BERR: Dispute Resolution Secondary Legislation Consultation
Response by Thompsons Solicitors - September 2008
On employment and industrial relations issues it acts only for trade unions and their members. Thompsons represents the majority of UK trade unions and advises on the full range of employment rights issues through its specialist Employment Rights Unit.
The firm regularly responds to Government and other public consultation papers on employment rights issues and other key areas of the law.
It is not our intention to respond to all the sections of this consultation, but only to those where we have particular views.
Employment Tribunal forms
The consultation paper refers in paragraph 1.7 of the introduction to the revised ET1 and other tribunal forms contained in Annex D. The paper does not offer specific opportunity to comment on these. We have however highlighted a number of problems with the current and redrafted ET1 and ET3 forms and made suggestions as to how these could be remedied.
These comments can be found in Section 4 (response to Q ix), Section 7 (default judgements) and elsewhere.
Section 2 – Extending the definition of “relevant advisor” for compromise agreements
i) Do you agree with adding CIPD members to the list of relevant independent advisers?
We do not agree with the proposal to add CIPD members to the list. CIPD members are the counterparts of trade unions. They are HR professionals. The core role of the typical HR department is to protect the employer’s interests and represent and advise management. For the Secretary of State to designate all CIPD members would fly in the face of this truism and create significant potential for irreconcilable conflicts of interest.
We note for example that the CIPD runs an employment law telephone advice service which members can use to get advice on matters including discipline and dismissal. The service is provided by the Royal Bank of Scotland Mentor Services.
The RBS service is expressly designed to “limit the financial and other associated risks of employing people” . It avowedly does not operate in the interests of employees.
Furthermore, the CIPD advises members to include warranties in compromise agreements. Warranties act to the benefit of the employer in almost every case.
It is important to appreciate that a compromise agreement is much more than a receipt for an employee’s golden handshake. It is a binding contract by which an employee permanently and irrevocably surrenders specific rights to seek a remedy in the courts or Employment Tribunals against their employer in respect of wrongs done to them in tort, contract and statute.
Use of compromise agreements is widespread. They are frequently highly technical and complex documents running to many pages. The extreme importance of this document has resulted in statutory safeguards and requirements being observed as a precondition to validity.
Although the role of the advisor under section 203 EPA is limited to advising on “terms and effect”, in practice it is very difficult to do so without negotiating amendments to the draft agreement, which frequently (and invariably in mass redundancies) is prepared by the employer’s advisors.
The current system has few enough safeguards to prevent vulnerable employees receiving inappropriate advice. The obligations on advisers to be insured and independent do not come with comprehensive definitions of independence, any requirement to demonstrate knowledge, or even to provide insurance details at the time that advice is given.
When a lawyer advises on the terms and effect of a compromise agreement, they do so while subject to the regulatory control of the Law Society or Bar Council. For the Secretary of State to specify CIPD members under the provisions of section 203(3)(d) of the EPA would be a significant step that carries significant risks, for reasons given below.
ii) What do you think are the benefits, disadvantages and risks?
Since the creation of compromise agreements, there has been much debate over the extension of independent advisers. See for example the objections of Lord Thomas of Gresford in the debate upon the Employment Rights (Dispute Resolution) Bill in the House of Lords on 25/07/97 [Column 1600].
Debate on extending the list of advisers continued. Clause 39 of the Employment Bill 1998/1999 proposed to extend the list of relevant advisers who could sign agreements off, and to extend the claims which could be compromised to include all future employment rights claims that may arise in the course of employment. After much opposition on the floor of the House of Commons, the clause was shelved.
Instead, restrictions were placed on who could give independent advice. Trade union officials and Citizen Advice Bureau (CAB) staff certified as competent were added. It was logical to include trade union officials as established worker representatives who would not abuse process. CABx too, have no shared interest with employers.
Thompsons is concerned that there is a greater than minimal risk that if specified as advisors on compromise agreements, CIPD members could be recommended by colleagues who do have a relationship with the employer.
In 2007, one of the largest employers in Cornwall reorganised its operation leading to redundancies. Thompsons acted for the hundreds of trade union members involved. Almost all said that the employer had instructed them to use its own local business solicitors as it would be “quicker” and would trigger release of their termination payments. The majority of employees followed this guidance.
