Government to consult on employment law reforms

The government has announced new areas that it will consider reforming as part of its review of employment red tape. This includes reforming: compensation for discrimination awarded by employment tribunals; collective redundancy consultation periods; and the transfer undertakings protection of employment regulations (Tupe).

Edward Davey, employment relations minister, detailed the plans during a speech at the Institute of Economic Affairs. Davey said: “The areas we are reviewing are priorities for employers. We want to make it easier for businesses to take on staff and grow.

“We will be looking carefully at the arguments for reform. Fairness for individuals will not be compromised but where we can make legislation easier to understand, improve efficiency and reduce unnecessary bureaucracy we will.”

The government will look in detail at the case for reforming:

  • Compensation for discrimination. Employers have expressed concern about the high levels of compensation sometimes awarded by employment tribunals in cases of discrimination and the lack of certainty they have about the level of award they may be required to pay. Compensation levels for cases of discrimination are unlimited and employers worry that high awards may encourage employees to take weak, speculative or vexatious cases in the hope of a large payout. This can lead to employers settling such cases before they reach a tribunal.
  • Collective redundancy rules. Employers are concerned that the current requirement that consultation over collective redundancy runs for a minimum period of 90 days is hindering their ability to restructure efficiently and retain a flexible workforce. Employers in financial difficulty worry about how long they need to keep paying staff after it has become clear that they need to let them go. They also claim it is not clear from the legislation at what point consultation on redundancies should start or end.
  • Tupe. These rules implement a European directive and protect employees’ terms and conditions of employment when a business is transferred from one owner to another. These rules offer important protections but some businesses believe that they are `gold-plated’ and overly bureaucratic.

The review will begin this year. The government wants to ensure that the regulations are fit for purpose, and legislation will not necessarily be the route to implement any change if there is a case for reform.

As part of the review of employment law, consultations have recently closed on simplifying the employment tribunal system and extending the period before an unfair dismissal claim can be brought. An independent review of the system for managing sickness absence has been commissioned and a review of the compliance and enforcement regimes for employment law has been launched.

Next week it will launch a consultation on plans to extend the right to request flexible working to all employees and introduce a new system of shared parental leave from 2015, to make it easier for parents to work whilst bringing up a family.

Katja Hall, chief policy director at the Confederation of British Industry (CBI), said: “A review of employment law is long overdue. Workplace relationships have changed dramatically over the last decade, with employers and employees engaging in a more flexible, personalised way, and it is time the law reflected this.

“The government is right to look at ways of reducing regulatory burdens on businesses, because this will help free them up to create jobs and drive growth.”

Selwyn Blyth, partner at law firm Pinsent Masons, said: “There may be issues about the legality of reforming compensation in discrimination cases. As a country we are expected to give an adequate remedy for discrimination under European Union (EU) law, possible reforms (for example, imposing a cap on compensation where there has previously been none) may be regressive and vulnerable to challenge in the European Court of Justice (ECJ).

“The government says it is responding to concerns about speculative claims, but is the right way to do this to penalise people with genuine claims in terms of the compensation they can recover?†

“Whatever the compensation reforms, there will still remain a financial incentive to bring a claim. If claims are really speculative, it would be better to focus on weeding out those claims at an early stage of the tribunal process.”

Caroline Carter, head of the employment practice at law firm Ashurst, said: “The government’s announcement is a welcome one for employers, as it has targeted some of the most problematic and key areas of employment law.

“Placing a cap on compensation for discrimination claims (as there is for unfair dismissal claims) will be a useful risk management step for employers, and give them more certainty in judging their financial exposure.

“The collective redundancy timetable is also unnecessarily arbitrary, and there is significant uncertainty about when it is triggered, both of which add unwanted pressures to businesses who are already in real difficulty

“Finally, the Tupe Regulations have been ‘gold-plated’ ever since their amendment in 2006, and it would be of great benefit to multinational companies doing business in the UK if there was a uniform approach across Europe.

“The sting in the tail is the commitment to extend the right to request flexible working to all employees and introduce a new system of shared parental leave from 2015, both of which will place a huge administrative burden on employers. So, despite the announcement, there remain tough times ahead for UK employers.”

Sarah Jackson, chief executive of Working Families, said: “The government admits that the high cost of compensation in discrimination cases is a concern for employers. So it should be. If we are serious about tackling discrimination at work, which continues to be an issue for many callers to the Working Families helpline, then the sanctions need to be severe.†

“Being the victim of discrimination at work is distressing and undermining for the employee, but few bring claims lightly. Accusing an employer of discrimination is very likely to mean that the employee will be out of a job, even if the tribunal finds in their favour.†

“Allowing tribunals to decide appropriate levels of compensation reflects not only the injury to the victim of discrimination, but the loss of earnings and potential earnings that result from the complete breakdown of an employment relationship.

“Last year Working Families helped over 200 parents (12% of all our calls to the helpline) with cases which raised discrimination issues. During the recession, employers appear to be flouting the law more blatantly. For example, one caller was told she could not return to the same hours of work after maternity leave. Her employer told her that, as she had been on leave, she had ‘drawn the short straw’ and had to do the shifts that no one else wanted.†

“The law is there to protect employees. The government needs to tread very carefully in reviewing this law to ensure that employees’ rights at work are not rendered meaningless.”

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