Friday 14 September 2012

Vince Cable's Employment Law Consultations

BLOGPOST substantially rewritten at 12pm 14/9/2012 following publication of consultation document

Vince Cable has announced various consultations on employment law this morning. The consultation papers are here.   Here are my initial thoughts (and you can hear me on the Today programme on iPlayer, at 2:51:20).

The consultation proposes reducing the cap on the compensatory award from £72,300 to the lower figure of the national median average earnings (£25,882) or an individual's annual net salary. The rationale is a huge increase in the award in 2000 (to £50,000) and above-inflation rises since then.  This is utterly disingenuous; the annual rises are inflation linked to the nearest £10 (thus, technically, there may be a rise that marginally greater than inflation; but it is deeply misleading of the government to suggest its anything other than trivial), and the increase to £50,000 was to link the compensatory award back to the inflation-adjusted equivalent to that which it had been in 1971.

The government is being vague on the exact cap - it's saying a cap of one year's earnings, subject in any event to something between 1x and 3x median earnings.  Not to be decided by parliament, but by a statutory instrument.   Let's see how long we have to wait for that one.

A lower cap doesn't make it easier to dismiss staff. An employer must still act reasonably to justify dismissing someone with more than two years' service. Instead, it makes it cheaper for employers to behave unreasonably.

A reduction in the cap doesn't address the real problem that businesses face: that of vexatious or unreasonable employees with unrealistic expectations. That needs to be dealt with by rigorous enforcement of costs rules, and requiring employees who bring hopeless claims to repay an employer's legal costs, as happens in other areas of litigation.

Many jobs last as long as a marriage - some last longer. People are as reliant on employment income as they are on spousal income. Nobody would suggest capping maintenance payments at one year's earnings; it is absurd to do so for unfair dismissal claims.

The proposals mean that bad employers can take a calculated risk that the maximum exposure is £25,882 - and take a commercial decision to act badly when they might not previously have done so. Employment law comes down to three basic principles: (1) be reasonable; (2) be consistent; and (3) be nice - until it's time to stop being nice. If employers follow those three rules, they'll be fine.

Employees will still try to claim discrimination - which has uncapped compensation because of European laws - in order to put commercial pressure on employers and inveigle higher payouts.

There's nothing new about employers and employees being able to settle employment claims before going to a tribunal.

Vince Cable is publishing standard template 'settlement agreements'. You can see sample templates at the back of the consultation document.  One question that DBIS is posing is whether there should be recommended tariffs for levels of settlement, depending on length of service, reason for dismissal etc.

The government is missing, however, the sensible development of abolishing the need for employees to get independent advice from a CAB, union or lawyer before settling claims.  Many settlements are straightforward and advice isn't needed, just as it isn't needed when settling a claim for a neighbour dispute or a badly installed kitchen.  Admittedly there is a risk of employers pressuring employees to sign on the dotted line and withholding pay entitlements until they do. But as long as suitable safeguards are included, such as a cooling off period and a statement that the employee should consider taking advice, it would be a sensible move forward to save enormous costs for businesses.  But it's not going to happen.

This is the most insidious of all the changes, although it's not obvious from the terms of the Press Release.

Straightforward claims for unpaid wages will cost £390 to take to a hearing. There is no way an employee on £300 a week, who has been underpaid £50, can afford to bring a claim. It makes justice unaffordable for workers on low incomes and gives unscrupulous employers comfort that their actions won't be challenged.

Claims such as unfair dismissal and discrimination will cost £250 to launch, and a further £950 to get a hearing date - £1,200 in total. This prices many ex-employees out of the tribunal, and will encourage employers not to settle claims because they will gamble that the employee can't/won't pay the £1,200 fee.


Simon Jones said...

The other issue on tribunal fees is that it automatically means that a claimant will add £1200 on to the amount they are prepared to settle for - something I blogged about when the idea was first mooted

Roy Carlo said...

This is another example of change for change sake and does not appear to have been thought through.

Newchodge said...

ITribunal fees will work wonders for trade unions membership figures.

Unknown said...

Presumably, most ex-employees will be unemployed and, therefore, entitled to a waiver of their tribuanl fees. This will just put more administrative work on tribunal staff, etc, in vetting claims. The very idea of charging fees is distasteful, given the fact that someone has just lost their job! In my opinion, they are meant to deter potential claimants and it will probably do exactly that.

