Judicial Review on Unfair Dismissal Cap Dismissed

On 29 July 2013 the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2014 came into effect. 

The upshot of this Order is that the compensatory award in unfair dismissal proceedings will now be limited to 1 year’s gross salary (or to the statutory cap on compensation, £76,574 (as of 6^th April 2014), whichever is the lesser amount). 

At the end of 2012 the London-based employment law firm Compromise Agreements lodged a Judicial Review Application for this Order to be reconsidered.

The founder of the firm, Mr Alex Monaco of Counsel, asserted that the new cap on compensation would disproportionately affect older people as they were, previously, most likely to receive more than a year’s salary in compensation due to increased difficulty in finding another job and thereby mitigating their loss.    

However, on Tuesday 13^th May 2014, the High Court dismissed the Judicial Review Application at a Permission Hearing.

In a recent statement Mr Monaco stated that he is currently “looking at options and looking at appealing [the decision]”. 

As a firm, we are of the collective opinion that the new cap is yet a further example of the current government’s deliberate erosion of fundamental employment rights.

In other news the Trade Union, Unison, is also currently challenging a High Court ruling (made back in February 2014) which rejected a request for a Judicial Review of the Government’s decision to introduce Tribunal fees, (fees which also came into effect on 29 July 2013.)

Recent statistics show that, since the introduction of Tribunal fees, the number of employment law claims has dropped sharply, with a 79% fall in the final quarter of last year compared with the same period in 2012. 

A recent written answer in the House of Commons has also revealed that only 24% of remission applications (i.e. applications for reduced fees) made between the introduction of Tribunal fees on 29th July and 31st December 2012 were granted (in full or in part). To place this in context, these figures evidence that remission has been granted in only 5.5% of the 9,305 single claims and 1,519 multiple claims that were issued in the same period. This is significantly lower than the Ministry of Justice’s initial prediction, prior to the onset of fees, when they stated that around 69% of Claimants would qualify for remission, either in full or in part.

Chris Ridley - Solicitor

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Changes to the TUPE Regulations

The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014, or “CRATUPEAR” for short, came into force on 31^st January 2014. The current government asserted that the TUPE Regulations 2006 (“TUPE Regulations”) provided transferred employees with more protection than was expressly required under the Acquired Rights Directive (“ARD”). The aim of CRATUPEAR was therefore to amend the TUPE Regulations to remove this so called ‘gold-plating’.

Upon close analysis of the changes implemented by CRATUPEAR it is our view that the pendulum has shifted in the employer’s direction to such an extent that certain provisions of the new TUPE Regulations are no longer compatible with the ARD. One such example is the new provision that permits a transferee to vary the terms of a transferred employee’s contract if there is a term in the contract that permits variations (even if the reason for the variation is solely or principally related to the transfer itself). We would argue that this is in contravention of the ruling of the CJEU in Daddys Dance Hall [1988 IRLR 315}  that held that a transferee could “alter the terms of the contract in all ways permitted by national law.................. provided that the transfer of business itself did not constitute the reason for the alteration.”

Domestic courts are required to implement domestic legislation in a way that is compatible with EU Law. If a domestic court determines that domestic legislation is incompatible with an EU Directive or a ruling of the CJEU, it is obliged to construe the legislation in a way that is compatible with EU Law; if necessary by inserting words into the legislation (Litster and others v Forth Dry Dock & Engineering Co Ltd and another [1989] IRLR 161). If a domestic court is unable to construe the legislation in a way that is compatible with EU Law then it is required to remove any contrary provisions from the legislation which renders it inconsistent (Kucukdeveci v Swedex & Co KG [2010] IRLR 346).

If our courts share our opinion that some of the provisions enacted by CRATUPEAR are not compatible with the ARD it will be up to them to construe such provisions, or alternatively remove words from them, to render the provisions compatible with the ARD. The result is an increase in uncertainty in the legislation surrounding TUPE. It would seem that (not for the first time) the government has proceeded with unnecessary (and frankly ideological) changes to our legislation. The only certainty is that there will undoubtedly be an increase in litigation in the area as a result of these botched changes. Employee protection is further reduced; but employers, too, will justifiably complain that they are less sure where they stand legally.  The acronym itself, CRATUPEAR, is telling of the inadequate amount of thought put into this piece of legislation.

Tony Rippon - Legal Assistant

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Employment Tribunal Fees – the employer pays?

