Key employment law changes in 2012

Many changes are planned for this year. John Charlton explores how they might influence employment practices.

Employment law fans must be looking forward to the rest of 2012 with gusto: it promises much on the legislative, consultative, industrial relations and economic fronts.

The latter two look like being rocky for the UK with little overall growth and the prospect of rising unemployment and public sector strife. The first two may bring the sort of change many employers want. Or they may not.

Employers are generally downbeat about growth prospects. For example, according to a January 2012 survey of chief financial officers (CFOs) from FTSE 350 companies, conducted by Deloitte, a return to a recession is their number-two concern, with the euro at number one. Deloitte chief economist Ian Stewart says: “CFOs are working on the assumption that Britain will fall back into recession. They see a 54% chance of a ‘double dip’, up from 27% a year ago. They enter 2012 with a focus on cutting costs and increasing cash flow.”

This will probably result in more lay-offs along with those likely in the public sector. The Chartered Institute of Personnel and Development’s (CIPD) annual barometer report for 2012 predicts that the number of those in work in the UK will fall by 120,000 while the unemployment rate will reach 8.8%, or 2.85 million people. This trend, plus possible public sector unrest over job cuts and pensions, may make interesting times for employers.

They will have much to consider on the employment law front as proposals set out last year progress. Many were put forward by business secretary Vince Cable last November. He promised: an overhaul of employment tribunal processes and regulations; the extension of the period worked before unfair dismissal claims can be lodged from one to two years; compulsory pre-claim conciliation via Acas; and streamlining the tribunal system. From April 2012, says the Department for Business, Innovation and Skills (BIS), all unfair dismissal claims will go to Acas in the first instance.

Promises and predictions

Cable promised consultations and cutting red tape. Calls for evidence on TUPE and collective redundancies ended on 31 January. BIS says that “consultations will be published with proposed changes later this year”.

It plans to consult key stakeholders on options for rapid resolution to disputes, which will be followed by a public consultation. Cable is also seeking views on changing the employment law regime for companies with fewer than 10 employees.

Kim Pattullo, head of employment at HBJ Gateley, says that the three most important employment law changes stated for 2012 are:

  • extending unfair dismissal qualifying time to two years;
  • the proposal to introduce fees into the employment tribunal system, which is likely to take effect in 2013; and
  • tribunal procedure reform.

She adds that extending the qualifying time for unfair dismissals “would prevent around 2,000 [claims], which is only about 1% of claims submitted each year. The likelihood is that claimants will use other means to raise tribunal proceedings so we may see an increase in discrimination and whistleblowing claims, both of which have no qualifying period of service. These types of claims are more complex and therefore more costly to run, which goes against the Government’s aim of reducing the costs to businesses.”

Key events

  • 1 February Limit on the amount of compensatory award for unfair dismissal rises from £68,400 to £72,300.
  • 1 April Standard rates for statutory maternity, paternity, and adoption pay rise from £128.73 a week to £135.45.
  • 6 April Statutory sick pay increases from £81.60 a week to £85.85. Qualifying period for unfair dismissal protection rises from one to two years. Major changes to employment tribunal procedure rules are expected.
  • 1 October Pensions auto-enrolment starts. National minimum wage may rise depending on Low Pay Commission’s recommendations to the Government – due in February.
  • Other Consultations on employment tribunal fees, and calls for evidence on whether or not TUPE and collective redundancy consultation rules should be amended.</

    Ed Bowyer, partner at Hogan Lovells, adds: “In the longer term, the plan to introduce fees in the employment tribunal in either 2013 or 2014 is likely to have a more significant impact on the number of tribunal claims being brought.”

    Charles Pigott, professional support lawyer at Mills & Reeve, agrees that tribunal changes will be significant, “but they are hard to assess because for the most part we don’t know exactly how they will work. Take for example the introduction of fees in the employment tribunal – a significant step certainly but the Government is still consulting on the detail. Likewise the proposal to filter all new claims through Acas. We have no idea how that is going to work.”

