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    19 September 2012

    Government announces further employment law developments

    After a lull in developments over the summer, the Government has issued the latest raft of consultation papers and responses in its programme of proposed reforms to employment law. 

    Settlement agreements

    A new consultation paper has been issued, Ending the Employment Relationship, which sets out the Government’s proposals in relation to ‘settlement agreements’ (currently known as compromise agreements).  It is the Government’s intention to make it easier for employers to use such agreements to ensure a ‘clean break’ at the end of the employment relationship and to avoid the costs associated with defending a claim at the employment tribunal.

    The consultation paper includes example letters and template settlement agreements with supporting guidance, and is seeking views on how well these would work in practice.  Acas will also be providing a new code of practice on the use of settlement agreements.

    Compensatory awards

    In addition, the consultation paper sets out the options being considered by the Government in relation to changing the cap on the compensatory award for claims of unfair dismissal.  The cap is currently £72,300, although in reality the majority of awards are much lower (the median is quoted as being under £5,000). 

    The proposal is for a new cap to be set at 12 months’ pay for the individual claimant, subject to an overall cap (an upper limit).  The Government is considering whether the current cap of £72,300 is set at an appropriate level.  Under provisions to be introduced by the Enterprise and Regulatory Reform Bill, the cap can be varied by between one and three times annual median earnings (currently £25,882).  It seems highly likely that the current cap will be significantly lowered. 

    The Ending the Employment Relationship consultation closes on 23 November 2012.

    Protected conversations

    It appears that the Government has now decided not to proceed with its proposals for introducing the new concept of ‘protected conversations’, which were intended to allow workplace discussions about performance to be held ‘off the record’ and not admissible in tribunal evidence.  The Government’s reasoning for abandoning this idea is hidden away in the impact assessment accompanying the consultation paper.  What remains (for now at least) is the new, very limited, provision in the Enterprise and Regulatory Reform Bill which attempts to exclude pre-termination settlement negotiations from being admissible in subsequent proceedings for unfair dismissal.

    Compensated no fault dismissals

    The Government has formally confirmed that it will not be taking forward this proposal, aimed at micro-businesses of fewer than 10 staff.  Its response to the call for evidence (which was issued in March 2012) concludes that there was insufficient support for or evidence that no fault dismissal would have a positive impact on the UK labour market.

    Instead, the Government will be working with Acas to make the guidance accompanying the Code of Practice on disciplinary and grievance procedures more accessible, particularly for small businesses.


    The Government has also issued its response to the call for evidence on the effectiveness of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (issued in November 2011).

    The response contains no firm proposals for the reform of TUPE and states that a further consultation will take place on specific proposals before the end of the year.

    Employment tribunals

    A new consultation has been issued to consider the amendments to the Employment Tribunal Rules of Procedure put forward by Mr Justice Underhill (see our previous briefing).

    The consultation includes proposed new ET1 (claim) and ET3 (response) forms.  It is also proposed to introduce an initial sift stage, for all claims to be reviewed at the outset by an Employment Judge to consider whether the claim should be struck out for having no reasonable prospects of success.

    The consultation closes on 23 November 2012.