Enterprise and Regulatory Reform Bill

15 Jun 2012

This draft legislation plans to introduce the following key changes: 

  • Compromise agreements will be called settlement agreements.
  • Tribunals will have the power to fine employers who have breached a Claimant’s rights and in so doing behaved badly, for example if the employer acted with malice or deliberately ignored the law.  The fine will be 50% of any compensation awarded, subject to a minimum of £100 and a maximum of £5,000.  If the employer pays up within 21 days the fine is reduced by 50%. 
  • The current maximum compensatory award is £72,300.  The Bill gives the Secretary of State the power to change this to either a set amount or a certain number of weeks’ pay or the lower of the two.  The set amount cannot be lower than the median annual earnings (£26,200 in April 2011) or higher than three times this figure.  If the Secretary of State opts for a compensatory award of a certain number of weeks pay, the minimum number that can be specified is 52.  Different amounts can be specified for different kinds of employees.
  • Claimants will have to contact ACAS before making a claim so that parties can be offered conciliation to see if a dispute can be resolved before it gets to a Tribunal. 
  • Low value claims will be dealt with by a legal officer without a hearing if the parties consent in writing. 

Our view:

Assuming that it becomes law, we expect:

  1. Maximum compensatory awards will go down;
  2. Unless ACAS gets more resources, we do not see how it can handle a huge amount of new work.  We suspect that compulsory conciliation will be a bit like the now discredited statutory disciplinary and grievance procedures – a good idea in theory but not in practice.