Canter Levin & Berg Employment Solutions Canter Levin & Berg Employment Solutions
September 2014

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This month's news round-up:

1. what is the future of employment tribunals?


This is the question that was asked by former President of the Employment Tribunals of England and Wales in a speech to The Law Society last June. It has turned out to be a timely question given the near-collapse of the current employment tribunal system following the introduction of fees, mixed reports about ACAS early conciliation (as I predicted) and the announcement by Chuka Umunna at the TUC Conference this month that, if elected, Labour plans a complete overhaul and perhaps even replacement of employment tribunals.

Tribunals as we know them were introduced in 1971 as a "cheap and informal" alternative to conventional court proceedings. As I have pointed out on many occasions they have become and expensive and complex alternative, to the extent that many would now prefer litigation in the county courts. It is therefore reasonable to suggest that their raison d'être has been undermined over time. It is also a cause of some concern that a significantly higher percentage of employment tribunal judgments than county court judgments are successfully appealed. We seem to have come to the point that all participants in the employment tribunal process, apart from those that have a vested interest, are ready for a change.

I have suggested on many occasions that employment claims should be dealt with in the county court on the basis that the respective processes are barely distinguishable in terms of the key elements of dealing with a claim - notice of claim, defence, schedule of losses, disclosure of documents, exchange of witness statements, exchange of legal arguments, advocacy, evidence in chief and cross examination, summing up and the delivery of a judgment. Indeed, the terminology - "judge", "judgment" - has been merging in recent years.

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2. is it really possible to recover public sector payoffs?


The contentious issue of what are often referred to in the media as "public sector payoffs" has attracted a good deal of attention in the last few months.

Faced with budget cuts and staff reductions there has been a good deal of irritation about managers receiving generous severance payments, only to take up alternative employment elsewhere in the public sector and thereby enjoy what many would regard as a windfall.

Matters came to a head a couple of months ago when it emerged that some 4,000 NHS managers received large severance payments only to be rehired - so-called "revolving door managers". On a wider basis since 2010 there have been 38,000 "severance agreements" which cost a staggering £1.6bn. Since last year there have been 6,330 exit packages for NHS staff, costing £197m. In 2013 237 managers were paid £100,000 to £150,000, 83 got between £150,000 and £200,000 and 40 got over £200,000.

In the face of a system which appears inequitable and out of control the Government has held a consultation which expired on 17 September with a view to recovering exit payments when high earners return to the same part of the public sector within twelve months of leaving. It is suggested in the consultation that repayment in full would be required in the event of re-employment within 28 days with a sliding scale of repayments applying for the remainder of the twelve months following termination.

The scope is wide-ranging and is intended to cover:

  • redundancy payments - these will include both voluntary and compulsory redundancies, whether offered on an individual basis or as part of a workforce-wide scheme
  • voluntary exit payments
  • discretionary payments made to buy out actuarial reductions in pensions to allow for early retirement
  • ex gratia payments and special severance payments
  • compensation payments due as a matter of contractual entitlement
  • payments representing the value of fixed term contracts
  • payments made to facilitate a dismissal on the grounds of efficiency
  • payments in lieu of notice
  • payments that have a potential if not actual monetary value, including share options or benefits in kind

Enabling legislation is intended to be included within the Small Business, Enterprise and Employment Bill.

The obvious problem with this is that there are existing contractual arrangements and collective agreements that have been negotiated and applied over many years. Can they be disapplied by the government at a stroke?

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3. half of employment tribunal awards are not paid


Research in Scotland has revealed that nearly half of employment tribunal awards are not paid, while a further 13% of successful claimants receive only part of their award. This follows research carried out across the UK last year which showed that only 49% of successful claimants received payment in full, 16% received part payments with 36% receiving nothing at all. It seems that the situation in Scotland is worse because the methods available for enforcement of tribunal awards are unwieldy and not widely known.

According to a report in the Scottish Herald examples include a Sikh garage worker, Paramjit Singh, who was racially abused by his Muslim bosses. They called him a "lazy low-caste Sikh" and, with reference to his white British wife questioned how he "could stay with a white woman. They're not clean and they don't know how to live". He was also forced to carry out demeaning work repeatedly. He was awarded over £18,000 but has recovered nothing. In August 2014 the Respondent, P K Imperial Retail Limited, made an application to Companies House to be struck off and a director resigned. The reality is that the prospects of Mr Singh recovering anything are negligible.

Recently, the Government decided against tightening the existing regime concerning the liquidation and/or administration of companies and the formation of new companies which often carry on the same business with the same owners from the same premises, but without any of the former liabilities, including tribunal awards. The rationale for this is that the "enterprise culture" should not be suppressed so that people who have lost their businesses through no fault of their own should not be deterred from starting over. I think that many would say that not paying tribunal awards is an unlikely indicator of a no-fault business failure.

In response the UK government has suggested giving powers to employment judges to require businesses deemed to be possible non-payers to be required to pay a deposit. Deeming a business a possible non-payer is a big call for an employment judge to make and one that is likely to prompt at least indignation from the business owners. What evidence would be relied on and what tests would be applied?

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