The contracts were defective in terms of full legal protection for the employees. Not only did they compromise any employment claims arising from the termination, they also compromised any pre existing personal injury claims as most agreements do. The employer was involved in heavy industry and the workforce had been exposed to chemicals. Breathing difficulties were common.
We excluded from the agreements a number of chemical poisoning claims during this exercise. In addition, the agreements bound the employees to the strictest of confidentially terms about the existence of the agreements despite the job losses being reported in the press.
We amended the agreements to reflect this, but again no such provision was sought for the non trade union employees.
While lawyers are by no means immune from accusations of bias and of being capable of working in the specific interests of a party, the profession is regulated. We face severe sanctions for unprofessional conduct and for being negligent in the advice given to clients. Law firms and trade unions also have a degree of longevity, enabling an individual to claim against them or their insurance even if the individual who negligently advised them is no longer there.
In the case of solicitors firms, additional protective mechanisms exists which were originally instituted by the Law Society and are now operated by the Solicitors Regulation Authority. This is known as the assigned risks pool. It provides cover for firms which cannot get cover from qualifying insurers or cannot reasonably afford the terms available to them.
It also covers claims against firms which do not secure cover in accordance with the rules. There are no such safeguards, professional regulations and sanctions for CIPD members.
The CIPD does have a code of conduct and we are aware that a limited number of complaints about members who are believed to have breached the code are made each year. However, we understand that the majority of investigations conclude that the act complained of is a failure in the organisation’s processes rather than an individual HR practitioner acting unethically.
There is no requirement for CIPD members to have employment law expertise or to stay up to date with employment law developments. Thompsons regularly deals with HR managers who are unable to explain why certain clauses have been included in a compromise agreement that has been drafted by their lawyers.
iii) Do you think any other group(s) of advisors ought to be considered and if so, why? What other issues need to be considered in respect of the group(s) that you have suggested?
We do not think there are any other groups who could be considered as advisers.
Section 3 – Arrangements for accruing interest on unpaid Employment Tribunal awards
iv) Do you agree with the case for moving from a fixed to a floating rate of interest on unpaid awards?
We do not agree. The interest rate, currently fixed at 8%, is consistent with the interest rate applied in relation to debt cases in the civil courts. We see no reason for applying a different regime in the Employment Tribunals (ET).
vi) Do you agree with the case for streamlining the date from which interest is paid?
This would mean aligning with the existing provisions on discrimination and equal pay.
We agree with this proposal. As stated above, we consider that consistency is important – and such consistency should apply both within the ET jurisdictions as well as in relation to the courts and tribunals service as a whole.
There is a further related issue here in that interest is also payable on injury to feelings awarded in discrimination cases at the special investment rate (currently 6%) from the date of the alleged act.
On other losses, interest is payable in discrimination/equal pay cases at the rate of half of the special investment rate from the date that the loss began to the date of judgment.
We see no reason why injury to feelings awards in other cases, such as action short of dismissal on the grounds of whistle blowing, trade union activities or health and safety activities, should not attract interest in the same way.
Further, wages and holiday pay claims in the ET do not currently attract any interest award, prior to the judgement being made and remaining unpaid. Again, we see no reason why interest should not be payable on such sums, from the date that the debt arose, in the same way that other losses in discrimination and equal pay cases attract interest from the date that the loss first arose.
We consider that this current consultation and forthcoming legislation would be an appropriate opportunity to deal with these further anomalies.
Section 4 – Broader powers for Employment Tribunals to make recommendations in discrimination cases
vii) What guidance ought to be made available to parties on the operation of the extended power?
We welcome the decision to extend the existing power of ETs to make recommendations in discrimination cases.
We believe that any guidance issued must make clear that the recommendations made can benefit not only employees but also employers. Otherwise the effect of any recommendations may be minimal: unless employers see the benefit of recommendations they are unlikely to implement the recommendations as fully as possible.
The guidance ought to clarify that recommendations may help improve an employer’s policy or practice with a view to eliminating discrimination.
That in turn would make the employer less vulnerable to discrimination claims.
