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The employment bill

11 February 2008

Tougher penalties for rogue employers

The Employment Bill ("the Bill") was published on 6 December 2007. The Department for Business, Enterprise and Regulatory Reform ("BERR") say that the Bill is aimed at toughening penalties for rogue employers…and [simplifying] the dispute resolution procedures.

The Bill includes policies on the national minimum wage, unlawful deduction of wages, dispute resolution procedures, employment agencies and trade union membership. The main areas of interest are as follows:

1 Dispute Resolution

The Government undertook a review[1] into the impact and operation of the statutory dispute resolution procedures, two years after its implementation. As many commentators had foreseen, the review found that the current procedures though correct in principle, have led to unforeseen consequences. The review recommended that the current statutory procedures be repealed.

A full public consultation was undertaken by the DTI (now BERR), with the result that the Bill will:

  • Abolish the current statutory dismissal, disciplinary and grievance procedures in their entirety
  • Encourage compliance with dispute resolution by giving the Tribunal a discretionary power to increase/decrease awards by up to 25 if an employer/employee unreasonably fails to comply with a relevant statutory Code of Practice (e.g. ACAS Code of Practice for Disciplinary and Grievance Procedures)
  • Revert back to the pre-2004 position on breaches of procedure, which provides that, whilst a dismissal can be unfair purely on procedural grounds, the Tribunal can reduce or eliminate the compensation payable to an employee if it is likely that the employee would have been dismissed in any event
  • Introduce a new fast track procedure for settling monetary disputes on the basis of documents submitted to the Tribunal in certain areas of employment law and where both parties agree, so that there will be no need for a full hearing
  • Extend ACASs powers so that it has a discretionary power to offer conciliation for pre-tribunal disputes only where it considers that there is a reasonable prospect of success of settlement
  • Remove the fixed conciliation period, so that ACAS duty to conciliate will continue throughout proceedings until the Tribunal delivers a judgment

2 National Minimum Wage

The Bill provides workers with further protection, so that employers will be served with a notice of underpayment where it is believed that workers have not been paid the national minimum wage or where an employer has not fully repaid any arrears that the worker is entitled to. Where a notice of underpayment is served, in addition to payment of arrears of wages, an employer will be required to pay a financial penalty to the Secretary of State which is set at 50 of the underpayment of the national minimum wage, subject to a minimum penalty of £100 and a maximum penalty of £5,000.

The Bill provides that where an employer has committed a criminal offence, cases can be tried in either the Magistrates or the Crown Court. This means that whilst the financial penalty will be withdrawn where an employer is convicted, the fine imposed in the Court could be unlimited.

3 Unlawful deduction from wages

The Bill also gives the Tribunal the power to award compensation for financial loss suffered by an employee which is attributable to the employers unlawful deduction from wages (e.g. bank charges or interest).

Whilst BERR have indicated that the Bill will receive Royal Assent in Summer 2008, it is rumoured that it will not become law until Spring 2009. Employers need to keep abreast of developments - dont get caught out - when the Bill comes into force, make sure that managers receive training and that your procedures are updated.

Update - increase in compensation limits

The limits on payments and certain Employment Tribunal awards have been increased and are effective from 1 February 2008.

This years main increases are as follows:

  • The limit on the amount of compensation awarded in unfair dismissal claims has been increased from £60,600 to £63,000
  • The limit on the amount of a weeks pay for the purposes of calculating a redundancy payment or basic award of compensation in unfair dismissal claims has been increased from £310 to £330

These new limits apply for dismissals that occur on or after 1 February 2008.

[1] A Review of Employment Dispute Resolution in Great Britain - DTI March 2007 URN 07/755

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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