Enterprise and Regulatory Reform Act 2013

Wed, 05 Jun 2013

By Gemma Roberts and Mugni Islam-Choudhury

The Enterprise and Regulatory Reform Act 2013 [‘ERRA’] received Royal Assent on 25 April 2013, bringing some significant changes to employment law and tribunal procedure. Gemma Roberts highlights the main reforms affecting employment tribunal, ACAS procedure and the changes to whistleblowing; Mugni Islam-Choudhury considers the amendments introduced to the Equality Act 2010. 
 
Conciliation (provisions likely to come into force in Spring 2014)
 
New Sections 18A and 18B are added to the Employment Tribunals Act 1996 making it mandatory for potential claimants to contact and give details of their proposed employment tribunal to ACAS before commencing proceedings. ACAS will offer the parties the opportunity to engage in conciliation with a conciliation officer for a specified period before a claim can be submitted to the Tribunal. 
 
By Section 7(1) ERRA, a four step early conciliation procedure is introduced under s18A Employment Tribunals Act 1996:
 
1.    Before lodging a claim to institute ‘relevant proceedings’ (those listed in Section 18(1) ETA 1996), a potential claimant must send ‘prescribed information’ to ACAS in the ‘prescribed manner’ (“prescribed” means “prescribed in employment tribunal regulations”);
 
2.    ACAS must then send a copy of the information to a conciliation officer;
 
3.    The officer must try to promote a settlement within a ‘prescribed period’;
 
4.    If settlement is not reached, either because settlement is not possible in the view of the conciliation officer or the prescribed period expires, the officer must issue a certificate to that effect. A claim may not be submitted without such a certificate. The officer may continue to promote settlement after the expiry of the period. 
 
Schedule 2 of the ERRA amends the calculation of limitation periods to allow for conciliation: the period from the day the prospective claimant provides the prescribed information to ACAS until the day when a certificate is issued is not counted for the purpose of calculating limitation periods. 
 
Confidential Negotiations (Prospective date for introduction, summer 2013)
 
Section 14 ERRA introduces the concept of confidential pre-termination negotiations. Tribunals hearing unfair dismissal claims will not be able to hear evidence of discussions held before termination of the employment in question, with a view to it being terminated on agreed terms. 
 
However, such evidence could be admitted under three circumstances; firstly, if any other provision requires the complainant to be regarded as unfairly dismissed, ie in cases of automatic unfair dismissal; secondly if anything was said or done which, in the opinion of the tribunal, was “improper” and the which the tribunal considers it just to consider and thirdly, when considering the question of costs, any offer made on the basis that the right to refer to it was reserved. 
 
Settlement Agreements 
 
By Section 23 ERRA, compromise agreements are renamed ‘settlement agreements’.
 
New Cap on Compensatory Award (Effective from 25 June 2013)
 
Section 15 ERRA allows the Secretary of State to vary by statutory instrument, the upper limit on compensatory awards under s124 Employment Rights Act (currently set at £74,200). 
 
The new limit is likely to be the lower of the current cap or one year’s gross pay.  
 
Financial Penalties (provisions likely to come into force in Spring 2014)
 
By Section 16 ERRA, a new section 12A is inserted into the Employment Tribunals Act 1996 which gives Tribunals the power to impose financial penalties against employers of ‘workers’ who are found to have breached employment rights and where the case has one or more “aggravating factors”. The penalty, of between £100 and £5,000, is to be paid to the Secretary of State. Where a financial award is made against the employer and the tribunal also orders the employer to pay a penalty, the amount of the penalty shall by 50% of the amount of the award, up to £5,000.  
 
Deposit Orders (provisions in force from 25 June 2013)
 
Section 21 ERRA enables the Secretary of State to make regulations giving Tribunals the power to make a deposit order of up to £1,000 in respect of a specific part of a claim or response (rather than the whole claim or response as currently occurs); or to make an order for the payment of witness expenses where it has also made a preparation time order. 
 