Cynic414 said...

As I sit here, drafting a response to a badly written ET1, which is wholly without merit, and costing the employer organisation hundreds of pounds worth of my time, I cannot wait for the day that tribunal fees are introduced.

I also look forward to the tribunal judges striking out more claims - even the discrimination ones - when they are without merit.

Alan Sarhan said...

Good commentary, I couldn't agree more. It is interesting to compare employment rights in Ireland (where I practiced originally) and the UK. If only because until recently (i.e. before it joined the EU) Ireland tended to follow the UK model. In Ireland, employees have 6 months to bring a claim after employment ends. The effective date of termination is not when you stop work, but when your contractual notice would have ended. Compensation for unfair dismissal is capped at two years pay. The qualifying period for unfair dismissal remains one year. There are no plans to introduce fees to take ET claims, and a much more informal first tier forum exists to deal with simple claims in the form of a Rights Commissioners Service.

Employment solicitor said...

It does seem that the government is overselling the issue if they are saying that this will make it much easier for employers to sack staff – however it might indirectly make it significantly less risky to do so given firstly that the cap on unfair dismissal compensation is being reduced so much and, secondly, the introduction of tribunal fees. It will have to be quite a brave claimant who is prepared to put £1200 up front to effectively gamble on their claim given the unpredictability of many employment tribunals - that’s of course provided they can actually lay their hands on £1200. What it might also do is significantly reduce the number of no win no fee employment tribunal claims. I suspect that many solicitors, even if they are confident about running no win no fee employment tribunal claims now, won’t want to run many cases if they have to stump up £1200!

billw said...

nice to see Cynic414 voting for his own demise

Anonymous said...

Maybe. But you assume trade unions have the funds to underwrite these claims. Small unions certainly won't particularly if a settlement through ACAS. Does not account for the fee to be recovered. At present it seems only sucessful claimant will get their fees back. What classes as success? COT3 settlement?

Anonymous said...

I am currently having absolutely no success in persuading two ETs that the claim against my client is totally vexatious as the ETs have accepted without checking or question whether or not the Claimant is actually an employee.

Both are sub-contractors having signed a sub-contract agreement and have only been such for a period of a few weeks and are claiming for non-payment of fees following the bankruptcy of my clients main contractor.

I have been instructed to follow the complete procedure despite having told both ETs of the facts with the inevitable increase of cost to my client and the farcical potential waste of public funds in setting up two separate ETs in different locations for identical claims!

The sooner some form of enforceable cost structure for vexatious claims is introduced the better!

Gilbert Moon said...

Fees do not discourage claims from unmeritorious claimants, they discourage claims from impecunious claimants.

Of the hundreds of cases I've dealt with which I felt lacked merit very few of the claimants thought they did.

Chris Sharp said...

Excellent commentary...and many thanks for it.

It is exceedingly perverse that society places such a low value on what is one of our most important relationships.....that between employer and employee.

P Spence said...

This is class war. The vast majority of claimant's are working class: court fee to pursue a wages claim is particularly pernicious.

Also worth noting claimants are going to loss any right to legal aid, limited as it was.

Such changes are likely to radicalise employees and assist trade unions with recruitment.

CAB MAN said...


Henry Scrope said...

Isn't the point about "settlement agreements" rather different? I thought the main point was that the fact that specified types of DISCUSSION about dismissal have taken place will not be admissible in evidence at ET(whether or not followed by a settlement). This is not mentioned in the Press Release (or by Daniel) so maybe I'm wrong? Henry Scrope

David Hartley said...

On just one point in the argument: the comparison between compensation for unfair dismissal and spousal maintenance is probably unhelpful: s.25A Matrimonial Causes Act 1973 requires the court to consider how soon it can terminate the dependence of the payee on the payer (a.k.a. the “clean break” principle). Wouldn’t it make more sense just to stick with the idea that the purpose of compensation is, as in tort, to compensate the victim for the loss occasioned by the wrongdoer’s actions, subject always to the victim’s duty to mitigate? Why shouldn’t the employer pay for the consequences of his wrongdoing?

Anonymous said...

