately, common sense has prevailed and the government seems to have taken on board the views of most respondents to the consultation who believed that there had been a welcome increase in the certainty of the application of TUPE to outsourcings and changes of service provider as a result of the 2006 changes.

Of course, the issue of service provision changes will still remain a sometimes contentious and complex issue in certain situations, for example where there is a fragmentation of services between more than one service provider, but in our view scrapping this part of the TUPE regulations would have been a retrograde step.

Other changes

The government has also confirmed in its response that it does intend to proceed with other proposed changes to TUPE, including the following:

• The TUPE provisions relating to protection against dismissal will be narrowed so that the protection only extends to circumstances where the TUPE transfer is the reason for the dismissal. Dismissals for a reason “connected with” the transfer will no longer be covered.
• The variation of terms and conditions will only be prohibited where the transfer is the reason for the variations. Unfortunately for employers, this will still not allow for post-transfer harmonisation of terms and conditions which is often a major practical concern for transferees.  However, a further amendment will expressly permit transferees to make variations that are permitted under a contractual provision. This may lead to some interesting case law if employees seek to claim that such as contractually permitted variation also involves a substantial change in working conditions to their material detriment (which can allow them to treat their contract as having been terminated under a separate provision in the 2006 TUPE regulations).
• The requirement for transferor employers to provide “employee liability information” has been extended from 14 to 28 days before a TUPE transfer. The government considered, but decided against, repealing the obligation to provide this information, apparently taking into account the views of respondents to the consultation.
• Redundancies arising from a change in the employees’ place of work, arising on a TUPE transfer will now fall within the scope of “economic, technical or organisational reasons entailing changes in the workforce” . This solves another difficulty which sometimes arises for transferee employers which is that “place of work” redundancies which may arise where the transferee employer is located in a different region to the transferor will no longer be deemed to be automatically unfair under TUPE.
• It will be possible to renegotiate terms that are derived from collective agreements one year after a TUPE transfer, although this will only be the case where the changes are no less favourable to the employee overall.  Employers would have welcomed a similar change to the position regarding individual contracts of employment and harmonisation exercises, though there is still plenty of scope for dispute regarding claims from employees who argue that collective agreement changes made under this provision are not “favourable overall” – even if agreed by their trade union.
• Micro-businesses (those with ten employees or fewer) will be able to inform and consult directly with affected employees, rather than having to elect employee representatives, where there is no recognised independent union or existing appropriate representatives.  This is a very welcome change for employers and employees alike, reflecting practical reality and avoiding the need to go through an unnecessary nomination/election process when information and consultation can be dealt with far more effectively in a direct manner with the affected employees.

TUPE interaction with collective redundancy consultation

Another related change, which will be welcomed by employers in solving what has often been a tricky issue to deal with in practice, is that the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) is to be amended  to make it clear that collective redundancy consultation that begins before a TUPE transfer can count for the purposes of complying with collective redundancy rules, as long as both the transferor and the transferee can agree and the transferee employer has carried out meaningful consultation.

The transferee will continue to be responsible for consultation and the subsequent costs of redundancy. There will be no obligation on the transferee to consult before the TUPE transfer, so the fact that a consultation under TULRCA does not begin until after a TUPE transfer will not, in itself, affect the fairness of a dismissal or lead to a protective award against the transferee.

Conclusion

In our view the changes to TUPE which the government has confirmed it intends to implement will bring clarity and provide some practical solutions to a number of issues that have cause difficulties to employers in TUPE transfer situations, whilst balancing the interests of employees.  It is also welcome that whilst the original proposals to scrap the service provision changes provisions were misguided, the government has listened to the views of respondents to the consultation and responded accordingly.  However, the thorny issue of harmonisation of individual employment terms following a transfer is not going to be solved by the revised TUPE regulations and will remain a challenge for employers.

Following on from our first update on the introduction of Employment Tribunal Fees and other new Tribunal Rules from 29 July, our second update looks at the new rules regarding pre-termination discussions, the re-naming of Compromise Agreements as Settlement Agreements, and the new basis for calculating the cap on unfair dismissal compensation.

Pre-termination Discussions

It is well established that employers and employees can hold “without prejudice” conversations for the purpose of trying to settle a dispute, which must then remain “off the record” in any subsequent litigation proceedings if a settlement is not reached. However, a number of cases, including the BNP Paribas v Mezzotero case in 2004, have demonstrated the risks to employers of instigating a “without prejudice” discussion with an employee for the purpose of trying to engineer a severance deal in circumstances where the employee can argue that there was no pre-existing dispute.

Whilst without prejudice discussions are still widely used, there is therefore some risk that unless there is a clear dispute at the outset, such discussions might lead to the employee resigning and claiming constructive dismissal or seeking to rely on the conversation as evidence that the outcome of a subsequent redundancy, disciplinary or capability process was pre-meditated.