Whilst Unison’s judicial review application in the High Court about the introduction of ET and EAT fees was unsuccessful (for now) the Judgment in that case has shed light on the likelihood of repayment of ET fees to a winning Claimant.

You’ll no doubt appreciate that Claimants now need to pay ET fees to issue a claim and get a hearing (an individual may have to pay as much as £250 to issue and £950 for a hearing, the fees in ‘multiple’ group claims can be as high as £5,700 to issue and a further £5,700 for a hearing).

The ET Rules are brief on the point of repayment – they simply confirm that a Tribunal ‘may make’ an order requiring the employer to repay the ET fee where the Claimant’s case succeeds, ‘in whole or in part’. Note the ET fee is never repaid by the Tribunal.

This brevity has been cause for enormous concern about the fairness of the new fee regime and the serious risk posed by it in terms of lack of access to justice. This is because not only are the ET fees very high, and so likely to deter would-be Claimants who need access to justice, but if winning Claimants are unlikely to recover the ET fee why would they bother going to Tribunal in the first place?

In the High Court, Unison managed to eke some clarity out of HM Government – the Government ‘relented’ confirming, I imagine with great reluctance, that ‘the general position is that, if you are successful, the respondent will be ordered to reimburse you’ (my emphasis) with amended Guidance to be published (which I can’t yet find on the Ministry of Justice website) and ‘consideration’ being given to amendment of the ET Rules. A good sign - no doubt a clarification only given because of the very fact of the legal challenge in the High Court.

Very helpfully the Employment Appeal Tribunal has since stepped into the fray in the recent case of Portnykh v Nomura International plc [UKEAT/0448/13/LA]; whilst this concerned the possibility of repayment of an EAT fee, the ET and EAT Rules concerning repayment of fees are very similar. In this case, the EAT ordered the losing employer to repay the fee to the winning Claimant, identifying that the Rules give the EAT ‘the widest of discretions’ on fees and that ‘a broad view’ should be taken. The EAT pointed out that some factors weighed in the Claimant’s favour: the Claimant’s sometimes unhelpful and uncooperative conduct did ‘not make any significant difference to the conduct’ of the proceedings, the employer had the means to pay and ‘substantially lost’ the case.

So, where a Claimant behaves reasonably in the proceedings, the employer has money to pay and, most importantly, the Claimant wins in whole or in part, the omens look good for the Tribunal to require that the ET fee should be repaid by the employer.

David Sorensen - Partner

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Christmas comes early for the CBI and the payday loan companies?

This time two years ago, the Confederation of British Industry cheered on the government’s proposals to bring in fees for using Employment Tribunals whilst arguing that this would only weed out “more of the weak and vexatious claims” and “shouldn’t be a barrier to justice”.

As you know, ET fees came into effect on 29th July and the vast majority of employees do not qualify for “remission” (where the fee is waived or reduced) meaning they will have to pay the full fees. This means a low paid worker who has say £250 withheld from their last pay packet, has to pay £390[1] in fees to recover the £250 without any guarantee that the £390 in fees will be recovered. An unfair dismissal claim costs £1,200 in all[2] and again there can be no guarantee this will be repaid if the employee wins. It goes without saying that a worker who’s owed money or an employee who’s just been dismissed is not going to be in the best position to fork out hundreds of pounds to bring a claim and with typically only a 3 month time limit within which to issue, they need to find the money fast (the pay day loan companies will no doubt be happy).

Even if the ET orders that the employee is repaid the ET fees if he or she wins some months later, there’s a real risk the employer will not pay up – the latest government report[3] shows that 51% of successful employees either received only part of the awarded compensation (16%) or none of it (35%).

If that was not bad enough, the latest government statistics on the number of ET claims issued since ET fees were introduced in July, currently show a 75% fall in claims in comparison to last year – for example, in September 2012 there were 3,078 ET claims issued, in September this year 681[4].

The next few months will tell us whether this is a temporary blip or a sign of a permanent fall – this is because many ET claims were issued in the run up to ET fees being introduced and, for example, an employee who was dismissed on say 28th July (and who would normally have had until 27th October before limitation expired) may have issued the fee that day so as to avoid paying a fee the day after. That would mean that there was a bunching of claims in July and a gap before new claims began to be issued from September onwards. However, if the October – January statistics, when published, show similar levels to September 2013 we have a real barrier to justice and no-one in their right mind can argue that the missing 75% is simply made up of weak and vexatious claims.

