Acting to stop harm: the FCA and Appointed Representatives
A number of important changes to UK employment law came into force on Sunday 6th April. Below are our comments in relation to those which we think will have the biggest impact on litigation tactics and strategy, for employers and employees alike.
Early Conciliation will be introduced on a (transitional) voluntary basis. Prospective claimants will be encouraged to contact ACAS before lodging their ET1, and complete a prescribed form to engage in the process.
An Early Conciliation Support Officer will be allocated who, after checking basic details, will pass the matter to an ACAS Conciliation Officer and s/he will have one month to try to help the parties resolve the issue. The parties can then agree to an extension of time of 14 days to enable the Early Conciliation process to run its course. If no resolution can be reached, the claimant can issue proceedings before the Employment Tribunal should they so wish. Importantly, the time limit for lodging a claim will cease to run whilst the Early Conciliation process is ongoing (under a “stop the clock” mechanism). ACAS will have discretion over if/when to terminate the process in the event that it is unable to engage either party after making “reasonable” attempts to contact them or one or other of the parties refuses to conciliate. An Early Conciliation certificate will be issued, following which the Employment Tribunal timetable will resume.
As of 6 May 2014, Early Conciliation will become “mandatory” (so all claimants must instigate the process before issuing an ET1), albeit either parties’ decision as to whether or not to accept any offer of Early Conciliation or engage in the process will remain voluntary.
There is a question mark over whether respondents will want to engage in Early Conciliation, particularly as claimants are not required to include any details of their claim on the prescribed form. This means that respondents may not necessarily know the full details of the case they are conciliating and/or may be unable to quantify their liability (if any) fully. Also, by engaging in Early Conciliation, claimants could artificially extend the Tribunal time limit in respect of their claim(s) by up to a month or more (thanks to the “stop the clock” mechanism referred to above). Tactically, this could give claimants an advantage by affording them greater time to assess the merits of their case and the respondent’s keenness to litigate or settle. That said, a respondent could use Early Conciliation as a means of scoping out the prospective claim against them, and establishing how prepared the claimant is to pursue litigation (particularly in light of the new rules regarding Employment Tribunal fees).
The aim of Early Conciliation is laudable: resolving employment disputes at a preliminary stage without parties suffering the stress, potential reputational damage, wasted management time, and overall cost of litigation. Practically, employers may want to consider nominating someone—perhaps a senior individual within their organisation, or if they have an HR department, their Head of HR—to deal with any Early Conciliation processes. When it becomes mandatory in May 2014, Early Conciliation will be a standard part of the Employment Tribunal framework, and one which employers and employees alike will have to consider.
With the recent introduction of Employment Tribunal fees, claims which can be brought before a Tribunal have been categorised as either “Type A” or “Type B”. Different fees apply to each, with Type B claims attracting higher fees (namely, a £250 issue fee and a £950 hearing fee). As of today, new claims will be classified as Type B claims, namely those relating to:
By broadening the scope of the Type B claims, the financial burden of issuing proceedings will fall on claimants in a greater number of cases, which could act as a deterrent. The window of opportunity to settle will in all likelihood be before the issue fee or hearing fee is due. In any event, if Tribunal fees have already been paid, their reimbursement may form part of any subsequent settlement, and Tribunals do have discretion (which they are likely to exercise) to award reimbursement of some or all of any such fees to the successful party. Litigation tactics may also change in light of the increased Tribunal fees to be incurred in relation to these claims, particularly when considered alongside the abolition of discrimination questionnaires (considered below) which have traditionally assisted claimants seeking to bring equal pay or sex equality claims.
The legislation governing the use of discrimination questionnaires has now been repealed, meaning that there is no longer a statutory protocol enabling claimants to request such broad, workforce-oriented, pre-claim disclosure. In response, ACAS has published helpful (non-binding) guidance for those seeking to ask or respond to queries regarding workplace discrimination.
