Monthly Archives: October 2013

Unfair dismissal: Read this before you wield the axe

Ashby Cohen explain the process of unfair dismissalPrior to 6 April 2012, employees needed one-year’s qualifying service to bring a claim for unfair dismissal.  However, after 6 April 2012, employees now need TWO years’ service before they are able to bring an unfair dismissal claim.

The increased qualifying period means there is significantly less risk to employers having to defend an unfair dismissal claim against those they seek to dismiss within the first two years of service.

However, as a matter of good practive, employers should still regard the basic dismissal procedures set out in the ACAS Code of Practice.

As a gloss on this, employers who have contractual, disciplinary or dismissal policies, but who fail to follow these, could still find themselves defending a breach of contract claims and should, therefore, take care to adhere to the process or calculate the commercial risk in breaching it.

As a reminder, discrimination claims do not require a qualifying period, and neither do whistleblowing claims. For example, an employee who is dismissed whilst pregnant, irrespective of her length of service, and employees who have raised discrimination complaints, would need to be handled carefully.

Compensation changes come into effect

Another more recent change applies to the compensation that can be awarded to the employee by the Employment Tribunal if their claim is successful.

The potential compensation awarded in successful unfair dismissal claims is split into two areas.

First, there is the ‘basic award’, which is calculated in the same way as redundancy, based on a capped week’s pay, the employee’s age and length of service.

Second, and often the more costly part, is the ‘compensatory award’, which is based on the employee’s loss of income as a result of losing their job.  The previous statutory cap on the compensatory award in an unfair dismissal claim was £74,200. Now, the compensatory award for claims filed after 29 July 2013 is 52-weeks’ pay or £74,200, whatever is the lower.

Not forgetting there are other potential financial claims that an employee may also claim, such as a nominal amount for ‘loss of statutory rights’ and up to a 25% increase to any award because of the employer’s failure to follow ACAS procedures.

The 52-week limit is no doubt good news for employers.  However, it only applies to unfair dismissal claims, and it remains to be seen whether more claims will be crafted to include elements of discrimination or whistleblowing to avoid the limit.

Goodbye compromise agreements, hello settlement agreements …

Ashby Cohen explain the change from compromise agreements to settlement agreementsThere is very little difference between compromise agreements and settlement agreements, aside from the name change – but it does mean that those of you with precedents should get them reviewed and updated.

Another interesting development in this area relates to the conversations you have with employees before offering a settlement agreement.

As of 29 July 2013, the new position is that offers or negotiations with employees regarding an exit on agreed terms will not be admissible in unfair dismissal claims unless there is improper behaviour.

Prior to this, these discussions could only not be mentioned if there was already a dispute in place and, therefore, references to these conversations could, in some cases, make their way in to pleadings and witness statements.

Hopefully, this change will mean employers can have purposeful discussions with employees regarding an exit on terms without the fear that the discussions could be used as evidence of an intention to part company with the employee.

The government’s focus towards pre-claim conciliation continues with proposal in play, potentially to come into force in April 2014, which will make ACAS early conciliation mandatory before the claimant is able to file a claim.

If you require further assistance with any of the above, then please don’t hesitate to get in touch.

Tribunal fees: What you need to know

As of 29 July 2013, all Employment Tribunal claims must be filed with an issue fee. As of 29 July 2013, all Employment Tribunal claims must be filed with an issue fee.

For simpler claims, such as unpaid wages, holiday and redundancy payments etc. (type A claims), the issue fee is £160.

For more complex complaints, such as unfair dismissal, discrimination and whistleblowing (type B claims), the issue fee is £250.

If the claim progresses to a hearing, the Claimant will need to pay a hearing fee. For type A claims this is £230, and for type B claims £950.

There is also a scheme in place which allows for the ‘remission’ of fees for persons on benefits.

It is hoped that the payment of fees will discourage claimants pursuing weak cases as there is a tangible cost to them, even if pursuing the case as a litigant in person.

For information about tribunal fees, please feel free to contact us – we offer a free initial telephone consultation.

What is a week’s pay when you are not entitled to pay?

Ashby Cohen discuss zero hour contractsThe traditional arrangement of an employee working a set number of hours for a set wage is breaking down.

The Unite union estimates that up to 5.5 million people are on zero-hour contracts where no particular number of hours of work is specified.

There is also a debate as to whether someone on a zero-hour contract is an employee (with all the rights of an employee) or a worker (with more limited rights). The debate centres on whether an individual is required to work when offered hours, or is free to turn it down.

If required to accept the work, then the zero-hour contract is a contract of employment.

A case in the Employment Appeal Tribunal*, involving a hairdressing salon, has confirmed the calculation of a week’s pay for working out the unfair dismissal basic award – a calculation which would be relevant in an unfair dismissal claim brought by an employee on a zero-hours contract.

The facts were that the employee had sold her hairdressing company, which held a franchise.  It was a term of the sale agreement that the employee would be employed in the business as a hair stylist, but her earnings were to be on a commission only basis.

Eventually, the employee was dismissed and brought a claim for unfair dismissal.  She won her claim.

In calculating the basic award, the Employment Judge took into account that, in the period leading up to her dismissal, the employee had been suspended twice, during which her name had been blackened, thereby losing goodwill with her own clients and those she had had diverted from her.

As a result, he calculated the basic award by reference to a higher weekly wage than that which she had in fact earned in the 12 weeks prior to her dismissal.  The employer appealed against this calculation to the Employment Appeal Tribunal.

The Employment Rights Act 1996 contains detailed rules for the calculation of a week’s pay for the purposes of the unfair dismissal basic award.  What these rules boil down to is that an employee’s actual earnings during the 12-week period prior to termination are ascertained and averaged out.  That gives a week’s pay for the purposes of the basic award.  No variation from that formula is permitted.

The Employment Appeal Tribunal ruled that the speculative figure adopted by the Employment Judge, based on the employee’s suspension, blackening of her name and diversion of work, was impermissible.

However, for the purposes of calculating the unfair dismissal compensatory award, which is to be calculated on a just and equitable basis having regard to the loss suffered by the employee, the Employment Judge was entitled to compensate the employee for her lost earnings post dismissal on the basis of what she would have earned but for her unfair dismissal.