Employment Law Changed July 2013: Tribunal Fees, Maximum Compensatory Awards and Settlement Agreements

TRIBUNAL FEES

A fundamental change to the Employment Tribunal system came into force on Monday 29 July 2013 with the introduction of fees, predominantly for the employee as the claiming party.

This has resulted in two tiers of cases with different fees payable by the employee. A simple unlawful deduction of wages claim or breach of contract claim will cost £160 to issue. The more complicated unfair dismissal and discrimination cases will require an issuing fee of £250.

In order for the case to proceed to a hearing, a simple claim will attract a hearing fee of £230, but for complex cases the fee is an eye-watering £950.  

There have been concerns that even if an employee wins their case, they won’t automatically receive these fees back. It will be down to the discretion of the Judge as to whether this fee is paid by the employer on top of their compensatory award.

In addition, other fees are now payable by the party making certain applications such as an application for reconsideration of a judgment following a final hearing.

Fees are also payable by an employer making a counter claim to an employee’s breach of contract claim and a flat fee is payable by an employer where the parties agree to Judicial Mediation. This is a shame as mediation has been a comparatively swift and more economic way of resolving claims. The fear is that employers will be reluctant to pay the fee of £600 as an alternative to defending at a hearing, despite a success rate of over 65%.

Our firm and many employment law firms across the country consider the introduction of these fees to be a significant obstacle to obtaining justice. This is a large amount of money for someone who has been dismissed and is no longer working and earning a wage. The Government has introduced fees to bring down the cost of administering the Employment Tribunal system but there are fears that the management of the complicated fee remission scheme and dealing with payments will not bring down the £74 million bill. In addition, if a claim is lodged without payment or a remission application, this could result in cases going out of time as most employment cases only have a short limitation period of 3 months.

Unison has been granted a judicial review in October to challenge the introduction of these fees but unfortunately it appears that it is unlikely these will be overturned.

MAXIMUM COMPENSATORY AWARDS

Another change on 29 July 2013 which has attracted a lot less publicity is the reduction of the statutory cap to be applied to compensation awards for unfair dismissal. A more complex formula for calculating the cap will apply. The maximum compensatory award is now the lower of £74,200 or 52 weeks' pay. This is 52 times one week's actual gross pay for the employee at the time of dismissal.

The change will apply where the dismissal falls after Monday 29 July 2013.

Exceptions to this are where someone is dismissed for whistle blowing, or for carrying out health and safety activities, or is selected for redundancy for one of those reasons.

This will have a profound effect on employees who still have valuable benefits such as a Final Salary Pension. The loss to their pension would previously have been claimed in addition to any loss of earnings and in many cases would have been the more valuable element. This statutory cap will mean that these employees will not be able to recover fair and adequate compensation, even if they win their case.

SETTLEMENT AGREEMENTS

The other main change that has been introduced on 29 July 2013 is the renaming of Compromise Agreements, which are now called “Settlement Agreements”. Most employment law specialists are of the view that the changes are minor.

Under the new ACAS Code of Practice on Settlement Agreements there is no need to complete or even start internal processes before offering a settlement, and no need for any offers to be put in writing. There is also no need for the employee to be accompanied to any meetings. However, the final Agreement must be recorded in writing in the usual way. One improvement is that employees should be given a reasonable time to consider the offer. The Code suggests 10 calendar days as a reasonable amount of time.

Apart from this, all usual conditions of a Compromise Agreement will need to be satisfied in that the employee is entitled to independent legal advice and the substance of the Agreement will be similar to a Compromise Agreement. The new ACAS Settlement Agreement Guide has now been published and provides more detailed guidance and practical advice including template letters as well as a model Settlement Agreement.

However, most employers and lawyers believe that the Government missed a trick here as this replicates the contents of the Compromise Agreement rather than removing a lot of the unnecessarily complicated legal jargon to make Settlement Agreements more user friendly.

The only real change with the introduction of Settlement Agreements is that conversations will be protected and not admissible in Employment Tribunal proceedings relating to ordinary unfair dismissal. Previously the ability to talk “without prejudice” or “off the record” had only existed where there was a serious dispute between the parties. This did not include situations where an employee has raised a grievance or indeed where there were capability or performance proceedings in place.

However, even if there is only an ordinary unfair dismissal claim these conversations can be produced if there has been “improper behaviour”.

This means that if a claim arises due to bullying or alleged discrimination, and let’s face it, “protected characteristics” such as age and sex relate to everyone, then these conversations may be brought before a Tribunal.

In an attempt to be the employer’s friend, the Government have introduced additional employment law changes which are ill thought-out, unfair to employees, and have the effect of confusing employers so that unfair dismissal claims may in fact increase.

More work for the employment lawyers then! At a difficult economic time, when employment relations should be as harmonious as possible, it is a shame that the Government are encouraging employers to take shortcuts rather than to promote best practice and fair treatment of their employees.
 

Fiona Martin
Director and Head of Employment Law, martin searle solicitors
www.ms-solicitors.co.uk

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