The guidance should also make clear, particularly to employees, when recommendations are likely to be made by the ET and when they are most likely to be effective. Examples of effective recommendations ought to be provided in the guidance.
viii) Should guidance to the judiciary emphasise that recommendations should be commensurate to the capacity of the employer to implement them?
We accept that some employers may be more able to comply with recommendations than others because, for example, they have greater resources. However we do not think that the guidance to the judiciary should emphasise that recommendations be commensurate with the employers capacity to implement them.
Instead the guidance should emphasise that recommendations must be practicable. This would ensure that the judiciary make recommendations which are realistic and are such that compliance with the recommendations is within the employer’s capacity.
ix) Do you have views on how employees might be informed about recommendations made to their employer?
We welcome the suggestion in the Government’s response to the consultation on the Discrimination Law Review, that tribunal judgements and details of recommendations be made available on the ET Service website.
However many claimants are unrepresented and may not have the resources or knowledge to obtain information from the website.
Guidance on completing the ET1 form should include information about what recommendations are and how best to check if the employer has had any previous recommendations made against them.
A further question should be added to the ET1, asking the claimant if they are aware of any recommendations against the employer.
It would also be helpful if the employer is asked in the ET3 form to confirm and provide details of the relevant recommendations made against them.
A further way in which to receive information about previous recommendations from the employer would be via the statutory questionnaire procedure, though this again may cause difficulties for unrepresented claimants unless it is accompanied with a clear explanation of how to use it.
x) Do you think that a mechanism should also be put in place for alerting tribunals to relevant previous recommendations?
See our response to ix) above. Providing details in the ET1 and ET3 forms would assist in alerting tribunals to relevant previous recommendations.
Section 5 – Written Determinations
xi) Do you agree that there are benefits in introducing such a procedure?
We consider that there could be potential benefits if there was firm evidence that the time of ETs could be saved, provided also that the safeguards set out in section 5 are followed.
However there are very few cases which we consider could appropriately be dealt with by the proposed procedure. We find that extremely few cases involve no factual disputes and can be resolved by way of written submissions only.
xii) Can you propose an alternative approach, which would still protect the rights of parties to Tribunal cases and ensure their written determinations weren’t made on the basis of informed positive consent?
We do not consider that any alternative approach would protect the rights of parties in tribunal cases.
Section 6 – Adding holiday pay to the list of jurisdictions normally heard by an Employment Judge sitting alone
xiii) Do you agree that holiday pay should be added to the list of jurisdictions normally heard by an Employment Judge sitting alone? Please give your reasons for agreeing or disagreeing.
We do not agree. Holiday pay cases often involve issues of whether an individual has employee and/or worker status.
These are complex questions of mixed fact and law, where the experience brought to bear by a full ET is especially important. It is not therefore appropriate to have such cases heard by an Employment Judge sitting alone.
Section 7 – Other changes not directly related to the Dispute Resolution Review
xiv) Do you think that the clarifying and procedural changes set out above and in the draft regulations at Annexe B would be helpful? If not, why not?
Paragraph 7.3: The overriding objective
We have no comment to make on this proposal.
Paragraph 7.4: Interim relief hearings
We agree that the rules ought to acknowledge that the procedure for interim relief hearings is not always exactly the same as for other pre-hearing reviews (PHRs) and that the provisions of sections 161/165 TULRCA and 128/131 ERA need to be applied. As the consultation paper observes, primary legislation takes priority.
That said, the provisional drafting of new rule 18A equates “applications” to “hearings”, which does not seem sensible. We suggest inserting the words “hearing of the” before the word “following” in the third line of the draft rule and again at the start of each of sub-paragraphs (a) and (b).
Thompsons welcomes the proposal to make default judgements mandatory.
When the time available in which to file an ET3 was extended to 28 days the accompanying assurances were that tribunals would take a firm line on late ET3s. Even though 28 days is more than sufficient to file a holding response or to seek an extension, in practice the promised resolve has not materialised.
Patchy and inconsistent views on default judgements have mingled with Employment Judges granting applications to file ET3s out of time in breach of Rule 4(4) and without seeking any explanation at all for the delay.
This is particularly iniquitous since the limitation periods in relation to “reasonably practicable” claims effectively provide an automatic and virtually unchallengeable default judgement to the respondent.
