Posted: Thursday 24 May 2012
Changes To Employment Tribunal Compensation Limits?
Further to its announcement in the Queen’s Speech earlier this month, the Enterprise and Regulatory Reform Bill has now been published. The Bill includes a number of provisions that are significant to employment law, including:
- A mandatory period of Acas conciliation prior to instituting tribunal proceedings (sections 7-9);
- Employment Appeal cases are to be heard by a judge alone unless otherwise ordered (section 11);
- Creation of the power for the Secretary of State to limit compensatory awards for unfair dismissals to (a) a maximum sum of between one and three times the national median earnings; (b) a maximum of at least 52 weeks’ pay or (c) the lower of the two. (section 12);
- Creation of the power to impose a penalty (which will be paid to the Government not to the employee) on employers of 50% of any financial award where there are, as yet unspecified, “aggravating features” (capped at £5,000). As with parking tickets there will be a 50% discount if paid within 21 days. (section 13);
- Changes to the definition of qualifying disclosures in whistleblowing legislation (section 14);
- Compromise Agreements to be renamed Settlement Agreements (section 16).
The creation of the power for the Secretary of State to alter the limits on compensatory awards for unfair dismissals in accordance with a specified formula is perhaps the most interesting aspect of the Bill. The limit on compensatory awards for unfair dismissals is currently fixed at £72,300.
According to information released from BIS to Daniel Barnett, specialist Employment Barrister, the median average earnings figure is considered by BIS, for the purpose of these calculations, to be £26,000 (albeit as specified in the draft Bill this figure will be based on the latest median figure published by the Statistics Board), allowing the cap to be set anywhere between £26,000 and £78,000 – a very wide range indeed.
Intriguingly, a reading of the relevant provisions of the draft Bill reveals that “Different amounts may be specified… in relation to employers of different descriptions”.
As I’ve mentioned previously, the Government are currently consulting on no fault compensated dismissals for employers with fewer than 10 employees and it may be that they will introduce a different cap for small employers or perhaps even a sliding scale depending on the size of the employer.
It will be interesting to see how this develops. The limits are usually reviewed towards the end of the year and implemented on 1 February and it may be that the aim is to implement the compensation limit changes prior to then. It is also worth bearing in mind that the cap on compensatory awards does not apply to discrimination, whistleblowing and dismissals based on an employee raising certain health and safety issues, and so these types of claims look to be unaffected by this change at present.
I will provide more detail as the Bill progresses through Parliament. In addition, we will be looking at this development in our annual employment update seminars on 13 and 14 June in Glasgow and Edinburgh - click here for further details and to register.
If you are interested, for more details on the provisions put forward, the full text of the Bill can be read here.
