Lawyers demand clarity over employment reforms amid satellite litigation fears

The Department for Business, Innovation & Skills has proposed the introduction of a new system of settlement agreements. This regime would allow employers and employees to have a conversation at an early stage through which, it is hoped, the employee would agree to leave on mutually acceptable terms.

Under the proposed system, the content of the conversations could not be used as evidence at subsequent hearings should the sacked employee claim for unfair dismissal.

However, in its response to the DBIS consultation, the ELA pointed out that evidence could be used as evidence at hearings if there had been “improper” conduct by the employer in the discussions.

The Association warned that a failure to provide a clear definition of what “improper” means could lead to the term being “open to widely varying interpretation, causing disagreements and challenges”.

Stephen Levinson, one of the joint chairs of the ELA working party on the consultation and a lawyer at RadcliffesLeBrasseur, said: “Law needs to be clear and certain to give employers confidence to use it…. The degree of uncertainty around the meaning of 'improper' will send this law to the burial-place of good intentions.”

Pardoes Solicitors’ Maeve Vickery, also a joint ELA working party chair, added: “The more room that is left for interpreting new wording introduced by the Government the more likely we are to see satellite litigation. Cases will go to tribunal for adjudication which is exactly what the Government wants to avoid.”

The Association said it shared concerns that settlement agreements might discourage employers from trying to manage poor performance because no-fault sacking would require less effort.

It also "regrets" the Government’s idea of introducing fixed tariffs for compensation in unfair dismissal cases. These tariffs are supposed to give employers more certainty about their potential liability.

However, Ellen Temperton, who led on this part of the review for ELA, said: “The introduction of fixed tariffs or compensation caps would not be in anyone’s interests. Most likely it would lead to a rush to the top to obtain the highest settlement – not what employers want – whereas current processes and past settlements provide an adequate benchmark for compensation awards. The Government's aims could be achieved more simply by wider dissemination of information about tribunal awards.”