I’ve no doubt that the CBI may be happy with that but in my view it will be society as a whole that suffers.
[1] £160 to issue and £230 to go to a hearing.
[2] £250 to issue and £950 to go to a hearing.
[3] The Payment of Tribunal Awards 2013 Study
[4] Ministry of Justice 'provisional management information'

David Sorensen - Partner

For further information on Employment Rights, please visit our website or call 0033 3344 9603 and ask to speak with our Employment Rights team.

Employment Tribunal Statistics

In this month’s blog we focus on the recent report from the Ministry of Justice, published on 18^th October 2013, into the number of claims that Employment Tribunals received between January and September 2013.

This report makes interesting reading as it covers the period in which the controversial Employment Tribunal fee system was introduced, with effect from 29^th July 2013. 

It therefore provides the first real illustration of the impact that fees have had on access to justice.

At first glance the effect that Employment Tribunal fees have had on the number of claims issued does not appear to be too significant, as between January and May 2013 an average of 17,000 claims were lodged.  This is in line with the historical monthly average.

Upon closer analysis of the statistics it becomes apparent that there were 25,000 new claims issued in June 2013 and a further 17,000 in July 2013.  We speak from experience when we say that the sharp increase in June 2013 is likely to be explained by the ‘cluster’ effect as Claimant solicitors elected to issue as many claims as possible before 29^th July in order to avoid being caught by the fee system. 

Alarmingly, the report evidences that following this surge there were only 7,000 new claims issued in August 2013. 

In September 2013, there were 14,000, which despite being a marked increase from August, is still significantly lower than the historical monthly average.   

It should be noted that this report has not yet been through the Quality Assurance process and therefore is not yet classed as an Official Tribunal Statistics publication, although revised statistics are set to be released on 12 December 2013. 

We hear anecdotally that the Leeds Employment Tribunal were not able to process many of the claims it had received before 29 July 2013 until well into August 2013.  Assuming that this trend applies to all of the Employment Tribunals across England, Scotland and Wales the increase of receipts in July 2013 is likely to be higher than is cited in the report, and further, the figure for the number of receipts received in August 2013 may also be inaccurate.  

Additionally, it should be noted that since the introduction of fees there is an increased time lag in claims being entered into the Employment Tribunal’s case management system, which is likely to render both the August and September figures inaccurate.

Nevertheless, we consider that the clear fall in the number of claims issued is very concerning.  We have predicted for months that the fee regime would deter genuine claimants – it seems like that is exactly what is happening.  Our own experience is that clients are less likely to pursue claims, now, given the risk of paying out substantial monies with no guarantee of recovery.

 

Christopher Ridley - Solicitor

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

Employee Shareholders

From 1^st September new rules are in force to permit the establishment of a novel category of employee: “the Employee Shareholder”.

 

I read today in one on-line piece that these new contracts will bring new talent flooding into the UK, as entrepreneurial employees the world over rush to take advantage of a scheme that robs them of their essential employment rights in exchange for some pretty unclear financial incentives.

 

It would be fair to say that we at Morrish are pretty sceptical about the new rules.

 

At heart this is a measure further to reduce worker protection.  We have been blogging for many months about the unprecedented rate and extent of changes that have been wrought to employment rights in the last year or two.  Readers will not be surprised to hear that we remain concerned that, once again, the rights of workers are being sacrificed at the altar of “business flexibility”.

 

But leaving aside questions about the relative bargaining power of the parties to the contract of service, we have real doubts about whether – for most employers and employees – there is going to be any practical call for these new Employee Shareholder contracts.

 

Employee Shareholder status is conditional on the employer providing a written statement setting out the employee’s rights and obligations – and on the employee receiving independent legal advice about those rights and obligations.

 

There are a host of issues to be considered.  How will the shares be valued?  What type of shares will they be (some companies have lots of different classes of shares, with different voting rights associated with each)?  What provisions exist for sale of the shares?  What if the company goes bust?  Will the employee have to enter into a Shareholder Agreement?  What will govern the relationship between majority shareholders and minority classes?  What provisions exist in the Articles of the company in relation to shareholder rights?

 

It seems to us that any advisor worth his salt is going to take more than a few hours to look at all the relevant documents and to ensure that the potential Employee Shareholder is given proper advice about their future rights.  That is going to cost a not insignificant sum of money.  Will the employer pay?