Thompsons considers that an automatic default judgement is a key way of fulfilling the overriding objective. It marks a definite point in time where the claimant can cease efforts at assembling a liability case and turn their attention to quantum.
It is important to remember that many employment tribunal claimants have just become unemployed and can ill afford to waste what money they have.
Mandatory default judgments would also give teeth to Rules 4, 5 & 6, prevent unnecessary delay by closing the window in which a respondent can apply for an extension to the 28 day period under Rule 4(4) and bring into play the appropriate procedures elsewhere.
Reducing the delay between issue and being able to enforce an award would allow claimants, often unemployed at that point, to receive their compensation timeously. There would then be less need for them to extend their borrowing, maximum out credit cards, or go into arrears on the mortgage, therefore relieving a significant amount of additional stress.
However, Thompsons does not think it appropriate to limit automatic default judgements to circumstances where the ET1 contains sufficient information about both liability and quantum. No reason for this change has been advanced in this consultation and Thompsons cannot see the justification for it.
The proposal to seek information from the respondent prior to making a default judgement is absurd and unworkable.
The current position is that default judgement can be issued in respect of either liability alone or both liability and remedy.
Experience shows that (for good reason) ET1s rarely contain enough detailed information about remedy in order to assess it safely. This is the case whether or not the claimant represented.
The practice has therefore arisen whereby a default judgement is given in respect of liability and further information on quantum is sought from the claimant, usually ahead of a remedies hearing.
The draft ET1 appended to the consultation document does not even ask enough questions to make possible an assessment on quantum for many common cases such as unfair dismissal. So even if an ET1 were fully completed, making that assessment would be impossible in many cases.
For example, the question “Were you in your employer’s pension scheme?” does not begin to elicit the information necessary to decide whether pension loss has occurred and how to calculate it.
Other aspects that it, and the current version, cannot assist the Tribunal with include such basic elements as:
- how long it might take the claimant to find new work given their skills and experience
- the value of any benefits
- what contractual notice rights the claimant has
- what holiday entitlement the claimant has, or has taken
- whether any new employment has a pension scheme
- whether any new employment is temporary or permanent.
It is unclear from the consultation document what is actually envisaged in circumstances where the Employment Judge thinks that more information is required. It seems to Thompsons that:
- If the liability position is unclear then seeking the respondent’s view effectively allows them to lodge a late ET3 without the effort of applying for it within the Rules. The proper approach, which requires no alteration to the status quo, is to apply Rule 9 and seek further information from the claimant. If that information enables the Employment Judge to issue a default judgement then that is what they should do.
- If liability is clear but quantum is not, why not have a liability default judgement, apply Rule 9 and seek information from the claimant and/or respondent about remedy? Sometimes only the respondent will have the necessary information but they can be ordered to provide it under Rule 10(2)(d) if need be.
Any delay arising whilst these issues are resolved allows a respondent to seek permission to file an ET3 late and undermines the purpose of the automatic default judgement regime and its perceived advantages.
Were the proposed change made, and automatic default judgement limited to situations where both liability and quantum could be assessed from the ET1, only a handful of default judgements would ever be issued. This effectively defeats the point of having them at all, let alone making them mandatory.
Thompsons thinks that the better approach is to leave Rule 8(3) alone, continue to allow the tribunal to give default judgement on liability only and seek further quantum information from the claimant in writing or in person.
This would be consistent with the proposals in paragraph 7.3 relating to the overriding objective which deal with avoiding disadvantage by making allowances to take account of a claimant’s comparative level of skill and experience.
It would be absurd to create a situation whereby getting judgement where liability is clear is delayed because of quantum questions or, worse still, where the claimant gets a judgement which wholly undervalues the value of their claim as it was done on the basis of the inadequate information.
We welcome the proposals in paragraph 7.8
xv) Withdrawal of proceedings (amendments to rule 25)
We see the sense in spelling out that where a claim is dismissed, the claimant cannot bring fresh proceedings relying on the same cause of action. However, we question whether it is appropriate to include this in the rules of procedure, since it goes to jurisdiction, which is a matter of primary legislation and case law.
