News & Events

Employment Law Review 2012

By: Amanda Steadman

Submitted by Firm:
Addleshaw Goddard
Firm Contacts:
Michael Leftley, Sarah Harrop
Article Type:
Legal Update

2012 saw no stone left unturned by the Government in its quest to reform employment law, with barely a month going by without a new call for evidence, consultation or response document being published.  We round up some of the most important legislative developments and proposals from the year and also highlight some of the year's key decisions from the Courts and Tribunals.

New legislation

  • Changes to the unfair dismissal regime: as of 6 April 2012 the qualifying period for unfair dismissal claims increased from 1 to 2 years and the maximum compensatory award increased from £68,400 to £72,300.  The Government has recently concluded the Ending the Employment Relationship consultation which addresses how the compensatory award should be adjusted in future.  In addition, employment judges were given the right to sit alone in unfair dismissal hearings.  This trend is continuing with plans for EAT judges to also sit alone.
  • Employment Tribunal reforms: a raft of reforms came into force on 6 April 2012 as follows: (i) the maximum costs award that can be made by a Tribunal (before referring to the County Court for detailed assessment) increased from £10,000 to £20,000; (ii) the maximum deposit order a Tribunal can order a party to pay increased from £500 to £1,000; (iii) witness statements to stand as evidence-in-chief and to be taken as read at the hearing (unless otherwise directed); and (iv) Tribunals can direct parties to bear the expenses of any witnesses.
  • Pensions auto-enrolment: on 1 October 2012 auto-enrolment duties came into force requiring all employers in Great Britain to automatically enrol eligible jobholders into a pension scheme.  The new duties are to be formally implemented over a four year period starting on 1 October 2012 for employers with over 250 employees. 

Key consultations, responses, guidance etc

  • Mandatory equal pay audits: on 14 June 2012 the Government published its response to the equal pay elements of the Modern Workplaces consultation.  The response confirmed the Government's intention to introduce mandatory equal pay audits for employers who lose equal pay claims where the Tribunal considers that there may be continuing or likely discrimination.  A further consultation on mandatory equal pay audits is to be issued shortly and the change will be brought into force by way of the Enterprise and Regulatory Reform Bill in 2013.
  • Collective redundancies reform: on 21 June 2012 the Government published a consultation on proposals for reform to the collective redundancies regime. The consultation sought views on reducing the 90-day minimum period for redundancies of 100+ employees within a 90 day period to either: (i) 45 days; or (ii) 30 days.  There is no intention to reduce the maximum penalty of 90 days' pay per employee for failure to consult. The Government's response to the consultation was published on 18 December 2012 and confirmed that the consultation period would be reduced to 45 days.  Fixed-term contracts which expire naturally will also be excluded from the scope of the legislation. The changes are due to come into force on 6 April 2013.
  • Charging fees in the Employment Tribunal and EAT: on 13 July 2012 the Government published its response to the consultation on charging fees in the Employment Tribunal and EAT.  The response confirmed the intention to introduce fees into the Tribunal and the EAT for the first time.  A fee remission system will be introduced and a consultation on how the system should work is to be published shortly.
  • Reforms to the Employment Tribunal system: on 14 September 2012 the Government published a consultation on reforms to the Employment Tribunal rules, which primarily aim to streamline the Tribunal process by way of stronger case management.  The consultation sought views on the amendments to the Tribunal rules proposed by Mr Justice Underhill earlier this year.
  • Protected conversations and the compensatory award: on 14 September 2012 the Government published the Ending the Employment Relationship consultation, which sought views on the nature of the guidance needed to support the system of protected conversations outlined in the Enterprise and Regulatory Reform Bill.  Views were also sought on proposals to limit the maximum compensatory award for unfair dismissal to 12 months' pay, subject also to an overall cap of somewhere between £25,882 and £77,646. 
  • Reform of TUPE 2006: in November 2011 the Government called for evidence on the effectiveness of TUPE 2006 due to concerns that the regulations were overly complex and gold-plated the EU Acquired Rights Directive. On 14 September 2012, the Government issued its response to the Call for Evidence.  This briefly set out the key concerns raised by respondents including: (i) concerns about the operation of the service provision change rules; (ii) whether it would be possible to permit the harmonisation of terms post-transfer; (iii) a desire for greater clarity of how TUPE applies in insolvency situations; and (iv) concerns about the interaction of TUPE with other pieces of employment law.  A consultation is due to be issued shortly.
  • Gender diversity: on 1 October 2012 amendments were made to the UK Corporate Governance Code (which applies to companies with a premium listing of equity shares) to require the annual report to include a description of the board's policy on diversity (including gender), any measurable objectives that it has set for implementing the policy and progress on achieving the objectives.  In addition, a supporting principle requires that the evaluation of the board should include consideration of the gender balance.
  • Introduction of a new "employee-owner" status: on 18 October 2012 the Government published a consultation on the proposal to create a new employment status known as the "employee owner" (now to be known as "employee shareholder").  The hallmark of this status is that the employee owners receive fully paid-up shares worth between £2,000 and £50,000 from their employers in exchange for less favourable employment rights.  The Government published its response to the consultation on 3 December 2012, confirming legislation to amend the Employment Rights Act 1996 to create the new status has been included in the Growth and Infrastructure Bill.
  • New family-friendly regime: on 13 November 2012 the Government published its response to the flexible working and flexible parental leave elements of the Modern Workplaces consultation.  The response confirms that in 2014 the right to request flexible working will be extended to all employees who have 26 weeks' continuous service.  In addition, the consultation outlines a proposal to allow a mother and father / mother's partner to be able to share up to 50 weeks' "flexible parental leave" and 37 weeks' "flexible parental pay" where the mother ends her maternity leave and pay.  The system will be introduced in 2015 and a consultation on the system will be published next year.  Finally, the response confirms proposals to implement a number of other family-friendly measures including: (i) improved rights for adopters; (ii) rights for parents by way of surrogacy; (iii) rights for fathers to take unpaid time off to attend ante-natal appointments; (iv) extending the period of unpaid parental leave; and (iv) extending the age limit of a child for whom unpaid parental leave can be taken from 5 to 18.

