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Employment Law Changes - What you might have missed and what does it all mean

11 September 2013

Various changes have been made to employment law over the summer, including whistleblowing, a secondary unfair dismissal cap, pre-termination negotiations, Employment Tribunal fees, compromise/settlement agreements and employee shareholders. We summarise these changes below and then comment on the impact of the changes on employers.

In addition, we are running a free webinar on key employment law reforms, their impact on Tribunal claims and what this means for employers. The date is being finalised but is likely to be in October.  Please email us if you would like to be informed once the webinar is open for signing up.


Pre-termination negotiations (PTNs) are similar to "without prejudice" discussions, but do not require there to be an existing dispute in order for the conversation to be protected. Since 29 July 2013, discussions with a view to the employment being terminated on agreed terms are inadmissible in unfair dismissal cases (except "automatically unfair" dismissals) provided there is no "improper behaviour".

ACAS has published a Code of Practice on Settlement Agreements which provides non-exhaustive guidance on what constitutes "improper behaviour". For example, bullying, intimidation, undue pressure and harassment are among those examples given as inappropriate, along with not giving the employee a reasonable time to consider the offer. It is important that employers who plan to use PTNs are familiar with what constitutes improper behaviour.


On 29 July 2013, a secondary cap on unfair dismissal awards was introduced. Compensation for claims made after this date is capped at the lower of one year's pay or the existing statutory limit, currently £74,200.


Important changes have been made which affect "protected disclosures" made on or after 25 June 2013, as follows:

  • a disclosure only qualifies for protection if the worker reasonably believes it to be made in the public interest
  • the requirement that a disclosure must be made in "good faith" has been removed but the Employment Tribunal now has discretion to reduce compensation by up to 25% where the disclosure is not made in good faith, and
  • employers may be liable for actions of their workers who subject a whistleblower to detriment, unless the employer has provided appropriate training to ensure employees are aware of their obligations towards whistleblowers.

Employers should ensure that their whistleblowing policies are updated to reflect these changes. Given the risk of vicarious liability, employers should take steps to draw their employees' attention to the policy and provide specific training.


Compromise agreements have been renamed settlement agreements. It is the same agreement, simply with a new name. The conditions that applied to compromise agreements, for example that the employee receives independent legal advice, continue to apply to settlement agreements.

Employers should amend the references to compromise agreements in any standard agreement used.


For all claims submitted on or after 29 July 2013, Claimants have had to pay a fee to issue the claim and will pay a further fee if the case proceeds to a hearing.

There are two levels of fee depending on the type of claim (regardless of how much the claim is worth):

  • Type A claims are generally for sums due on termination of employment, such as unpaid wages, notice payments and redundancy payments. These have an issue fee of £160 and a hearing fee of £230,
  • Type B claims include unfair dismissal, discrimination and whistleblowing. These carry an issue fee of £250 and a hearing fee of £950.

Employment Tribunals can (and are likely to) require employers to reimburse Claimants for fees they have paid if the claim is successful.   

Two separate challenges to the Government's decision to introduce fees have been brought and full hearings are expected in October 2013. The Government has given an undertaking to refund any fees if they are subsequently found to be unlawful. 


On 1 September 2013, a new "employee shareholder" status was introduced whereby employees can waive certain employment rights, including their rights to claim "ordinary" unfair dismissal and a statutory redundancy payment, in exchange for at least £2,000 worth of shares.

We are not expecting many employers to choose to make use of this status, but you may wish to consider whether it would be beneficial for your organisation. 


The Government's key objective in making these changes is to reduce the number of claims made and encourage employers to employ more people without what has been seen to be employment restraints. In our view the changes will go some way to achieving these aims.

More flexibility and less risk in managing staff
  • PTNs give more flexibility to employers, allowing them to have settlement discussions which are genuinely off the record. Used properly and in the right circumstances, PTNs therefore lower the risk of making settlement offers and are likely to encourage settlement.
  • In some circumstances, managing staff carries a lower risk following the reforms. Employees now face fees to bring claims and those earning under £74,200 also have a reduced cap for unfair dismissal. For employers of low paid staff, this could be an important change.
Fewer claims
  • The new compensation cap will discourage some claims but as the median awards are well below even the secondary cap, this change alone will not discourage claims being made.
  • The introduction of Tribunal fees will lead to a drop in the number of claims brought, although to what extent remains to be seen. Unsurprisingly, anecdotal reports suggest Tribunals received as much as an entire month's worth of claims on the final day before fees were introduced and very few in the following days!
  • In our view, fees are likely to discourage Claimants from making claims, particularly where the claims are relatively low value. However, employers may still face speculative claims as these are often driven by emotion or malice and will not necessarily be discouraged by the issue fee.
  • Claimants who pay the fee and bring a claim may have a greater resolve to continue their claim to a hearing, and may look for higher settlement offers, including reimbursement of Tribunal fees paid.
Avoiding discrimination is still key
  • Except for fees, none of the reforms above have a substantive impact on discrimination claims. The number of discrimination claims may in fact increase as Claimants allege discrimination either to take them outside of the reduced unfair dismissal cap or to argue that a PTN is admissible.
  • Employers should be conscious of the risk of discrimination in their workplace and should ensure that any practices adopted do not inadvertently discriminate against certain employees due to a protected characteristic. If any policy does indirectly discriminate against a category of employees, employers should think carefully about whether the policy can be justified as a proportionate means of achieving a legitimate aim. 
Litigation strategy
  • The Government hopes that the salary-based cap will lower expectations on compensation of Claimants whose annual salary is well below the overall cap. This should be the case for Claimants who receive legal advice, but is less likely in the case of unrepresented Claimants who often vastly overvalue their claim. These tend to be some of the hardest cases to settle and were perhaps just the sort of cases that the Government was seeking to reduce by making the changes.
  • In addition, some Respondents may wait to see if the Claimant brings a claim or pays the hearing fee before considering settlement discussions. It is not yet clear how long before the hearing the hearing fee will be due, although there has been some suggestion that it could be just a few weeks. If so, routinely delaying settlement discussions until this point could increase costs or present logistical difficulties.
  • Finally, although not dealt with in this article, the rules on deposit orders in Employment Tribunals have also been widened. Respondents may wish to make use of the wider deposit order regime as part of their litigation strategy.

For more information please contact Christopher Bushnell, Associate

T: +44 (0)20 7427 6427