The UK’s coalition government is to take a radical look at the existing processes for protecting employment rights. The latest proposals look to place more emphasis on mediation in the workplace to resolve disputes. There will be information, support and incentives to encourage both sides to reach a solution rather than resort to employment tribunals.

The last annual figures show that there were more than 250,000 employment tribunal claims.

In April 2009 LCN published an article reporting the demise of the unloved Statutory Procedures and their replacement in April that year with the new ACAS Code of Practice on Discipline and Grievances, which provided less prescriptive guidance on those subjects.

The new Code was based on the work of the Michael Gibbons Review set up by the Labour government to simplify the resolution of workplace disputes.

Since its general election victory in May 2010, the coalition government has wanted to build on those changes and now proposes a comprehensive overhaul of the whole system. It recognises that most businesses, particularly SMEs, see the existing complex stock of employment regulation and the almost constant flow of new regulations as a hindrance to both economic survival and growth. They also believe that the tribunal system is biased against employers.

The coalition’s proposed measures focus on mediation, early conciliation, the tackling of weaker cases, encouraging settlements and on shortening tribunal hearings.

The use of mediation as a way of resolving disputes before employment has ended has been advanced enthusiastically before, but despite its obvious attractions such efforts have met with a minimal response from either employees or employers.

However, the consultation on these proposals will seek to determine why the response has been so poor and will look again at the use of various agencies, including the voluntary sector, and at more widespread use of compromise agreements.

The proposals regarding early conciliation where relationships have broken down are far more radical. In future all potential employment tribunal claims will first have to be presented to ACAS so that both parties better understand the demands that the tribunal process will place on them.

This development of the new pre-claim conciliation (PCC) service provided by ACAS will seek to ensure that claimants understand the likelihood of success of their claim, the possible value of any award and the length of time the tribuanal process might take.

At the same time, the employer will be advised of the potential outcomes of the tribunal process so that they can make an informed decision.

It is often the case that both parties will harbour unrealistically optimistic views of their prospects before a tribunal and the PCC service has had a very promising start.

Claimants will submit a shortened version of the current ET1 form to ACAS, not to an employment tribunal, and the proposals anticipate that ACAS will have one month to gain agreement.

If agreement is reached, the normal COT3 settlement form will be raised concluding the process.

However, if agreement is not reached, the claimant will then be able to proceed to an employment tribunal.

The current process of post-claim conciliation by ACAS may well be dropped but clearly the demands of this process will have a significant impact on the resourcing of ACAS.

Many employers believe that weak cases place an unjustifiable burden on them but will settle to buy off the claimant when faced with the substantial costs of a tribunal hearing (Gibbons’ estimate was £9,000 on average) and the demands on management time. However employers often see this as a form of “blackmail” and settling only encourages unjustifiable claims.

Tribunals already have the power to strike out those claims where there is “no reasonable prospect of success” or to require the parties to attend a short pre-hearing review (PHR). Those powers are too rarely used and the proposals want to make these powers more flexible and robust while still recognising the need for procedural safeguards on what is necessarily a draconian measure.

In future in weak cases an employer would be allowed to submit a shortened ET3 response form suggesting insufficient information has been provided to justify the claim proceeding and that they should either be provided with either further information or the ET should strike out the claim.

If that information were provided, the employer would then complete a full ET3, but otherwise if the case were struck out, the claimant would have the opportunity apply for the order to be set aside or stayed to demonstrate why the case should proceed.

Pre-hearing review

Employment judges already have the power to seek a deposit from a claimant whose case appears to be weak but that power can only be exercised at a pre-hearing review.

The proposals suggest that judges should have that power without necessarily holding a PHR, subject to the development of better criteria for imposing such a deposit. They also suggest increasing the present deposit maximum from £500 to £1,000 – any such deposit may be used to award costs to the employer if a very weak case has been taken to full hearing.

It is worth emphasising that the proposals are not seeking to introduce costs-recovery for tribunal actions in the normal way of other civil litigation but to strengthen the disincentive to pursue weak claims and to actively discourage other exceptional abuses of process.

One of the proposals’ main objectives is to encourage parties to settle before a tribunal hearing and in addition to extend ACAS involvement through the enhanced PCC service. Subsequent applications to an ET will have to provide significantly more information, including a schedule of loss for any compensation sought. This means that employers have better and earlier information to allow them to make more a informed decision as to how and if to proceed.

If either party seeks to settle the claim, and that offer is rejected, they will be able to register that offer with the employment tribunal office.

Should the tribunal subsequently make a less favourable award, there will be an additional mechanism for recognising the additional costs incurred, probably by using the existing remedy of an increase or decrease in the amount of any financial compensation.

If the case were lost and there was no award, and a reasonable offer of settlement had been made, then the tribunal would then consider whether an award of costs against the claimant would be appropriate.

The settlement offer will be registered with the employment tribunal office but not paid in. Its existence will not be made known to the tribunal that hears the case until after it has made a decision.

Offers to settle during the ACAS discussions would not form part of this process, thereby maintaining the confidentiality and integrity of the ACAS conciliation process, until one of the parties sought to make an offer under the new rule, lodging it with a tribunal office.

The other thrust of the proposals is an attempt to shorten tribunal hearings, to reduce the costs involved but without threatening the fairness of the procedure. Written witness statements have to be exchanged before a tribunal hearing and in future they will be “taken as read” at the hearing and the witness would no longer have to read them out. This would leave only cross-examination of the witnesses, significantly shortening the time needed and bringing tribunal practice into line with other civil courts.

Currently in some cases parties and their witnesses can claim expenses from the tribunal for their attendance. These expenses will be withdrawn to discourage unnecessary witnesses. For many of the more technical legal claims, employment judges sit on their own without lay members, and in future judges will sit alone on many unfair dismissal cases, using lay members only when their experience of industry and commerce will be of value when questions of fact rather than law are of importance, or when the parties clearly express a wish for a full panel.

One final element is that much of the general interlocutory work currently undertaken by judges, such as postponements, adjournments and document exchange, could be delegated to suitably qualified legal officers.

This would leave the judges more time to hear claims and such appointments will be made in due course.

Payment of fees

The Ministry of Justice budget settlement imposed a reduction of 23% over the next four years, and the tribunal service will not be immune to the effects of those £2bn savings. Without as yet establishing the detail, the proposals make clear that it is anticipated that tribunal users, both claimants and the parties at full hearings, will be required to contribute by the payment of fees.

Employers that are found to have breached an employee’s rights will face an additional penalty of 50% of the award (with a maximum of £5,000). This will be payable to the Exchequer not the claimant and the penalty will be reduced by 50% if it is paid within 21 days.

To end on a more cheerful note, the news that many employers will find especially encouraging is that the eligibility period for claims of unfair dismissal will increase from one to two years, giving more than enough time to determine those new employees who will make a real contribution to the business.

Other good news for employers is the announcement in February that the Employment Law Review will include a root and branch review of the current sickness absence system looking at its impact and costs particularly for SMEs.