From 29 July 2013, employers and employees will be able to enter into confidential pre-termination negotiations which will be inadmissible in any ordinary unfair dismissal proceedings unless there has been “improper behaviour”. Negotiations mean any discussion or offer of proposed settlement terms. If it appears that there has been improper behaviour the negotiations will only be permissible to the extent considered just by the Court or Tribunal.

The new ACAS Code of Practice on Settlement Agreements contains a list of what can amount to improper behaviour, including all forms of harassment, bullying or intimidation; physical assault or the threat of physical assault or any other criminal behaviour.  We can probably expect some interesting cases to unfold during the next few years regarding the type of verbal statements which might cross the line into harassment, bullying or intimidation.

The most striking aspect, and potential weakness, of this reform is that these “Pre-termination Discussions” will only remain inadmissible in ordinary unfair dismissal proceedings.  They will continue to be admissible in, for example, automatically unfair dismissal cases (such as whistleblowing-related dismissals), breach of contract or discrimination cases.

The Government’s aim of this new legislation is to encourage early dispute resolution without resorting to litigation, thereby reducing the cost to both employers and employees and reducing uncertainty. However, given its limited application to ordinary unfair dismissal cases only, there must be a question mark over how effective it will be.  There may even be a concern that it may encourage employees to bring more speculative claims in addition to unfair dismissal for the purpose of circumventing these rules.

In practical terms, employers would be well advised in most situations, but especially where they are any obvious concerns about claims such as discrimination or whistleblowing to ensure that any such conversations are also covered by the existing without prejudice rules rather than simply relying on the new pre-termination discussion rules.  However, even then they must still keep in mind the need for there to be a pre-existing dispute.

To settle is not to compromise

Perhaps one of the more semantic (and arguably unnecessary) of the forthcoming changes is the re-naming of statutory Compromise Agreement as Settlement Agreements.  The government’s rationale for making this change is that employers or employees might sometimes be dissuaded from agreeing to settle a dispute because they would not wish to be perceived as “compromising”.

This concern does not reflect our own experience as employment lawyers. We have advised on many compromise agreements during the last fifteen years (both employers and employees) but have on only one occasion encountered a query by a client (a non-UK headquartered employer with limited experience of UK employment law) as to whether the word “compromise” could be omitted from the compromise agreement.  When we explained the reason why the term compromise agreement had to be used, they were perfectly happy to proceed.

In any event, the change is upon us and the legal position relating to the actual Settlement Agreement itself remains the same as for Compromise Agreements (including the requirement for independent legal advice), with the one slightly amended condition being that the agreement must state that “the conditions regulating Settlement Agreements have been satisfied”.

New Compensatory Award limits for Unfair Dismissal

At present the cap on the compensatory award is £74,200. This has previously been subject to annual review and increase in line with RPI.

For any dismissal which takes effect on or after 29 July 2013, the cap on the compensatory award will be the lower of £74,200 or 52 weeks’ pay. A week’s pay will be based on the Claimant’s annual gross salary prior to their dismissal and will not include pension contributions, benefits-in-kind or discretionary bonuses.

Future RPI-linked changes to the statutory cap will take effect on 6 April each year, not 1 February as has previously been the case. In addition, the government is not obliged to make an RPI-linked change where the new power to vary has been exercised in the previous 12 months. Since this amendment is in force from 29 July 2013, the next RPI-linked change to the unfair dismissal cap is therefore likely to be April 2015, not April 2014.

The Government’s aim in implementing the 52 weeks’ pay element of the cap is to manage employees’ expectations of likely compensation and encourage earlier resolution of disputes. It is also designed to provide employers with more certainty over the likely cost of any unfair dismissal award.

In practice it is fairly unusual for unfair dismissal compensation awards in excess of 12 months’ pay to be awarded by Employment Tribunals, so the change is unlikely to have a significant impact.  However, it will at least lead to greater clarity in settlement negotiations regarding employees whose annual salary is less than £74,200.  For more senior employees on higher salaries, it’s a moot point since the unfair dismissal cap remains the same and this is likely to constitute just one element of negotiations over their severance package in any event.

We’re in the middle of a busy year for employment law reforms and a number of key changes are about to come into force on Monday 29 July 2013.

We’re going to be posting two separate updates on these reforms – this first update covers the changes to the Employment Tribunal system, and the second will cover changes to unfair dismissal compensation, new rules regarding pre-termination discussions and the renaming of Compromise Agreements as Settlement Agreements.