We observe that draft rule 25(4) only explains the bar on commencing a further claim, omitting the current bar on continuing the current proceedings. It may be better to retain the current bar.
We have a number of concerns regarding the proposed rule 25A (settlements through ACAS).
- Paragraph 7.12 reads as if the intention is to trigger a dismissal procedure on ACAS notifying the Employment Tribunal that a settlement has been reached. Draft rule 25A(1)(d), on the other hand, makes the procedure conditional on the Claimant notifying the ET of withdrawal in accordance with rule 25(2).
- The reference in the parties settling proceedings “through ACAS” is vague. We suggest using the wording in section 203(2)(c) ERA: “any agreement to refrain from … continuing proceedings where a conciliation officer has taken action under section 18 of the Employment Tribunals Act 1996”.
- We repeat our comments on rule 25(4): it is sensible to spell out that the claimant cannot continue the current proceedings.
xvi) Stage 1 equal value hearings
We do not agree that a Stage 1 equal value hearing should be treated as any other pre-hearing review.
In every Stage 1 hearing the tribunal needs to hear evidence about the jobs of the claimant(s) and comparator(s) in order to decide whether to appoint an expert.
A full tribunal is needed for this. It may be true that in many cases at present, the (full) tribunal concludes that an expert is needed. But that does not detract from the fact that in order to reach the decision to appoint an expert at Stage 1, the tribunal considers facts which by definition are in dispute.
See paragraph 4(1) of Schedule 6: “When in an equal value claim there is a dispute as to whether any work is of equal value…” .
The judgement that the tribunal has to make is whether, on the facts, they can determine whether the jobs are of equal value without the assistance of an independent expert. This judgement, by its very nature, is one that requires the experience of the lay members.
Furthermore, such disputes are not minor. The tribunal at Stage 1 almost invariably has to determine “one or more substantive issues of fact” – see rule 18(3)(b).
So if anything the analogy with a PHR suggests that a full tribunal with lay members is needed. That, indeed, was the thinking behind the current provisions that Stage 1 hearings are not PHRs. Paragraph 7.13 of the consultation paper does not identify any change in circumstances or new evidence suggesting that the original scheme was mistaken.
xvii) Implementation of the TCE Act 2007 in relation to qualification periods
We do not agree with the proposal to reduce the level of experience required for appointment as an Employment Judge. The Ministry of Justice’s review of the tribunal system recognised that employment tribunals should remain as a distinct pillar, based largely on the complexity of cases they hear.
Seven years is low enough for qualification for appointment and we do not agree with the proposal to reduce that period to five years.
Section 8 – Changes to secondary legislation as a consequence of the Employment Bill
xviii) Do you agree that references to the 2004 Dispute Resolution Regulations in the TUPE Regulations should be replaced with references to the ACAS Code of Practice on Disciplinary and Grievance Procedures?
We agree that the proviso to regulation 11(2)(c) will not be appropriate once the Dispute Resolution Regulations 2004 are repealed. However, we do not agree that the reference in the proviso to those procedures should be replaced with a reference to the ACAS Code of Practice.
The current proviso reads “within the previous two years, in circumstances where the [2004 Regulations] apply”. The word “apply” has a clear statutory meaning, which is not the case with an ACAS Code of Practice.
Section 199 of TULRCA empowers ACAS to issue Codes of Practice “containing … practical guidance”. Section 207 expressly provides that a failure to observe any provision of a Code of Practice shall not of itself render any person liable to any proceedings but that an ET or the Central Arbitration Committee (CAC) shall take it into account if relevant to any question before it.
There is nothing in legislation that specifies when an ACAS Code shall “apply”.
The 2004 Regulations defined, with some precision, when they and the statutory disciplinary and dismissal procedure (DDP) and grievance procedures (GP) would apply. Neither the current ACAS Code or its proposed (inadequate) replacement defines with sufficient precision when its provisions “apply” so as to enable transferor and transferee to understand the basis on which the relevant employee liability information is being provided.
It would be better therefore to revoke the proviso after the words “within the previous two years”; to keep TUPE regulation 11(2)(c)(i) as it is; and to replace regulation 11(2)(c)(ii) with “written grievance received from an employee or their representative”.
xix) Do you agree with the Government’s conclusion on transitional arrangements? If not, can you suggest an alternative which enables more cases to transfer to the new regime sooner without retrospective changes to the legal position of individuals and employers?
