Employment Law Round Up
Published: 18 June 2014
UK employment law continues to develop at a rapid pace. The last few months have brought about several important employment law changes. Going forward fundamental changes are also imminent to employment tribunal rules, procedures and awards that represent a seismic shift to the landscape of UK employment law and the employment litigation process.
These are the major reforms that employers, HR professionals and employment law practitioners need to be aware of that have either recently or are about to come into force:
Major Employment Tribunal reform
This summer will see a number of important changes to the Employment Tribunals Service, its rules and procedures.
On 25 June 2013 changes to employment tribunal procedure and the orders a tribunal can make will be introduced, including:
- The Enterprise and Regulatory Reform Act 2013 (‘ERRA’) will amend the Employment Relations Act 1999 so that the annual adjustments to various employment awards (including a week's pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal) will be rounded up to the nearest £1.
- Enabling deposit orders and costs. From 25 June 2013, a tribunal will be able to make a deposit order in respect of a specific part of a claim or response. It will also be able to make both a preparation time order and witness expenses order to a litigant in person.
In relation to the Employment Appeal Tribunal (‘EAT’), from 25 June 2013, EAT judges will hear cases sitting alone, unless they direct otherwise.
More importantly perhaps, from the perspective of the parties involved in the employment tribunal process at first instance, from 29thJuly 2013 further employment tribunal rules and procedures will also be introduced, including, critically, a new fees regime. This represents a fundamental change in terms of the employment tribunal process where previously no fee was required to be paid by a claimant before commencing litigation.
Going forward, from 29 July 2013, a claimant will be required to pay two fees: an issue fee on submitting the claim, and a hearing fee around four to six weeks before the full tribunal hearing. Tribunal judges will have a power to order the unsuccessful party to reimburse any fees paid by the successful party, although this will be at the judge's discretion rather than automatic. Failure by the claimant to pay the issue fee may lead to the claim being rejected. The need to pay fees may deter claimants from lodging speculative and unmeritorious claims in future.
Additional changes to the employment tribunal process to be introduced from 29 July 2013 include the following:
- The introduction of revised ET1 and ET3 forms which are intended to make them easier to understand and complete
- The power for a Tribunal to reject an ET1 if it is in a form which "cannot sensibly be responded to or is otherwise an abuse of the process". It remains to be seen how this will be interpreted, but this change is likely to predominantly affect unrepresented claimants with poor literacy or English language skills. Rambling ET1s which express a sense of grievance against the employer but which do not make clear the legal basis of the claim are likely to be rejected.
- The power for a Tribunal to reconsider a claim that has been rejected. The need to make a formal written application for a reconsideration of that decision may put some would-be claimants off pursuing their claim further.
- An extension of time to file a response can be applied for after the original 28 day time limit for filing a response has elapsed.
- A relaxation of the rules on default judgement and debarment in circumstances where a respondent has failed to file a response within the prescribed time limit. The tribunal will no longer automatically issue a default judgment if a response has not been received by the 28-day deadline. It will be for an employment judge to decide whether they can determine the claim from the information they have before them, or from further information they can request the parties provide, or whether a hearing is still required. It will be for the employment judge to decide the extent to which a respondent who has not presented a response should be permitted to participate in future proceedings.
- A new initial sift stage after the claim and response have been filed. Along with the fees regime, the introduction of this sift stage represents one of the most radical changes to the tribunal rules. Each case will be considered by an employment judge. The tribunal will undertake an assessment of the merits based on the papers, with a view to deciding (amongst other things) whether all or part of any claim or response may be struck out (for example where the claim or response does not have reasonable prospects of success or if the tribunal does not have jurisdiction) or, if the case is to proceed, what case management directions may be appropriate. The effects of the introduction of this initial sift stage may lead to Claimants and respondents having to undertake a more detailed assessment of the merits of their cases at the outset, rather than as the case develops. Also both parties will need to ensure their cases are properly pleaded. The effect of all of this may mean that fewer unmeritorious claims and responses are likely to reach final hearing.
- The replacement of case management discussions and pre-hearing reviews with one preliminary hearing to be conducted by an employment judge sitting alone, at which both case management and substantive preliminary issues may be determined.
- Simplification of the withdrawal system so that after a claim has been withdrawn, the tribunal will issue judgment dismissing it, effectively closing the door on the claimant reviving the claim at a later date.
- A new procedure whereby the parties can apply for reconsideration of any decision of the tribunal taken at interlocutory stage.
- Costs assessments of over £20,000 no longer being needed to be remitted to the civil courts.
- Employment judges to be given a wider discretion to run final hearings as they see fit in accordance with the overriding objective
- Tribunals to give written reasons of any disputed issue following final hearing.
Introduction of new Government powers that may lead to further reform
From 25 June 2013 also, the Secretary of State will have the power to order a variation of the statutory limit on the compensatory award in unfair dismissal claims under the ERRA. The power will be introduced on 25 June 2013. It will allow the unfair dismissal compensatory award to be capped at the lower of one year's gross pay (excluding pension contributions, benefits in kind and discretionary bonuses) and the existing limit. There is no indication at present as to when this power may be used.
The ERRA will amend the Equality Act 2010 to enable the government to provide that caste is an aspect of race, therefore making caste discrimination unlawful. This power will be introduced on 25 June 2013, although it is not known if or when the power will be exercised.
