Arriving hot on the heels of the Beecroft Report, Vince Cable yesterday announced the Government’s “Enterprise and Regulatory Reform Bill” which – it is claimed – will make the UK “one of the most enterprise-friendly countries in the world”.
The measures were announced as part of the Queen’s Speech earlier this month, and include modifications to the employment tribunal system, a new Competition and Markets Authority and allowing shareholders a binding vote on executive pay. Compromise Agreements are also to be renamed “Settlement Agreements”.
“We want to make sure the right conditions are in place to encourage investment and exports, boost enterprise, support green growth and build a responsible business culture” said Vince Cable. “The bill will help ensure that people who work hard and do the right thing are rewarded.”
Shadow Business Secretary Chuka Umunna said that the reforms fail to provide a “compelling vision” for economic growth.
So, what does the Enterprise Bill include?
Clauses 7 to 9 and Schedule 2: Compulsory referral to ACAS for conciliation prior to a claim being presented to an employment tribunal. This section also affects the normal three month limit within which most employment law claims have to be sent to tribunal.
Many employment law practitioners (including ourselves) are concerned that this will become another successor to the turgid Statutory Dispute Resolution Procedures (SDRP) which in theory was great legislation but never worked effectively because it was insanely technical.
Clause 10: “Legal Officers” who can determine some types of employment tribunal claim, which might be the basis for the “rapid resolution” procedure for small claims.
Clause 11: Reiterates the expected reduction from three judges to one sitting on an Employment Appeal Tribunal.
Clause 12: Likely to be the most controversial proposal, permitting variation on the compensatory award cap to either (i) a specified amount of between 1x and 3x median annual earnings (somewhere between £26,000 and £78,000) or (ii) a specified number of weeks’ pay for the individual concerned or (iii) the lower of the two.
The original concept of capping compensation was introduced in the Donovan report in 1968. It is not clear yet whether the current statutory cap of £430/week would apply.
This is one of the few surprises of the bill, as commentators cannot recall the power to reduce the compensatory award cap as having been previously discussed. Labour and the Lib Dems are unlikely to agree with the potential for slashing compensation claims down to £26,000 when the employee’s claim might be substantially greater than this.
Clause 13: Allows for financial penalties to be paid where the employer is found to have breached their rights where there are (as yet unspecified) aggravating features. The range of these penalties will be between £100 and £5,000 and will be, subject to these limits, an additional 50% of the compensation award. However, the penalty will be paid to the government and not the employee.
There may be more pressure on employers to settle at an amount higher than they might originally have planned, in order to avoid paying extra penalties to the state if they lose at the tribunal.
Clause 14: Limits the basis of whistleblowing claims – known as “protected disclosures” – by suggesting that the disclosure must, in the reasonable belief of the employee making the claim, be in the public interest.
Clause 16: Renames “Compromise Agreements” as “Settlement Agreements”, whilst not interfering with the technical requirements for compromise agreements. There had been some discussion about standard-form compromise agreements, or simplification of some of the technical rules, but these are not mentioned in the bill.