There have been a number of significant changes in the United Kingdom’s employment tribunal system and employment dispute resolution rules over the last year. In this post, we outline two recent changes which, with the introduction in 2013 of fees for bringing tribunal claims, are likely to have an impact on the number and cost of employment tribunal claims brought in the future.
Financial Penalties for Employers
Prior to April 6, 2014, if a U.K. employment tribunal found in favour of a claimant, its principal power was to award compensation for financial losses, such as lost earnings (depending on the type of claim), and to award legal costs. Now, however, employment tribunals have the power to penalize respondent employers for breaches of employment law by imposing financial penalties when there have been “aggravating features.” There is no definition of “aggravating features,” so it is for the employment tribunal to decide which factors are relevant. Relevant factors may include:
- whether the employer’s conduct was malicious, insulting, or oppressive;
- whether the employer’s motive was based on prejudice rather than, ignorance or a mistake, for example;
- the subsequent conduct of the employer, such as conducting the defence of the proceedings in a wholly inappropriate, intimidatory, or unnecessarily offensive way;
- whether the employer had committed repeated breaches of the claimant’s employment rights; and
- the size of the employer and whether it has a dedicated human resources team.
The amount of any penalty will be 50 percent of the compensation awarded to the claimant, subject to a minimum of £100 and maximum of £5,000, with a 50 percent reduction applying for early payment. This rule could result in significant costs in circumstances where two or more claimants bring claims against the same employer at the same time. The possibility of financial penalties adds to a number of factors that employers must consider before deciding whether to fight or settle an employment tribunal claim, and may also affect the actions an employer takes before dismissing an employee.
A process of “early conciliation” has been introduced with the aim of reducing the number of claims taken to employment tribunals. Employees must now notify the Advisory Conciliation and Arbitration Service (Acas) before lodging tribunal claims against their employers. Acas is a publicly funded independent organization that provides information, advice, training, conciliation, and other services for employers and employees to help prevent or resolve workplace problems. After receipt of an employee’s notification, Acas will attempt to contact the parties to try to resolve the dispute, assuming all parties wish to do so. During this process, the time limit for making a claim to the tribunal is paused for up to one calendar month, plus a further 14 days if more time is needed for conciliation. Employers should closely monitor this period, as it affects when tribunal limitation periods expire. If a case is not settled during this period, Acas will bring the early conciliation to a close, issue a “conciliation certificate” (a formal declaration certifying that the process has been completed), and the claimant will be free to pursue his or her claim before a tribunal.
In July 2013, a measure took effect requiring claimants to pay fees to bring their employment tribunal claims. The legislation was grounded in the U.K. government’s desire to reduce the number of vexatious claims and based on the principle that the users of a system should help pay its costs. In recent months, the first statistics have emerged since tribunal fees were instituted, indicating that there has been a 79 percent drop in claims. The marked decrease has caused widespread concern that the introduction of fees has negatively and disproportionately impacted access to justice. The public sector union, Unison, originally launched judicial review proceedings to challenge the introduction of fees on the basis that they were discriminatory and adversely affected women in lower-paid occupations. That challenge was rejected, but it appears that an appeal may yet be filed; the matter remains unresolved.
Given the recent introduction of the changes outlined above, it is too early to predict what the long-term effects will be. What seems to be emerging, however, is a landscape where employers and employees will increasingly settle their disputes through negotiation and dialogue, rather than through the tribunal system.
Justin T. Tarka is an associate in the London office of Ogletree Deakins.