Over the last two years, changes to employment law have resulted in a paradigm shift in the arena of employment disputes. Mike Wilson, Partner in the employment team at law firm Blake Lapthorn, outlines the impact and potential benefits.

The changes to employment law, described as seismic and ground-breaking, has relieved employers and employer bodies, that it redresses what has been an unfair weighting of the odds, which has resulted in a proliferation of unmerited claims against employers, before Employment Tribunals (ETs). 

The changes include an increase in service requirement for unfair dismissal, a reduced collective redundancy consultation period, the introduction of fees, a two-tier cap on unfair dismissal compensation, new ET rules, pre-termination negotiations and, since 6 April, compulsory pre-claim conciliation via ACAS. These present potential advantages for employers faced with difficult and potentially litigious employment issues. Difficult workplace situations may involve ongoing grievance and disciplinary procedures and the landscape, in respect of those internal procedures and their implementation, have not changed. However, the ability of employers to enter into difficult conversations, in an effort to broker agreed departures, has been significantly improved, by the introduction of 'pre-termination negotiations'. This is a statutory provision allowing an employer to commence confidential discussions about whether an employee should leave the organisation by mutual agreement, avoiding what has become a legal quagmire around trying to protect disclosure of such discussions by the 'without prejudice rule'.

So, there is now statutory recognition that employers can hold such conversations and that it is good practice to do so. Such conversations remain confidential and cannot be referred to in legal proceedings. There are areas where the protection will not apply (for example discrimination) but this is a radical approach with obvious benefits. Recent figures have confirmed a reduction of at least 79 percent in the number of ET claims in the last quarter of 2013. This is attributed to the introduction of fees in which a claimant may have to pay between £390 to £1200 to pursue a claim to a hearing, which damages the viability of speculative claims and smaller claims which can still involve employers in difficult, protracted and expensive proceedings in various areas, for example holiday pay. However, this is not the only factor at work. An employee has to work longer to gain the right to pursue a claim for unfair dismissal.

There is a greater exposure to costs being awarded against a Claimant. There is also the burden of representing yourself if you cannot afford professional representation. The requirement to enter into Early Conciliation (see below), and the complexities of doing so, adds a further hurdle to surmount before proceedings are issued, after which cost and other procedural matters arise. In addition, the level of potential compensation for unfair dismissal has been significantly reduced for a substantial number of claimants – the maximum compensation is now capped at one year's gross salary or £76,574 where their annual salary exceeds that cap. Furthermore the individual cap is very narrowly construed by the definition of a “week's pay”. Benefits in kind, discretionary bonuses and certain types of commission are likely to be excluded. Therefore, for some claimants, the maximum compensation will not equal the value of their annual remuneration package. One note of caution is potential litigation seeking to extend the definition of a “week's pay”. This should result in a reduction in compensatory awards, but also on employees' expectations of the compensation which they could receive from an ET; a clear disincentive to pursuing proceedings and a considerable advantage in negotiating severance packages, particularly in pre-termination negotiations.

The effects of a more buoyant economy should not be forgotten. A dismissed employee's employability in the labour market has always been a key element in assessing the extent of potential claims – for the employer and the ex-employee. There are often arguments about whether efforts to mitigate loss have been reasonable. The depressed labour market has made employers' arguments in this area potentially difficult but a buoyant market in many business areas should now reverse the position.

Is there a downside for the employer? There are critics who argue that these changes will result in more discrimination and whistleblowing claims, to circumvent qualification periods of employment and compensation limits on unfair dismissal. These are serious claims which need to be supported by relevant evidence which will be subject to rigorous scrutiny. All-too often such claims are add-ons to enable a claim to be made or to lift the cap on compensation and achieve advantageous settlement terms. To pursue such weak claims is fraught with difficulty and could have serious implications in terms of costs for a claimant who is unsuccessful with a demonstrably unjustified claim.

The difficulty and expense of defending such claims can never be avoided, but the new landscape has lessened employers' potential exposure for such claims and improved the chances of defeating them at an early stage and obtaining a costs award. 

From 6 April there has been a further requirement placed on the employee with the introduction of conciliation before proceedings via ACAS. The principle is straightforward, an employee cannot submit a claim to an ET unless he has contacted ACAS for it to investigate a settlement with the employer. There must be some concern that because of the points made above, employers may not be attracted by the prospect of negotiating a settlement on a claim which may never be brought. However there are potential benefits for an employer. An example would be a situation where the employer knows there are sensitive issues, for example harassment, which could adversely impact on reputation and goodwill, or a strong claim that has a good chance of success. In those circumstances, this offers a rapid and confidential route to achieve early settlement and avoid such difficulties.

There are other factors in play which affect the termination of employment contracts in the modern landscape. For example, flexible and remote working is widespread. From 30 June, the right to request flexible working will be available to all employees, not just those caring for a child or dependent adult. Yet the existing statutory protection of fixed-term or part-time employees remains. Furthermore, the explosion of social networking as a key to business development presents another consideration on termination of employment. The pressure points here are: return of company property; protection of confidential information; access to networks and systems; and the potential for derogatory comments on social networks sites by disgruntled ex-employees. The advances of technology do not change how you identify and protect a business's interests. It is important to establish good housekeeping on social media and the use of mobile devices (Bring Your Own Device). 

There must be clear, well-publicised policies, in conjunction with contractual provisions, setting out what employees can and cannot do; the consequences of any breach; and what will happen on the termination of employment, whatever its circumstances. This could include requirements to: update a status to show when an employee has left; hand over contacts made during employment; surrender login details; and potentially shut down certain accounts. Both during and at the end of employment, adherence to these policies must be effectively monitored. On termination of employment, where appropriate, company devices should be collected, access to company systems disabled, or arrangements made to delete information on the employee's own device, but not the employer's, which may contain information about an employee's competitive activity. If a disgruntled employee creates a scene on social media, the disciplinary route is always available whilst they remain employed. Once they have left, the options are more limited. If there is an agreed severance package, wording in the settlement agreement can build in protection. Furthermore, unless they concern confidential information (for which prompt and decisive legal action will often be appropriate), the reputational impact of a rogue employee's comments may not be as damaging as feared. They will usually reflect badly on the author. Astute employees will appreciate the detrimental impact emotive and inaccurate commentary could have on their prospects of future employment.

This new landscape does not provide complete solutions or allow departures from best practice, but does improve the employer's overall position. The two pillars of employee relations continue to be fairness and reasonableness. Effective HR procedures, properly managed, ensure that all employees are dealt with fairly and reasonably and that the employer can demonstrate this. This expectation is not removed or reduced. Indeed, the uplift for failure to follow ACAS procedures remains, and a further potential financial penalty of up to £5,000 where an employer's breach of employment law has 'aggravating features' has been added to that. Nevertheless, the benefits to employers are significant, and, taken as a whole, are complementary to fair and transparent procedures and continue to underpin them and should reduce protracted and expensive legal proceedings.

Mike Wilson, Partner

Blake Lapthorn
www.bllaw.co.uk