On the 25th April 2013, after receiving Royal Assent, The Enterprise and Regulatory Reform Act 2013 (ERRA) was passed into law.
The Bill passed through both Houses of Parliament with relative ease and followed the launch of the Employment Law Review by the Conservative Government in 2011. This review was set up with laudable aims: to simplify and disentangle the UK’s employment legislation in order to allow for greater flexibility, fairness and effectiveness. Whilst this will mainly have been about simplifying and bringing employment law ‘up to date’, by having a system that is quicker, less complex and less expensive to administer would also have been a consideration.
The ERRA is part of the Conservative government’s long-term economic plan to boost the economy, lower unemployment and to lower the deficit through increased competition. It aims to do this by cutting the cost of doing business, boosting consumer and business confidence and by helping the private sector to create jobs.
This article evaluates the main changes to the employment sector brought by the ERRA, detailed in Parts 2 and 6 of the Act.
- Section 7 makes it a requirement for a prospective claimant to refer the case on to the Advisory, Conciliation and Arbitration Service (Acas). A conciliation officer is assigned to the case and will endeavour to efficiently resolve the dispute without the need for a tribunal hearing. If either party refuses to take part in the conciliation process or if it is unsuccessful, Acas will then issue a certificate to the effect that the early conciliation process has been completed and unsuccessful. Only then will a prospective claimant be able to proceed with lodging a complaint with HM Employment Tribunal.
- Section 11 provides for the appointment of a legal officer to hear and judge cases with simple or low value claims, where all parties to the proceedings consent in writing. Resolutions under this section will have the same legal standing as rulings made by judges. Claims which qualify for this ‘rapid resolution’ scheme will be further specified by secondary legislation.
- Section 12 replaces the systematic requirement for judges to sit with lay members to hear and judge cases that reach the Employment Appeal Tribunal. Judges may now sit alone or may appoint ,on a case by case basis, either a panel of two or four lay persons with an equal number of worker and employer representative members or a panel of one or three lay persons so long as they have the written consent of all parties.
- Section 13 mandates that ,where unfair dismissal is concerned, there is no qualifying period of employment if the principal reason for the dismissal relates to the employee’s political opinions or affiliation.
- Section 14 provides that discussions for or offers of settlement agreements are inadmissible in proceedings for unfair dismissal. The aim is to provide a safe route for such negotiations to be made without a case for unfair dismissal being brought against an employer.
- Section 15 introduces a cap on compensatory awards for unfair dismissal. The Act allows the Secretary of State to amend the limit to address new business concerns and a changing economic climate. This new cap may be a specified amount, a certain number of week’s pay, or the lower of the two. Any specified amount cannot be lower than an employee’s median annual earnings or more than three times their median annual earnings. The minimum number of weeks which can be specified is 52, i.e. the limit cannot be used to reduce the cap to below the employee’s annual average earnings.
- Section 16 gives the tribunal discretion to impose penalties on employers who have breached the claimant’s employment rights and where the breach has aggravating features. ‘Aggravating features’ are for the tribunal to decide, but the Explanatory Notes suggest malice, negligence or deliberate actions constitute such features. The penalty can be anywhere between £100 and £5,000 and will have regard to an employer’s ability to pay. Where compensation is awarded, the penalty will be 50% of that award except where compensation is under £200 or over £10,000. In these cases the penalty will be £100 or £5,000 respectively. Where the employer pays the penalty within 21 days, it is reduced by 50%.
- Sections 17 and 18 introduce a public interest clause to whistleblowing claims. Claimants must now show that they believed that their disclosure was made in the public interest and that their belief was reasonable in the circumstances. This excludes breaches of individual’s employment contracts and other breaches which breach private interests. The good faith test – which has been replaced by the public interest test – will now solely be used by the tribunal when deciding on remedy. Where a disclosure has been made in bad faith, the tribunal has the power to reduce compensation awards by 25%.