Thompsons welcomes the repeal of the Dispute Resolution legislation, which has operated to exclude many meritorious claims from the ETs. We acknowledge that transitional arrangements are unavoidable, but we would make the following introductory points:
- The estimate that the current regime will continue to apply to some cases that come for hearing in 2010 does not seem to take account of the EAT decisions in BUPA Care Homes v Cann (22 Feb 2006) and Ashcroft v Haberdashers Aske’s Boys School (14 Nov 2007). These cases held that the normal time limit extensions (e.g. “not reasonably practicable”) continue to apply even if a three-month extension is available under the dispute resolution regime. So the operation of parallel regimes may last longer than the consultation paper envisages.
- an approach based on avoiding retrospective changes will on balance benefit employers more than workers, particularly in light of the Court of Appeal decision in Selvarajan v Wilmott & others (23 July 2008) narrowing the basis for dismissals being automatically unfair under s.98A(1) for non-completion of the DDP
- furthermore, the Government’s approach to the transitional provisions in cases where the GP applies, centres solely or mainly on employees’ right to an extension of the time limit. It does not give proper weight to the injustice of the continuing operation of section 32 of the 2002 Act, which excludes claims that have not been grieved.
Subject to those observations, we understand that the proposed transitional provisions will apply to grievances by virtue of the draft Statutory Instrument (SI), Regulation 2 and Paragraph 3 of Schedule 1, in the following way:
|Line||Employer's Action||Grievance raised or ET1 lodged||Effect|
|1||Starts and ends before 6 April 09||Anytime||Para 3(1): 2002 Act & 2004 Regs apply|
|2||Starts before and ends on 6 April 09|
|3||Starts before and ends after 6 April 09||On or before 4 July 09+||Para 3(2)(b)(i): 2002 Act & 2004 Regs apply|
|4||Starts before and ends after 6 April 09||After 4 July 09+||Para 3(2)(b)(ii): 2002 Act & 2004 Regs disapplied|
|5||Starts and ends on 6 April 09||Anytime||Reg 2: 2002 Act & 2004 Regs disapplied|
|6||Starts on 6 April 09 and ends after 6 April 09||Anytime||Reg 2: 2002 Act & 2004 Regs disapplied|
[+ We assume that the standard time limit of three months will apply i.e. that the claim is not equal pay or redundancy payments complaint – three months should be added to the third column for such cases.]
First, as we have indicated in direct communication with BERR, it appears that the draft SI should be amended for a case that falls on our Line 2 ie the employer’s action of which the employee complains starts before but ends on 6 April 2009.
This type of case falls outside para 3 of Schedule 1: para 3(1) would not apply because the action does not occur “wholly before” 6 April; while para 3(2) would not apply because the employer’s action does not continue “beyond” 6 April.
We understand that it is intended that such cases be treated the same as cases on our Lines 3 and 4, in which case reg 3(2)(a) should be amended by substituting “on or before 5th April 2009” for “before 6th April 2009”.
We are grateful for the department’s clarification of the thinking behind a case that falls on our Line 3. We understand that the intention is that an individual does not find that the time limit they expected to apply is shortened due to the repeals taking effect on 5 April and that as far as possible, claims arising out of the same facts are dealt with under the same regime.
We remain concerned, nonetheless, about cases such as that of an employee who complains of underpayments of wages occurring on, say, 5 April, 5 May and 5 June.
If they lodge an ET1 on 30 June 2009 without having raised a grievance in compliance with reg 6 or 9 of the 2004 Regulations, the ET1 will be rejected and they will be advised to raise a statutory grievance.
The effect is that the timing of an ET1 in respect of an employer’s action that continues after 6 April 09 affects the employee’s rights. We accept that an individual in an identical case who did raise a grievance would obtain the three-month extension, but we do not follow why, with repeal taking effect on 6 April, an employer’s continuing action [on or] beyond that date should not free the employee to lodge an ET1 without raising a grievance.
We do not agree that such a provision amount to retrospective legislation.