A discrimination questionnaire was a potentially powerful weapon in a claimant’s arsenal, enabling them to engage in pre-claim disclosure (and request information which may not otherwise become available as part of any subsequent disclosure exercise) in order to better understand the basis upon which they could issue proceedings. If an employer failed to respond to a questionnaire within eight weeks, or otherwise provided evasive answers, Employment Tribunals were entitled draw adverse inferences.
With the abolition of discrimination questionnaires, employers will, in theory, be in a stronger position to deal with queries about workplace discrimination more robustly or not at all. That said, an Employment Tribunal may regard an employer’s response (or lack thereof) to any queries as a contributory factor in any discrimination, and could order an employer to provide information which it considers to be relevant to the litigation in question, in any event.
Individuals may seek to rely upon a Subject Access Request (SAR) if they want/need pre-claim disclosure. However, a SAR will only entitle the individual to receive all and any information which their employer holds about them, not about its workforce more broadly. Some employees may therefore be dissuaded from issuing proceedings and incurring Employment Tribunal fees if they are unsure about the merits of their claim.
Other than in exceptional circumstances, Employment Tribunals will now have the power to order a losing employer to pay a financial penalty (FP) of between £100 - £5,000 to the Secretary of State in cases presented on or after 6 April 2014, where any such case has “one or more aggravating features”. This FP will be payable in addition to any compensation the Tribunal awards to the claimant. The amount of any FP will be 50% of the compensation awarded (subject to the £5,000 cap). If the FP is paid within 21 days, the losing employer will only be required to pay 50% of the FP in total. Employment Tribunals are required to take into consideration an employer’s ability to pay when determining any such FP.
Where a claimant succeeds in a number of different claims which relate to the same issue or are against the same employer, these will be regarded as a single claim. The compensation in respect of these claims will be added together and treated as one, single award of compensation against which the FP will be calculated.
In respect of multiple claims relating to different acts, an Employment Tribunal will be able to exercise its discretion as to whether or not to impose a FP in respect of each of those separate claims. In such cases, the £100 minimum shall apply to the amount of the FPs in total. However, the £5,000 maximum shall apply to each separate FP.
This enactment appears to contradict the Government’s stated intention to reduce the burden (both financial and practical) on employers who are faced with Tribunal claims. It may be seen as a quid pro quo for the more employer friendly provisions introduced in the last year. The legislation provides no guidance as to what is meant by “aggravating features” and with the prospect of incurring a potentially significant fine and the litigation risk, employers may feel under undue pressure to settle with the claimant, even though if they go on to challenge the case at Tribunal and lose, any FP that may be awarded will not be paid to the claimant but to the Government. In its response to the consultation, the Government noted that Employment Tribunals would impose penalties where the breach involves unreasonable behaviour (such as negligence or malice), and (helpfully from the employer’s perspective) that “genuine mistakes” by employers will not be penalised.
If an employer is found to have employed an individual who does not have the right to work in the UK, it will now be liable to a civil penalty of up to £20,000 per illegal employee (previously, the limit was £10,000), as well as a criminal penalty.
It is illegal to employ anyone who does not have the right to work in the UK or who is working in breach of their conditions of stay. Employers need to conduct certain checks to assess an individual’s ability to work in the UK, before that person starts employment, and a record of these checks has to be kept. The civil penalty has increased significantly so an employer whose workforce (in whole or in part) is based in the UK needs to ensure that its employees are entitled to work in the jurisdiction, and must be alive to the serious civil and criminal ramifications if they are not so.
The maximum amount of compensation which an Employment Tribunal may award in relation to claims for unfair dismissal where the effective date of termination is on or after 6 April 2014 will increase to £76,574, or 52 weeks’ gross pay (whichever is lower), whilst the limit on a week's pay for the purposes of calculating the basic award will increase from £450 to £464. Compensation for other claims (such as a failure to provide particulars of employment, breach of a right to be accompanied to a disciplinary or grievance meeting, breach of flexible working regulations, etc.) will also increase, as will rates of statutory sick pay (which increases to £87.55 per week) and statutory maternity, paternity and adoption pay (which increases to £138.18 per week). Further, the amount of “a week’s pay” (for the purposes of calculating statutory redundancy pay) will also increase from £450 to £464.
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