Department for Business, Innovation and Skills
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Workplace dispute reforms proposed by Government

Workplace dispute reforms proposed by Government

News Release issued by the COI News Distribution Service on 27 January 2011

The Government has today announced the next steps in its comprehensive review of employment laws.

New plans to improve the way in which workplace disputes are resolved have been published alongside an “Employer’s Charter” – the measures are designed to give businesses more confidence to take on workers and support growth.

Tribunal claims rose to 236,000 last year – a record figure and a rise of 56 per cent on 2009 – and business has to spend almost £4,000 on average to defend itself against a claim. Concerns have been raised by businesses that the system has become too costly, takes too much time, places unnecessary strains on small businesses and that it is too easy to make unmerited or vexatious claims.

Prime Minister David Cameron said:

"A critical element of the Government's growth strategy is to create the conditions which allow businesses, especially smaller businesses, to flourish and expand, by reducing regulation and maintaining a flexible and dynamic labour market.

“Today's announcements on reforms to employment law are among the first conclusions of our government-wide growth review, and highlight our determination to ensure that employment law is no longer seen as a barrier to growth, while making sure that employees and employers are treated fairly.

“Giving businesses the confidence to take on somebody new will be a real boost to the economy, and help generate the sustainable growth we need."

Business Secretary Vince Cable said:

“Disputes in the workplace cost time and money, can affect morale, reduce productivity and hold back businesses. We often hear that knife-edge decisions about whether to hire new staff can be swung by concerns about ending up in an employment tribunal if things don’t work out. Today’s proposals address these concerns and should help give employers more confidence.”

“But let’s be clear – resolving disputes earlier is also in the interests of workers. No one wants to spend month after month worrying about a claim – we need to make what can be an extremely stressful time in people’s lives as short as possible.”

“In the business world there is also a common misconception that employment protections are all one-way - towards the employee. The Charter we are publishing today tackles this myth by setting out clearly some of the most important rights that employers already have in the workplace.”

The Government wants to enable workplace disputes to be resolved as early and as easily as possible. The key proposals set out in a consultation published today are:

Giving businesses greater confidence to hire new staff by increasing the qualifying period for employees to be able to bring a claim for unfair dismissal from one to two years - this will also ultimately reduce the number of disputes that go to Employment Tribunals;

Encouraging parties to resolve disputes between themselves as early as possible – requiring all claims to be lodged with Acas (Advisory, Conciliation and Arbitration Service) in the first instance to allow pre-claim conciliation to be offered. This also includes introducing settlement offers to encourage parties to make reasonable offers of settlement to avoid Tribunal hearings and encouraging parties to consider other forms of early dispute resolution such as mediation;

Speeding up the tribunal process – extending the jurisdictions wherejudges would sit alone to include unfair dismissal, introducing the use of legal officers to deal with certain case management functions and taking witness statements as read. This will result in Employment Tribunal resources being used more efficiently and allow cases to be listed and heard more quickly, saving time and cost; and

Tackling weak and vexatious claims – providing the Employment Tribunals with a range of more flexible case management powers so that weaker cases can be dealt with in a way that does not mean disproportionate costs for employers.

There is also a commitment for the Ministry of Justice to consult separately on introducing fees for Employment Tribunal cases and appeals, to ensure that users contribute towards the cost of running the system.

Justice Secretary Kenneth Clarke said:

"It's in everyone's interests - employers, employees and taxpayers - to have a dispute resolution system that is efficient, simple to use and supports the employment relationship.

"We have heard clear calls from users for reform to the Employment Tribunal system, particularly the need to ensure robust powers and procedures are in place to deal with claims more efficiently, more effectively and - importantly - more proportionately.

"So I will be working closely with colleagues across Government to get this package of proposals implemented as quickly as possible, and I will also be consulting separately later in the year on the detail of introducing fees for Employment Tribunal cases, to ensure that people who use the system contribute towards its cost."

The consultation document also includes proposals to:

Increase the provision of information – aimed at reducing speculative claims, this would require more information on the nature of the claim being made and to include a statement of loss. It will help parties to decide whether to agree a settlement offer or proceed to a Tribunal hearing;

Withdraw the payment of expenses - encouraging parties to either settle earlier or reduce the number of witnesses they call; and,

Introduce financial penalties for employers found to have breached rights – aimed at encouraging greater compliance from employers and thus a reduction in the number of Tribunal cases.

The intention of the Charter is to raise awareness and give clarity amongst employers on what they can and can’t do when managing their staff and covers a wide range of employment law issues.

The employment law review is taking a comprehensive look at employment legislation across government. In the next few months, we will consider the requirements on employers when they take on staff to ensure that it is as simple and straightforward as possible. As part of this, we intend to publish a model contract for employers shortly.

Notes to editors:

The joint BIS and Tribunals Service consultation document can be found here - http://www.bis.gov.uk/assets/biscore/employment-matters/docs/r/11-511-resolving-workplace-disputes-consultation and will run from the 27 January to 20 April 2011. The Employer’s Charter can be found here - www.businesslink.gov.uk/employerscharter. The Ministry of Justice propose to consult on how best to implement a fees mechanism in the spring of 2011.Currently only a small number of workplace disputes result in a potential claim contact via Acas. Of those that are referred into pre-claim conciliation (PCC), less than 30% go on to become Tribunal claims. Effectively extending PCC to all potential claimants could offer significant savings to employers through early resolution, and by identifying speculative, weak and vexatious claims.Under proposals in the consultation a judge will be able to issue a deposit order at any stage of the proceedings and will make the deposit order test more flexible.Formalising offers to settle will develop a process for allowing offers of settlement to be lodged with the Employment Tribunal if they are rejected by the party. In the event that the Employment Tribunal subsequently makes a less favourable award, then there is a mechanism for recognising the additional costs incurred by the other party in proceeding to hearing. This is similar to the system that operates in the civil courts (under part 36 of the Civil Procedural Rules), but the differences in the way Employment Tribunals operate present some challenges, including attaching a financial value to the non-financial elements of a remedy (such as an apology or a reference).Initial estimates show that increasing qualification periods for unfair dismissal from one to two years would result in 3,700 to 4,700 fewer Employment Tribunal cases per year. The proposal would not affect the so-called "day one" rights against unfair dismissal, such as on grounds of discrimination.BIS has estimated that employers face average costs of £3,800 per case with an average additional cost to the taxpayer of £1,900. Alongside other proposed changes to the Employment Tribunal system, the Government is also taking the opportunity to consider some changes to the way in which certain Employment Tribunal awards and other payments under employment rights legislation are revised each year. Included in the consultation are proposals for witness statements will also be taken as read.Upon taking office, the Government started a fundamental review of employment law so that it properly balances the needs of employers and employees, and provides the competitive environment required for businesses to thrive.A key part of the Government’s growth strategy is to create the right conditions that allow businesses, particularly small and medium enterprises, to grow and expand by reducing regulation and maintaining a flexible and dynamic labour market. The Growth Review will report by Budget 2011 http://www.bis.gov.uk/growth.BIS' online newsroom contains the latest press notices, speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.

Contacts:

Betty Nwosu
Phone: 020 7261 8849
betty.nwosu@coi.gsi.gov.uk

Henry Tanner
Phone: 020 7215 5947
henry.tanner@bis.gsi.gov.uk

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