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Employment Law Review

Volume 556: debated on Thursday 17 January 2013

The Government believe the UK economy should be supported by a framework of laws that ensures we have a strong and efficient labour market which is flexible, effective and fair. We are looking at the laws that affect all aspects of the relationship between employers and employees, and at each stage of the relationship, through the employment law review. Priorities for reform have been informed by the red tape challenge process, and the results of the 2011 resolving workplace disputes consultation.

Today the Government are publishing their response to the consultation on ending the employment relationship, and launching three further consultations relating to the employment relationship, covering:

How early conciliation should operate in practice;

A range of proposals to improve the TUPE regulations; and,

Reforming the regulatory framework for employment agencies and employment businesses.

Our response to the ending the employment relationship consultation details how we will support the legislative changes in the Enterprise and Regulatory Reform Bill regarding the inadmissibility of offers of settlement in unfair dismissal claims at employment tribunal, and a power to increase or decrease the limit on the compensation awarded in cases of unfair dismissal.

Settlement agreements offer a dignified, consensual and mutually beneficial way of ending the employment relationship without risking a long, costly and distressing employment tribunal claim. In support of the legislative change, we have consulted on the principles to underpin the system, and the best way for Government to enable employers and employees to approach settlement agreements confidently in a fair and appropriate way. We will ask ACAS to publish a statutory code of practice, which will include template letters for beginning the settlement discussion, and an explanation of the term “improper behaviour”. Accompanying guidance will supplement the code with more substantive practical advice, including guidance on good practice for employers to approach settlement within the broader context of management.

The Government intend to introduce the statutory code and guidance by the summer, in line with the legislative change coming into force. In relation to the unfair dismissal compensatory award cap, the Government intend to introduce a 12 months’ pay cap on the compensatory award for unfair dismissal, subject to parliamentary process. The introduction of a pay-based cap will run alongside a specified overall cap, with the limit the lower of the two figures.

With regard to the overall level of the cap, no consensus emerged in consultation either in terms of whether it should be changed, or, if so, how it should be changed. We are therefore not pursuing a change to the overall cap on the compensatory award for unfair dismissal at this time.

The Government will introduce the necessary secondary legislation to implement the change to the cap after the Enterprise and Regulatory Reform Bill receives Royal Assent.

We are also launching today a further consultation on early conciliation. We announced, in the Government response to the resolving workplace disputes consultation, our intention to introduce an early conciliation (EC) process that would make it a requirement for most prospective claimants to send the details of their claim to ACAS before they are able to lodge the claim with the employment tribunal. This proposal, which has received broad support from all stakeholders, will enable ACAS to offer the parties the opportunity to resolve their dispute without the need for tribunal involvement.

We are taking the necessary primary powers to introduce EC in the Enterprise and Regulatory Reform Bill. However, the implementation of EC requires secondary legislation and the development of the necessary administrative process. This consultation sets out how we intend that EC should operate.

Our consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) also launches today. TUPE legislation protects employee rights when the business or undertaking for which they work transfers to a new employer. The call for evidence identified concerns that the benefits intended from service provision changes to TUPE made in 2006 had not been achieved and that the provisions on employee liability information were not required.

The Government consider that there is scope to improve the regulations by removing unnecessary gold-plating and generally eliminating bureaucracy. Accordingly, we are consulting on a range of proposals designed to ease the transfer process, including the repeal of the service provision changes and the specific requirements regarding the notification of employee liability information.

In addition, we are consulting on a number of proposals to change the wording of particular provisions in TUPE to more closely reflect the acquired rights directive and the case law of the Court of Justice of the European Union.

One example of this is the provisions restricting changes to contracts. Other proposals will allow smaller firms, in some situations, to inform and consult employees about transfers directly and we will also improve guidance on a range of issues.

Additionally, we are launching today a consultation on reforming the regulatory framework for employment agencies and employment businesses. The recruitment sector plays an important role in the UK’s labour market by improving the efficiency of matching demand for jobs to demand for workers. However, the legislation which regulates the sector is complicated and difficult for businesses and individuals to understand.

We want to reform how the recruitment sector is regulated, ensuring that protections are in place for people looking for work, but removing costly and complex regulations.

We want to establish when it is appropriate for the Government to impose rules on the recruitment sector and when it is more appropriate for the sector and marketplace to decide the rules for themselves. The consultation will also seek views on different enforcement options and whether individual enforcement would be more effective than the current Government enforcement regime.

Copies of the “Ending the employment relationship” Government response, and of each of the consultation documents being launched today, have been placed in the Libraries of both Houses.