Employment Tribunal Fees

The first and most controversial change to the tribunal system is the introduction of Employment Tribunal Fees.  From 29 July 2013, Claimants will be required to pay a fee to issue an Employment Tribunal claim and a further fee in order for the claim to proceed to a hearing. The level of the fee will depend on the claim.  More straightforward “Level 1” claims covering matters such as unlawful deductions from wages and unpaid redundancy payments will be subject to a £160 issue fee and £230 hearing fee. Level 2 claims, which include claims for unfair dismissal, discrimination, equal pay claims and whistleblowing, will be subject to a £250 issue fee and £950 hearing fee.

The new fees are meant to introduce an element of financial risk for employees, who will need to win their case in order to be reimbursed the fees they have paid. The aim is to reduce the volume of cases, especially low-value and vexatious claims, being brought to Tribunal and therefore to assist businesses.

It remains to be seen how effective the reforms will be in achieving this aim. There will be a fee remissions system applying to individuals in receipt of certain benefits or who have a disposable monthly income below a certain level, with the income of a Claimant’s partner also being taken into account.  However, it is still likely that as well as dissuading opportunistic or vexatious Claimants from pursuing claims, the introduction of fees may also result in more meritorious claims not being pursued by low income employees.

The introduction of fees is likely to have less impact on higher value claims being brought by higher income employees.  However, if settlement is a realistic possibility any employee is likely to think twice before proceeding to pay a hearing fee of nearly £1,000 (likely to be payable 4 to 6 weeks before the hearing), particularly if the merits of their claim are not clear-cut.

Perhaps unsurprisingly, the changes are being strongly resisted by the trade unions and UNISON have applied for a judicial review as to the legality of the reforms, partly on the grounds that tribunal fees indirectly discriminate against women, who (typically) earn less than men.

We’ll keep you updated about those judicial review proceedings and also the practical impact of the introduction of fees on the type/number of Tribunal claims being brought. In the meantime, Tribunal Fees will become a reality on 29 July and we can both expect a reduction in the number of lower value claims and also a change in strategy from employers regarding the timing of settlement negotiations.   Rather than seeking to settle claims in the 28 day window between the ET1 claim form being issued and the deadline for the employer’s ET3 response, employers may now be inclined to file the response and then wait to see if the Claimant pays the hearing fee (and is therefore serious about proceeding to a hearing) before deciding whether to make a settlement offer.

New Employment Tribunal Rules

The introduction of Tribunal Fees has attracted most of the attention, but other important new Tribunal Rules are also coming into force on 29 July 2013 which will apply to all claims from that date irrespective of whether the claim was raised before 29 July 2013.

The Rules make several significant changes to the Employment Tribunal procedures, including the following key points:

• A claim will be rejected if it “cannot sensibly be responded to or is otherwise an abuse of process”.

• An initial “sift “stage (similar to that which has been applied for many years for appeals to the EAT)  will be introduced for both claims and responses to decide whether a claim or response should be struck out and to decide what case management orders are necessary to get the case ready for a hearing.

• Case management discussions and pre-hearing reviews will be combined into new preliminary hearings.

• Costs awards in excess of £20,000 may be made by the Employment Judge.

Overall there is every prospect that these new Employment Tribunal Rules will have a positive impact on the fairness, speed and efficiency of the tribunal process. In particular, the introduction of an initial “sift” stage and requirement for judges to issue case management orders at the sift stage, and the streamlining of CMDs and PHRs, are sensible practical measures. The new Rules should improve the Tribunal process and ensure that the key legal and factual issues in any employment tribunal claim are focused on by Claimants, Respondents and Employment Judges at an early stage. 

We’ll be posting and tweeting regularly on www.walbrooklaw.com about the world of employment law and other economic, legal and regulatory developments which could affect the job market or sectors which we advise in.

2013 is a time of significant change for UK employment law with two important new pieces of legislation coming into force – the new Employment Tribunals Rules of Procedure 2013 on 29 July 2013 and the Enterprise and Regulatory Reform Act 2013 which includes a range of different employment measures and is being implemented in stages.

There’s also the Growth and Infrastructure Act 2013 due to be come into force on 1 September 2013 – implementing the government’s “shares in exchange for employment rights”  concept, the wisdom of which many business owners, employees and employment lawyers have called into question but which has certainly attracted media headlines.

The practical impact of these legislative changes varies from the semantic (compromise agreements being renamed “settlement agreements”) to the controversial (the new requirement for claimants to pay fees to issue tribunal claims and then to proceed with a hearing).

Some changes are regarded as being not particularly well thought through policy-wise in terms of their practical use and impact.  For example, the inadmissibility of pre-termination negotiations in unfair dismissal claims (but not other types of claim) and the intention to create a new breed of employee shareholders who forfeit employment rights.

However, there’s no doubt that these are all significant changes that employers and employees need to be aware of, and we’ll be posting regular updates in the coming weeks and months on the key issues. We’ll also be posting on other issues which we think will be of interest to our clients and business contacts. So please keep an eye on our website for further news – and you can follow us on Twitter as well…