The Government started the consultation process for reforming employment claims on 27 January. It published an 89-page consultation document setting out its proposals.

The key proposals in the consultation paper are:

  • increase the length of service requirement for basic unfair dismissal claims from one year to two years. The Government acknowledges this would only reduce the current tribunal workload by a very small percentage;
  • the compulsory referral of claims to ACAS for a one-month period before claims can be filed with the tribunal;
  • employers to face punitive fines, payable to the Exchequer, if a tribunal finds against them. The fine would be 50 per cent of the compensation awarded, with the fine no less than £100 and no more than £5,000. Like many parking tickets, the fine would be reduced by 50 per cent if paid early;
  • a formal process for registering settlement offers with the tribunal. If the offer is not accepted it may lead to an adjustment to compensation awards or may be used in support of a costs application if the claimant loses. Surprisingly the Government predicts that the number of times a claimant will lose after a formal offer is made is small;
  • expansion of the power of judges to strike out a claim if it has no reasonable prospect of success. Hearings will not always be required in order to strike out a claim; and
  • expansion of the power of judges to require claimants to pay a deposit in order to proceed with their claim if the judge finds it has little reasonable prospect of success. The Government proposes doubling the deposit to £1,000.

There are further proposals relating to witness statements, costs orders, schedules of loss, reimbursement of expenses and various procedural issues.

The Government is also seeking information on the use of mediation and compromise agreements with possible further proposals to follow.

Despite the media publicity, the Government has not yet made any proposals about the payment of a fee to the tribunal before a claim can be brought. However, this hasn't been abandoned and they will revisit it in the spring, with a separate consultation to follow.

This consultation process will close on 20 April 2011.

It was a mixed day for employers. On the good side, the increased power to strike out claims may lead to employers wasting less time dealing with spurious claims. The pre-claim involvement of ACAS and the formal settlement offer process may both lead to sensible resolution of claims. Increasing the service requirement for unfair dismissal will give employers more time to assess new employees (although it may lead to an increase in claims where there is no service requirement). On the bad side, the proposal to impose fines on employers on top of any compensation payable simply increases the financial exposure of employers and may make them more inclined to settle at a higher amount, irrespective of the merits of the claim.

The much awaited "Employer's Charter" was also published and is a disappointment. It is just a short list of bullet points of what employers are entitled to do. The list includes, for example, an entitlement to:

  • make an employee redundant if your business takes a downward turn; and
  • ask an employee to take their annual leave at a time that suits your business.

It also contains the double disclaimers "as long as you act fairly and reasonably" and "individual circumstances may vary and employers should act in accordance with their legal obligations". We do not see employers being able to make any use of this charter.

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