- Section 19 affords protection to workers subjected to detriment by a co-worker or an agent of their employer for making protected disclosures. Where a claimant is subjected to detriment this is treated as having been done by the claimants employer. It is immaterial whether or not the detrimental act was committed with the knowledge or consent of the employer. However, the employer will have a defence to the alleged detriment where they can show they took all reasonable steps to prevent the worker from doing said action or from doing anything of that description.
- Section 20 extends the meaning of ‘worker’ for whistleblowing claims. Previously certain healthcare workers were not subject to whistleblowing claims due to their contractual arrangements. The scope of ‘worker’ has therefore been widened to include these professionals. A power has also been included to allow the Government to make further amendments to ‘worker’ using secondary legislation to avoid the need for primary legislation should similar loopholes arise in the future.
- Section 21 enables the Secretary of State to give tribunals the power to make a deposit order of up to £1,000 in respect of a specific part of a claim or response (rather than the whole claim or response) or to make an order for the payment of witness expenses where it has also made a preparation time order.
- Section 23 renames compromise agreements to be known as settlement agreements in order to alleviate confusion and more accurately describe their purpose. These agreements are a way of amicably and mutually ending an employment relationship to avoid costly tribunals. The aim is to make it easier for employers and employees to part way on agreed terms. Settlement agreements will be made more accessible via a Statutory Code of Practice as well as a standard model text employers can use when drafting such agreements.
- Section 98 extends the power of employment tribunals to require employers to undertake pay audits where they have been found to breach the equal pay provisions in the Equality Act 2010. The purpose of the audit will be to identify future action to avoid equal pay breaches from continuing or happening again. The tribunal will be able to impose penalties for non-compliance. The results of the equal pay audit must be published on the employer’s website and remain for three years. Businesses with fewer than ten employees are exempt.
New and amended legislation, especially when it relates to individual rights, is important and must be handled with care to ensure the intended objective outcomes are achieved. The digital age brought with it increased public empowerment. With employment legislation accessible at the click of a button, individuals are more aware of their protected rights and civil liberties. The knock-on impact of this has been to highlight imperfections in the system such as, for example, the role of affirmative action in bring positive change and in realigning the business environment and the role of whistleblowers in highlighting defects in public services.
The ERRA appears to deliver such action and the Act brings with it a number of clear advantages to both employer and employee: streamlined regulation, reduced administrative cost, simplified guidance, straight-forward sanctions and timely resolutions to name but a few.
The sheer volume of UK legislation, its interwoven complexity and the wider interaction it has with common and European law mean that even the most dedicated professional can find it difficult to always correctly interpret and apply it to real-life, every-day scenarios. Legislation can sometimes have an effect opposite to that intended, undermining the rule of law due to inflexibility and regimented sets of rules that the average Joe can’t decipher. The new legislation aims to deliver a straight-forward agenda to support prompt and just resolutions.
Taking disputes to tribunals is typically costly to all parties including the taxpayer. The ERRA seeks to avoid the need for tribunals, in all but the most serious and complex of cases. Employees often suffer the effects of legal aid cuts and lack the resources to objectively defend claims filed at employment tribunals, thus a more defined set of governance to guide common sense solutions without the need for trial should, in theory, support and encourage fairer and better outcomes. Employees who previously felt that the cost of a dispute would grossly outweigh any tangible benefit resultant, may now feel encouraged to seek justice using the new legislative process, bringing more unjust employers to justice.
The general consensus is that the changes introduced to employment legislation are welcome and are a positive response to growing discontent over existing legislation in recent years. The changes overall seem to deliver common-sense improvements to ensure legislation is up to date with the current climate and further leverages’ the modern legal tools now on offer to support all parties.
Both employees and businesses, especially small and mid-size businesses, will benefit from the lower costs involved, the increased importance placed on conciliation as a means of resolving workplace disputes and more realistic expectations of compensation packages. The focus will now be on the successful roll-out of the legislation, its integration into the wider system and the ability to effectively amend it going forward as the business environment continues to evolve and change.