The DTI has issued a consultation paper on reform of the
employment tribunal system, encouraging employees and employers to resolve
disputes in-house. This should have far-reaching implications. Alison Gurden
sets out the aims of the reforms below
What is the aim of the consultation proposals?
The DTI has recognised that the cost of maintaining the employment tribunal
system is spiralling out of control. In addition, once an employee has issued a
claim in the employment tribunal, they are less likely to remain in employment
with that employer, or obtain employment of a similar status elsewhere. With
this in mind, the DTI hopes that the consultation proposals will result in more
employees staying in employment.
Background to the consultation
The new Tribunal Regulations, which came into force in July, are aimed at
speeding up the employment tribunal process, making it more cost effective. The
tribunal may now award costs of up to £10,000 against a party that has
unreasonably persisted in having its matter determined by a tribunal. This is
the first step towards deterring tribunal applications. The Acas unfair
dismissal scheme, which came into force in May 2001, aims to deter tribunal
applications for unfair dismissal claims, by encouraging parties to have their
case heard by an Acas conciliator, waiving their right to bring an unfair
dismissal action in the employment tribunal. Hence the DTI has already embarked
on measures to reduce applications.
What further obligations will be placed on employers?
Employers will be encouraged to have proper disciplinary and grievance
procedures in place. At present an employer is often not aware of an employee’s
grievance until an application is lodged with the tribunal. The DTI hopes to
restrict applications being lodged until the internal procedures have been
While the employer will not be under an obligation to have disciplinary and
grievance procedures, a failure to do so may be looked upon unfavourably by the
tribunal, which may have the discretion to increase or decrease a compensation
award by up to 50 per cent if internal procedures have not been followed.
It is proposed that small employers (those with less than 20 employees) will
have to include disciplinary and grievance procedures in the employee’s written
statement. This is to encourage the use of internal procedures particularly in
small businesses, which in the main, do not currently use their procedures
How will these reforms affect employees?
It is suggested that the applicant pays a fee to lodge their application
with the tribunal. The amount has not yet been determined, however, it is
expected to be about £100. It is questionable whether this proposed fee will
restrict genuine applicants from bringing a claim due to their lack of funds.
How will employers benefit from these reforms?
The main way in which an employer may benefit is that it may be able to
reclaim its costs if successful. This will include costs for time spent
preparing the case and attending the tribunal. However, there will be some
situations where the unsuccessful applicant will not be in a position to pay
the employer’s costs due to lack of funds. It is anticipated that the tribunal
would be more likely to award substantial costs against an unsuccessful
employer than against an employee of limited means.
Reforming unfair dismissal rules
The Acas unfair dismissal scheme was the first step towards deterring unfair
dismissal claims in the tribunal, the consultation proposals go further. They
suggest that where a dismissal would be fair, except for the fact that the
employer has not complied with the correct procedure, the non-compliance should
be ignored by the tribunal. In other words, if the procedural irregularities
would have had no impact on the fairness or otherwise of the dismissal, it
should be considered fair.
This will be a welcome change for many employers who currently settle cases
due to the fact that the dismissal is likely to be deemed unfair for procedural
reasons. It is difficult to accord the proposed unfair dismissal changes with
those proposed in relation to disciplinary and grievance procedures.
The tribunal is to be encouraged, on the one hand, to increase an award by
up to 50 per cent if internal procedures have not been followed, while at the
same time to ignore situations where the procedure has not been followed in
relation to a dismissal. The employer will be faced with a difficult task in an
unfair dismissal claim (a) should the claim be settled for fear of having an
increased costs award made, or (b) should the claim be defended on the grounds
that the dismissal was fair, despite procedure not being followed?
Encouragement of conciliation
Throughout this consultation, the emphasis is on conciliation. It is
recognised that the number of conciliators available to assist the employer and
employee will need to increase.
Removal of the current duty on Acas to offer conciliation in disputes over
pay, breach of contract and redundancy is proposed, in order that it may offer
conciliation in a wider range of workplace disputes. In addition, there is a
suggestion that in the future there may be organisations which offer
professional conciliation very much along the lines of Acas.
When are these amendments likely to happen?
Consultation ends on the 8 October 2001, however, it is unlikely that any
changes will come into force until at least summer 2002. Many of the proposals
cannot be implemented without new legislation, and it is also anticipated that
there will be a large response to the proposals and that many will require
What should employers do in the meantime?
For those employers who currently do not have satisfactory disciplinary and
grievance procedures in place, it would be wise to consider implementing such
procedures as soon as possible.
Staff should be made aware of the procedures. Employers should begin to
encourage all employees to be open about their grievances and to bring them to
the attention of the employer, so that by the time these proposals are
implemented, internal dispute resolution will naturally be the employee’s first
Alison Gurden is a member of the employment department at Beachcroft
Contact 020-7894 6038