Decision Makers
 
Section 11 ERRA amends s 4 of the Employment Tribunals Act 1996 concerning the composition of Tribunals. A new s.6D is inserted into ETA 1996 permitting ‘Legal Officers’ to determine certain types of proceedings that are to specified by statutory instrument, if all the parties consent in writing.   
 
Section 12 ERRA amends s28 of ETA to allow proceedings before the Employment Appeals Tribunal to be heard by a judge sitting alone.
 
Whistleblowing (provisions come into effect on 25 June 2013)
 
Section 17 ERRA amends the Employment Rights Act 1996 so that a disclosure will not be protected unless the employee reasonably believes that it is made in the public interest. This is an overriding requirement and applies to each of the qualifying disclosures in Section 43B of the Employment Rights Act 1996 but the intention is to remove protection from workers who complain of a breach of their own contract of employment alone as established in Parkins v Sodexho Ltd [2002] IRLR 109.  Such complaints will now only amount to protected disclosures if the worker reasonable believes that such a disclosure is in the public interest. 
 
Secondly, by Section 18, a disclosure no longer needs to be made “in good faith”; if the Tribunal finds that a disclosure was not made in good faith, compensation may be reduced by 25%
 
Thirdly, by Section 19, the ERRA introduces vicarious liability for the employer where a worker who has made a protected disclosure is subjected to a detriment by a co-worker or agent of the employer. The provision will therefore overcome the shortfall in protection highlighted in NHS Manchester v Fecitt [2021] IRLR 64. A defence is available to the employer where it can show it took all reasonable steps to prevent the detriment.  
 
There is also power in Section 22 of the ERRA to extends the definition of workers to cover groups of workers who are not currently within the scope of Section 43K of the Employment Rights Act 1996.   
 
Dismissal for Political Opinions (effective 25 June 2013)
 
S108 Employment Rights Act 1996 is amended by Section 13 ERRA to remove the two year qualifying period required to bring a claim for unfair dismissal where the reason or principle reason for the dismissal “is, or relates to the employee’s political opinions of affiliation”.  This is intended to give effect to the ECHR’s ruling in Redfearn v The United Kingdom [2013] IRLR 51.   
 
The new provision is effective from 25 June 2013 and only applies where the EDT falls after that date. 
 
Changes to Equality Law
 
Whereas there has been much publicity concerning the Enterprise and Regulatory Reform Act 2013 (“ERRA”) about reform to Employment Tribunal proceedings and the introduction of a new ACAS conciliation before a claim can be launched, the reform to equalities legislation has gone largely unnoticed.
 
However, there are some significant changes to equalities law about which practitioners and HR advisers need to be aware.
 
Reform of Equality and Human Rights Commission
 
Section 64 makes some significant changes to the EHRC, by amending the Equality Act 2006. Some argue that it will weaken its effectiveness as an “equalities regulator”, whereas the Government’s view is that it will enable the EHRC to focus its resources to be more effective. I’ll leave that for you to decide, but in essence, the main changes are as follows:
•    It repeals section 10(1) and 10(4) to (7) of the EA 2006, which imposes a duty on the Commission to promote good relations between members of different groups, and section 19, which gives the Commission powers associated with section 10.
•    It amends section 12 of the EA 2006, to require the Commission to monitor and report on changes and developments in society which are consistent with its duties in sections 8 (Equality and diversity) and 9 (Human rights).
•    It also reduces the frequency with which the Commission is required to publish a report on progress from every 3 years to every 5.
 
Third Party Harassment of Employees
 
When Section 40 of the Equality Act 2010 was introduced, making employers potentially liable for harassment by third parties, the provision sparked controversy, with those in some quarters describing it as equalities legislation going too far.
 
In reality it was quite a measured provision (although not without some problems concerning interpretation), allowing the employer to mount a statutory defence if it took reasonable steps from preventing harassment taking place - something that it could discharge relatively easily if it took a zero tolerance approach to harassment of its staff by customers or service users, which, I think, all would agree is good practice in any event. In any case, it only extended the “three strikes” rule to all categories of protected characteristic, when it had only previously applied to sexual harassment under the old Sex Discrimination Act 1975.   
 
