3rd April 2012

Reforms to the Employment Tribunals system

In an effort to promote business growth and encourage smaller employers to take on new employees, the Government has proposed changes to the rules of the Employment Tribunal system. In early October 2011 George Osborne, Chancellor of Exchequer announced the Government’s plan to increase the qualifying period in unfair dismissal claims from one year to two years.

In February 2012 a draft of the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012 was released. The effect of this legislation will impact on all employees who commence employment on or after 6 April 2012. For such employees the qualifying period of continuous employment for unfair dismissal claims will increase from one year to two years. Any employees whose period of continuous employment commenced on or prior to 5 April 2012 will be subject the old one year qualifying period.

There has been mixed reaction to this. The Government hopes that the number of unfair dismissal claims will decrease by approximately 2000 per year and that this will save businesses an estimated £6 million per year. Employees with less two years’ continuous service will be more vulnerable to dismissal without the employer following the appropriate procedure. Some fear that the change will result in a ‘hire and fire’ culture.

The change will no doubt result in an increased number of employees attempting to shoehorn unfair dismissal claims into discrimination or whistleblowing jurisdictions where there is no qualifying service requirement. For diligent employers who make use of probationary periods and dismiss poor performers relatively quickly the change might not make much difference. However, the increase in the qualifying period certainly allows more time within which an employer can assess new employees before deciding whether or not to retain them. The change might also act as an incentive for employers to select employees with less than two years’ service for redundancy ahead of those with longer service whose dismissal would be more costly because of the need to make statutory redundancy payments (but employers will still need to be careful to avoid age discrimination towards younger employees who are more likely to have shorter service).

A further change which came into force on 15 February 2012 is an increase to the maximum employment tribunal deposit order from £500 to £1000. If an employment judge considers that a claim has no reasonable prospect of success, the tribunal rules of procedure allow the judge to order the party concerned to pay a deposit. This is essentially a payment to allow that party to proceed with the case. If the claim is not successful, the deposit is not refunded.

There is a further significant change on the horizon. The Government is currently consulting on proposals to introduce a fee structure into the Employment Tribunal system. The proposals are aimed at encouraging early resolution of workplace disputes and shifting some of the costs associated with the system from the taxpayer to those who use the service.

Bringing a claim is currently free of charge. This is different from the position with ordinary court actions which involve a lodging fee (and further fees at each stage of the procedure). The consultation is seeking opinions on two separate charging options but makes it clear that the concept of fees being introduced is not up for discussion. The first option involves payment of an initial fee at the point when a claim is lodged (the amount of which will depend upon the nature of the claim and would be between £150 and £250). Option 1 would also involve a second charging point shortly in advance of the hearing (again the level of fee would be based on a sliding scale depending upon the nature of the claim from £250 to £1,250). The second option involves one main fee to be paid by the claimant at the time a claim is lodged irrespective of whether the claim progresses to a hearing. This fee would depend upon the nature and value of the claim and could range from £200 to £1,750. The second option would also involve a higher level of fee for those seeking to recover in excess of £30,000. Both options allow for the successful party to recover any fees paid from the unsuccessful party. The consultation period closes on 6 March 2012. Fees will not be introduced before 2013-14 so watch this space.

Jack Boyle
Employment Solicitor

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