Under the ERRA, discrimination questionnaires are also to be abolished, although there is no date set yet also for when this change is to be implemented.
From April 2013, a key change has been introduced where an employer intends to make 100 or more employees redundant within a 90-day period; employers must now start consultation at least 45 days before any redundancy can take effect. This is a significant reduction from the previous collective consultation period of 90 days.
At the same time, the period for lodging a form HR1 (the form employers are obliged to submit giving the Secretary of State advance notice of collective redundancies) has also been reduced from 90 to 45 days before the first dismissal takes effect.
Employees whose fixed-term contracts are about to expire (more specifically "which have reached their agreed termination point") are excluded from collective redundancy consultation obligations.
The government says this will enable businesses to become more agile and lessen the uncertainty for staff whose jobs are under threat. In practice, employers conclude their collective consultation well within a 90-day period and often the employees themselves are keen to move onto one-to-one redundancy discussions much sooner in the process. Therefore this move should help remove some of the red tape and make it easier for businesses and employees during what can be a challenging and difficult time. Acas has published How to manage collective redundancies, a non-statutory guide to assist employers work within the reforms. The move has not been universally well received though, with trade unions in particular seeing the reduction of the collective consultation period as an erosion of the protection afforded to employees collectively faced with losing their jobs.
In March this year, the government finally implemented the revised Framework Directive on Parental Leave, increasing the statutory parental leave entitlement of a qualifying employee from 13 weeks to 18 weeks in respect of each individual child.
Entitlement to such unpaid parental leave continues to be limited to a maximum of four weeks a year and is restricted to those employees with at least one year's continuous employment.
Increases in statutory pay rates
The standard rates for statutory maternity pay, statutory paternity pay and statutory adoption pay have now increased to £136.78 (up from £135.45). The weekly earnings threshold for these payments also rose from £107 to £109 per week.
Maternity allowance increased to £136.78 (from £135.45), with the earnings threshold remaining at £30.
The weekly rate of statutory sick pay has also increased from £85.85 to £86.70, with the weekly earnings threshold again rising from £107 to £109.
Real Time Information
The introduction of Real Time Information (RTI) has been described as the biggest shake-up of the PAYE system in 70 years.
The new process means employers are now required to move to a new way of reporting pay details and any change in employee PAYE deductions to HM Revenue and Customs in real time, i.e. each time they pay staff, rather than at the end of the year. The information needs to be sent electronically to HMRC, so employers – or their payroll provider – must have the appropriate software in place. The move is intended to improve the PAYE system so that it is quicker, easier and more accurate.
With the introduction of RTI, employers will benefit from much simpler requirements for reporting to HMRC and the abolition of the extensive annual tax return that the old system required.
David Gauke, Exchequer Secretary to the Treasury, has said:
"For employees, particularly the 1 million people in the UK with multiple jobs, RTI will bring benefits as HMRC starts to get details of their tax every time their wages are paid, rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will reduce the number of cases where someone is found to have under or overpaid tax during the year."
"RTI will deliver the new Employment Allowance, which will reduce the cost of taking on new staff for small business. RTI will make it simple to administer, to ensure maximum take-up and help aspiring businesses grow by hiring employees or expanding their workforce."
"Real Time Information will be better for employers and employees. It will bring PAYE into the 21st century."
Ruth Owen, HMRC’s Director General Personal Tax, commented further:
"This will be a year of transition. Employers will start to report PAYE in real time from their first payday on or after 6 April. We understand it may take some time before all employers will get into the routine of real time reporting. But HMRC is here to give help and support, including offering free software for employers with nine or fewer employees, regular live Twitter Q&As, YouTube videos and roadshows across the country."
The government has said that it will initially operate a "light touch" approach to penalties for failing to comply with the new system.
According to a poll from the Forum of Private Business though, up to 18 per cent of firms are still not prepared. Employer groups are still worried about the administration burden and potential for complications.
"Reporting PAYE in real time is a massive change to the way that businesses operate across the UK," said Adam Marshall, director of policy at the British Chambers of Commerce.
"HM Revenue and Customs must not underestimate the potential for problems to arise, and must provide firms with on-going support over the coming months as they adapt to the new system. We are concerned that the new system and future penalties could hit many well-intentioned businesses, especially since there is no transition period from the old system to the new."
Charles Cotton, reward adviser at the CIPD, added: "RTI, rather like auto-enrolment and universal credit, offers HR the opportunity to review its reward processes and systems. As a result of RTI, I wouldn’t be surprised if we started to see more employees being paid monthly and fewer paid weekly or fortnightly."
The personal allowance (the amount an individual can earn before tax is applied) has risen to £9,440 in the 2013/14 tax year. The rate of income tax for the country’s top earners taking home £150,000 or more per year has now dropped from 50p to 45p.
Time for a review of your business’s employment contracts, policies and procedures?
If you have not done so already, we recommend you ought to be carrying out a spring clean of your business’s employment contracts, policies and procedures to ensure they are fully compliant and up to date with these latest changes in UK employment law, so as to avoid unanticipated liabilities. This is particularly important bearing in mind that in February this year, the maximum compensation limit for loss of earnings for unfair dismissal rose to £74,200. Even a single case of unfair dismissal therefore could be very expensive for your organisation. Prevention is always better (and less expensive) than cure.