 

And what is the employer’s interest?  Principally, he benefits by avoiding claims for unfair dismissal and redundancy. 

 

But since last year, the qualifying time limit for unfair dismissal has been extended to 2 years – and by coincidence the redundancy payment regime only applies to employees with more than 2 years’ service.

 

Are many employers really going to want to part with shares, to grant possible rights to future employees, to pay potentially significant legal costs both to their own lawyers and the lawyer advising the employee – all for protection from a pair of rights that won’t apply to the employee until 24 months have passed, in any event?

 

We’ll see.  Given that none or almost none of the respondents to the Government’s consultation on the topic thought that Employee Shareholder status was a good idea – and the negative responses were both from employee and employer groups – we tend to think that this may end up being a flash in the pan.  And a good thing too.

 

Paul Scholey - Senior Partner

 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

An extraordinary day in the life of an Employment Lawyer – 29th July 2013

We blogged last month about the legal changes that were expected, but now they have arrived. The 29^th July has brought change – fundamental change. It has also brought with it... mayhem!

Last Monday, for the first time ever, Claimants now have to pay a fee to lodge their claim. A Claimant will pay £160 for a “type A” claim and £250 for a “type B” claim. Hearing fees for those claims are £230 and £950 respectively. Type A claims are meant to be the easier ones, type B the more difficult sort. But which claims are which? Good question – as of this past Monday, we didn’t have a final copy of the Fees Order – it was only in draft form. The final draft didn’t arrive until one day after implementation!

We also had an email from the Ministry of Justice who wrote to us to clarify that, astonishingly, Equal Pay claims, which can be some of the most complex litigation in employment law, are still type A claims – the simpler ones! However, ministers are expected to announce a change to that position shortly. So if anyone has a claim for equal pay they would be wise to issue it now whilst it’s at the cheaper rate. This could add to the surge of claims already issued before Monday by Claimants trying to avoid paying a fee altogether (although that could not be done on-line because the system was down).   We hear that over 500 claims were lodged in the Leeds Employment Tribunal alone on Friday! I think we can expect to wait many weeks for any of the Tribunals to acknowledge our claims. Claimants – expect delays.

Equal pay claims aren’t the only anomaly. A claim for a Protective Award for failing to consult about redundancies is a type B claim, yet the same claim for failure to consult under TUPE (when employees transfer to another employer) is a type A claim! In addition, the guidance suggests that TUPE failure to consult claims and working time claims fall within Band B whereas the fee Order clearly still lists them within Band A. Let’s hope for some clarity on the fee types as soon as possible.

And then we have brand new Claim Forms. We also have a brand new remission scheme, so that people can apply to pay no fee at all or only part of the fee. After road-testing these forms, whilst they look at first ok, we see there are real problems. First of all, it’s not easy for a Claimant to find their form on the Tribunal’s website. You then only have 20 minutes on each page when completing online, otherwise you lose your data. The fee type seems to (wrongly) set itself after only a few questions. It has crashed several times during our tests. There is no way of attaching documents such as additional particulars of claim and there is no way of saving the completed form – you have to print it for your records!

The PDf version of the form is no better. It can’t be saved without a ‘signature’ and once it’s signed it doesn’t seem to let us change it! It doesn’t seem as though we’ll be able to email a copy to our clients for approval and if any changes are required, the full form will need to be retyped. It is going to take some getting used to.

And this is in today’s age of technology!

A further issue that doesn’t seem to have been thought through is the problem of how to pay a fee. The Tribunal system would prefer for us to lodge claims on-line and pay the fee at the same time by debit or credit card.  Claimants themselves might be able to do this but what about law firms paying the fees on behalf of their clients, where the client has a source of funding e.g. a union? There was talk of a Paypal account but no sign of it. If we are to pay a fee on behalf of a client, we will need to send a cheque and rely on the postal system or hand-deliver it with the claim form! If your office is near to one of the allocated hearing centres, hand-delivery seems to be the best option and it guarantees the claim form and fee is received. However, when you act for clients nationally, a trip to Cardiff, London or Glasgow on the day limitation expires is going to be messy!

And aside from fees and new claim forms we have new rules of procedure, a new cap on unfair dismissal compensation, pre-termination negotiations in unfair dismissal cases are inadmissible and compromise agreements are now ‘settlement agreements’ with a new ACAS code of practice.   

What a landscape the government is creating! And what an interesting way of doing it...

Daniel Kindell - Solicitor 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.