However, the Government has taken a different view, and has seen it as unnecessary regulation, and so, it has now gone – Section 65 ERRA abolishes the provision.
 
This is not to say that there is now a licence for employers to ignore complaints from their staff about abusive customers. In the EAT case of Sheffield City Council v Norouzi [2011] IRLR 897, the employer was held liable for the harassment of an employee by a service user on the basis that the employer's inaction created a hostile and intimating environment on the grounds of race. The significance of this decision is that the claim was founded on the harassment provisions in the Race Relations Act 1976 - i.e. before the concept of third party harassment on racial grounds was enshrined in law in the Equality Act 2010. Those of you with sufficiently long memories will recall the case of Pearce v Mayfield School [2002] ICR 198 – where a lesbian teacher was subject to harassment from her pupils. The House of Lords rejected the claim on different grounds to the Court of Appeal, however the Court of Appeal in Pearce held that the employer could be liable for third party harassment, if its reason for ignoring the pleas of the hapless employee was also because of the protected characteristic. In that case, it was not and so the claim failed. However, it is easy to see that in other cases the argument could be successful (as in Norouzi), particularly when the reverse burden of proof is thrown into the mix. As a result, those employers preparing to turn a blind eye beware....
 
Abolition of Equality Act Questionnaires
 
One of the most potent weapons in the armoury of a prospective claimant alleging discrimination was the Equality Act Questionnaire. The statutory “fishing expedition” was invaluable to claimants and their representatives in indirect discrimination claims for unearthing statistical data relevant to a claim, and the bane of HR advisors in direct discrimination claims where it put employers under pressure at an early stage to explain their actions in the face of anticipated proceedings. 
 
However, that is not to say that the process was always free from abuse. Too often, one suspects, particularly lengthy questionnaires with all forms of disproportionate and oppressive requests were served as a mechanism to wear the employer down and force them to the negotiating table, sometimes used in conjunction with that other weapon, the DPA request. 
 
Section 66 ERRA now removes section 138 of the Equality Act 2010 which provides the mechanism for the questionnaire procedure. However, under the amended legislation, a potential complainant may still seek information from a potential respondent without the statutory procedure and a court or tribunal may consider any relevant questions and answers as part of the evidence in a case.  
 
It is a somewhat odd change in the law, given that in civil litigation, the emphasis is on “pre-action disclosure” and “protocols”, and the parties being encouraged to resolve disputes prior to issuing proceedings – the very reason the questionnaire process was conceived in the first place. If the aim was to address the mischief of overly oppressive questionnaires, then, perhaps, there were far more sophisticated ways to address this, than to abolish them altogether. Given that the complainant may still seek information, it will be interesting to see if practice will change at all.       
 
Caste as an aspect of race
 
Section 97 ERRA amends Section 9(5) of the Equality Act 2010 so as to place a duty on a Minister of the Crown to make an order which includes “caste” within the definition of “race” – i.e. caste discrimination is not unlawful right now, but the Equality Act could be amended at some stage in the future to make it so. 
 
Equal Pay Audit
 
Section 98 ERRA amends the Equality Act 2010 to enable a Minister of the Crown to make regulations to require employment tribunals to order employers to carry out equal pay audits where they have been found to have breached equal pay law or to have discriminated because of sex in non-contractual pay such as discretionary bonuses. 
 
Again, this provision is not in force, but gives the Minister power to bring it into force at a future date. Should the Minister do so, one can expect real concern from private sector employers, who to date have largely avoided the painfully expensive equal pay litigation that the public sector has faced in the last few years.
 
Please click here to view the profiles of Gemma Roberts and Mugni Islam-Choudhury

Related articles

This article originally appeared in the AvMA Lawyers Service Newsletter (November&nbs...

Date: Sun, 09 Dec 2018
Since I posted my Top Ten Tips for experts’ meetings, the recent decision by Mrs Justice Yip i...

Date: Wed, 29 Aug 2018
After the Anthony Bland case in 1993, it became the practice to get the courts to decide whether a p...

Date: Wed, 01 Aug 2018