Surely you already have this. If the case is vexatious then the ET can and increasingly does award costs. The level of these is to increase. In reality you can recover your costs in such a case if it is truly vexatios and not just 'without merit' according to your interpretation. If genuine legal argiements at the fringes of the law ate to be discouraged in this way then the law will not develop.

Anonymous said...

It already is in place!!!! If it is truly vexatious or without merit then the ET can award costs.

Anonymous said...

Won't this just lead to unlawful deductions claims being lodged in the Small Claims Court where the fees and costs are lower? Is this what Mr Cable wants?

Anonymous said...

Just how many awards of costs against a vexatious claim have been made this year and how many have been enforced? The issue is not the award of costs, but the guarantee that they will be enforced.

Anonymous said...

Can anybody clarify the legal position of the unemployed litigant who decides to pursue a claim before the ET,are fees applicable,what is the position in relation to this rather sad situation?

Anonymous said...

Vexatious claimants with no money are the cause of so much wasted time and money for businesses in my view. As far as I can see none of these reforms will really address this group of people since claimants with no money will still = no fees to issue and an inability within the rules for a Tribunal Judge to make a meaningful costs award against them. I don't have a magical solution to this problematic class (since I can see the access to justice need) but the government pretending these will make a huge difference is unhelpful both practically and politically I imagine (when we all remain as irritated with the system as we are now in a few years).

John Sharples said...

As a Union rep I find these proposals to be nothing more than an outright attack on workers rights. I do agree that there is a need to review the Tribunal system, and I feel compulsary abritration prior to submission of an ET1 would be a fair step. I have already found that certain employers in my area of operation have instructed business streams not to settle any claims and to leave the claimant to take the issue to Tribunal, clearly in the hope that the fees will prevent the claim from being submitted. This will also put further pressure on Unions because of the cost of supporting their members claims, and will impact mainly on those staff facing discimination in their employment.

CAB advisor said...

Perhaps if more investment was made in educating and training employers and their managers, this would eliminate a whole raft of potential employer foul ups. Why should a claimant have to pay fees to enforce rights as basic as requiring written statement of terms, payslips etc

Anonymous said...

fees will undermine settlements. Employers know what their usually ex-employees earned, and have even leSs reason to settle until after the full £1200 is paid for an unfair dismissal claim.
what mention of the discrimination bedded in charging fees?
a pregnant woman dismissed for pregnancy has to pay £1200 to make her claim.Fee charged automatically unfair??
parallel thinking for race, sex and disability discrimination claims? claims against MoJ in these instances presumably before or in tandem with th e case even coming to the ET.

Anonymous said...

fees will undermine settlements. Employers know what their usually ex-employees earned, and have even leSs reason to settle until after the full £1200 is paid for an unfair dismissal claim.
what mention of the discrimination bedded in charging fees?
a pregnant woman dismissed for pregnancy has to pay £1200 to make her claim.Fee charged automatically unfair??
parallel thinking for race, sex and disability discrimination claims? claims against MoJ in these instances presumably before or in tandem with th e case even coming to the ET.

Pascale said...

As a lawyer who has advised on compromise agreements over the years, whenever I sit doown with an employee who has stated that they have been asked to sign a straightforward compromise agreement and this is just a formality, I more often than not discover that the matter is far from straightforward. If the employee has not received any independent advice whther that be from a lawyer or whoever, then they have no way of knowing whether the proposed settlement is a fair one or not, and from experience this can eat away at someone for years. Sometimes the process of seeing the independent person acts as closure on the matter even if in the end they accept the proposal as originally drafted. As usual there is an assumption that just because it adds time to the process it has no value.

David said...

I found the following comment from your article of interest "It makes justice unaffordable for workers on low incomes"- The global legal system is unaffordable for people on low incomes, And Legal aid, Pro Bono and other methods are just a way of "camouflaging a moral dilemma for those who gain high incomes through a system that would like to say it offers "Justice for all".

Additionally those who think they are being charitable by supporting Legal aid, Pro bono and the like, should consider if someones human right to "seek" justice as they see it, (a right that those with financial means automatically attain under the current legal system) is being taken "away" from them, and put into the hands of someone else?

There is NOT a Justice System (although the term sounds compelling)there is however a legal system that affords great opportunity for seeking Justice as you see it, providing you have the financial means! My point being that there can NEVER be a Justice system when there are commercial barriers to Enter that system!

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