    He believes that using Acas as a “gatekeeper” for new claims will “have some impact on the volume of claims” but that will depend on “how well-resourced Acas is”.

    As for TUPE, Pattullo says: “One of the main aspects of the consultation that employers may welcome is the possibility of harmonising terms and conditions post-transfer which may mean more reduced pay or conditions for employees that have transferred. Currently the TUPE Regulations prohibit any reduction in terms and conditions unless the employees agree to the contractual change and various other tests are achieved.”

    Because of the force of EU directives, there is relatively little room for manoeuvre on TUPE changes.

    Change of focus

    Other issues will arise during the year. For example, Bowyer says: “The extent to which employers are seeking to justify their own retirement age following abolition of the default retirement age in 2011 is likely to become clearer.

    “The ECJ has been willing to accept that wanting to give opportunities for employment across the generations is a legitimate aim capable of justifying a retirement age and this may be particularly the case at a time of rising youth unemployment. However, it remains to be seen if employment tribunals and the EAT are willing to accept that retaining a retirement age is a proportionate means of achieving that aim.”

    Pigott expects an increasing focus on the law of industrial action in 2012. He says: “As the cuts bite it would not be surprising if the number of days lost to strikes rises and the Government will come under renewed pressure to tilt the balance of the law.”

    This may mean changes to balloting rules with a majority of workplace members, rather than those who vote, necessary to call a strike.

    Guy Bailey, the CBI’s head of employment policy, says: “The wide-ranging review that the Government is undertaking is a welcome step in the right direction.” But “we have so far seen more in the way of consultation than action. Small firms across the country will be looking for changes that will make a real difference to be implemented soon, starting with the extension of unfair dismissal in April.”

    TUC view

    The TUC’s head of equalities and employment rights, Sarah Veale, is less impressed: “The overall direction of travel in terms of employment law changes is to make life easier for the minority of businesses who mistreat staff. Vulnerable employees, particularly those without union representation, will find it harder to seek recourse when mistreated by their employer.

    “Extending the qualifying period for unfair dismissal will particularly affect younger workers, while the introduction of fees for employment tribunals will disproportionately penalise low paid workers.”

    As ever, case law will make its mark. Bowyer says: “The Court of Appeal decision in NHS Leeds v Larner will hopefully provide clarity on whether an employee absent because of illness has to ask to carry holiday entitlement forward from one leave year to the next, or whether carry-forward is automatic. At the moment there are inconsistent EAT decisions on the topic.”

    Pigott looks forward to a Supreme Court decision in the Seldon case, which was being decided as Employers’ Law went to press. “So far we have had no authoritative guidance domestically – and little clarity from Europe either – on the circumstances in which employers can justify maintaining a compulsory retirement age, now that the retirement exemption has gone. This case will present the first opportunity to the Supreme Court to give guidance on when compulsory retirement can be objectively justified.”

    In Scotland, says Pattullo, in the case of Kulikaoskas v MacDuff Shellfish and another “the Court of Session is considering whether or not associative pregnancy discrimination is prohibited”.

    All in all there is much to look forward to.

    Pensions auto-enrolment

    Pensions auto-enrolment will be a big 2012 workplace event. From 1 October, employers with 120,000 or more staff must enrol employees into a pension scheme. Staging dates will be based on the number of employees on PAYE rolls on 1 April.

    The process will continue until 2014 when employers with fewer than 50 employees must auto-enrol. Ferdinand Lovett, solicitor at pensions and law experts Sacker & Partners, says those who are enrolled are classified as workers and may include casual, temporary and agency workers. “Self-employed workers will normally fall outside the scope of the regime but employers need to check the nature of the working relationship.” Employers must ensure they are abreast of the Regulations and abide by them. The Pensions Regulator will have the power to fine employers up to £10,000 a day for non-compliance.

    Lovett warns that employers should take care when recruiting to make sure questions on auto-enrolment have no bearing on recruitment. Nor must they offer inducements – such as pay rises – to help persuade workers to opt out of pension schemes. He adds: “Employers must check what contracts say about pensions so they can be made compliant with the auto-enrolment regime.”

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