Key cases

UK Commuter working in Libya had the right to bring a claim for unfair dismissal: the Supreme Court held that in the case of an employee who worked in Libya on a rotational basis when his employment terminated, the connection with Great Britain was sufficiently strong for the employee to have a claim for unfair dismissal (Ravat v Halliburton Manufacturing and Services Ltd).

TUPE - guidance on the meaning of "organised grouping of employees" where service provision changes are concerned:  the EAT confirmed that the service provision change test in TUPE is not met as a matter of course because a contract is outsourced from one service provider to another. It is necessary to explore whether the employees constitute "an organised grouping" in the first instance. This involves examining whether the employees are organised according to client requirements rather than their employer's shift patterns or working practices (Eddie Stobart Ltd v. Moreman)

Age discrimination – justification of compulsory retirement: the Supreme Court decided that a firm of solicitors had identified "legitimate aims" which could objectively justify the compulsory retirement of a partner at the age of 65. The Court highlighted that 'inter-generational fairness' and the 'dignity of older workers' were proper social policy reasons which could justify what would otherwise amount to direct age discrimination (Seldon v Clarkson Wright and Jakes).

Employee fairly dismissed for Facebook posting about a colleague: derogatory comments made by an employee on Facebook about his colleague did not bring the employer's reputation into disrepute, however the harassment of a colleague was sufficiently serious to justify the gross misconduct dismissal. The employee's attempts to rely on the Human Rights Act 1998 were unsuccessful - by posting the comments on Facebook he abandoned any right to consider his comments as private. The right to freedom of thought to manifest one's beliefs was not engaged and the right to freedom of expression did not entitle the employee to make comments which damaged the reputation or infringed the rights of another (Teggart v Tele Tech UK Ltd).

Holidays and sickness: in ANGED v FASGA, the ECJ held that a worker who fell sick whilst on annual leave could take their annual leave at a later date. It did not matter whether the sickness started before or during the annual leave.  In NHS Leeds v Larner, the Court of Appeal held that a worker on long-term sick leave who had not had an opportunity to take annual leave could carry forward unused leave into the following leave year, despite the fact that the worker had not made a request to do so. The worker was also entitled to a payment in lieu of the carried over holiday upon the termination of her employment.

Time limit for bringing equal pay claims: the Supreme Court held that equal pay claims, which would have been out of time in an Employment Tribunal, could proceed as breach of contract claims in the High Court. Whilst the civil courts have a discretion to strike out equal pay claims that it is more 'convenient' for a Tribunal to hear, such claims can never be more conveniently disposed of by a Tribunal where they would be time-barred (Birmingham City Council v Abdulla).

TUPE - no service provision change where the identity of both contractor and client has changed: the Court of Appeal upheld a decision of the EAT that there will be no service provision change for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 on a change of contractor where there is also a change in the client to whom the services are provided (McCarrick v Hunter) .