This week, the government brought in big changes to employment law. Jonathan Bruck provides a comprehensive overview of the changes and looks at how this will affect charities.  

The government introduced a number of significant employment law changes from 29 July 2013.  Although they appear to have only attracted moderate publicity, they may well have a very profound impact on employers, particularly those in the charity sector.

All the changes are part of the government’s drive to reduce the burden of employment laws (and Employment Tribunal litigation) on employers. The government believes that the changes will be most welcomed by smaller employers. That includes charities, for whom Employment Tribunal claims can be particularly disruptive and damaging.

Reduced cap on unfair dismissal compensation

The government has reduced the cap on any compensation awards for successful unfair dismissal claims.  Prior to 29 July, a successful claim for unfair dismissal could result in an award (largely based on the claimant’s net losses resulting from the dismissal) for an amount up to £74,200.  That cap applied to all claimants, regardless of their salary levels.

In reality though, most unfair dismissal compensatory awards fell well below that cap.  Employment Tribunal statistics over the past few years show that, on average, successful claimants received surprisingly low awards, being no more than a few thousand pounds.

The government felt that a flat £74,200 cap on compensation (applying to all claimants regardless of salary), raised false expectations that claimants would receive high awards. It is for this reason that the he government has therefore brought the cap down to the lower of £74,300 or one year’s gross pay.

In my view, this is unlikely, on its own, to reduce the number of Employment Tribunal claims that charity employers will receive.  However, it does create more certainty, particularly for lower paid staff, as to what an Employment Tribunal might reasonably award, which in turn might moderate claimant’s early demands during settlement negotiations.

Tribunal Fees

More significant, is likely to be the introduction of fees that claimants need to pay before/during Employment Tribunal proceedings.  From 29 July 2013, any claimant who issues Employment Tribunal proceedings would need to pay an initial fee of either £160 or £250 (depending on the claim).  A further fee would then be charged prior to a final hearing of up to £950.  Prior to 29 July, no fees were payable by claimants within the Employment Tribunal system.

The government hopes that the introduction of fees will reduce the number of Tribunal claims. It is very likely that it will have the desired effect. Specifically, fees are likely to deter claimants with weaker claims. Before the 29 July, with no costs pressures, such claimants may have felt nothing to lose, by trying their luck at the Employment Tribunal.

Exemptions do allow claimants, who receive certain social security benefits and have low savings levels (all prescribed) to avoid paying the fees. However, the vast majority of claimants will not be covered by those exemptions.
   
Trade unions have strongly objected to the introduction of Tribunal fees.  Unison in particular have taken a stand by bringing legal action against the government, designed to prevent/reverse the policy. The courts will decide on those proceedings in October. In the meantime, charity employers should assume that the changes are here to stay.   

Settlement discussions

The last of the main changes from 29 July is the formal introduction of “settlement discussions”. The government have introduced a right for employers to have to have “off the record” conversations with employees about terminating their employment, without risk of those discussions being referred to in any Employment Tribunal proceedings for unfair dismissal.

Currently, the law only allows such discussions to be inadmissible in such Tribunal proceedings if there is a dispute in existence between parties at the time of the discussions. The new law removes that requirement.

However, such conversations are still likely to be admissible in discrimination claims. Furthermore, there are limited exceptions that allow such conversations to be admissible in unfair dismissal claims. The new changes are likely though, to provide employer charities with a small amount of extra comfort when having “frank” workplace discussions with certain staff.

In conclusion, dedicating time and legal costs to fighting weak Employment Tribunal claims can be frustrating for charity employers – a drain on charities funds that could be more usefully devoted to achieving  charitable goals. The 29 July employment law changes should hopefully reduce the number of such claims and/or increase the number of such claims that settle early. It is therefore likely to be welcomed by most charity employers.

That said, the 29 July changes do not alter the fact that employment law remains a minefield. All charity employers must of course continue to be mindful and take proper advice whenever necessary to avoid falling foul of the law.

Jonathan Bruck is a senior solicitor in the employment team at IBB Solicitors