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Law Commission proposes increased powers for Employment Tribunals

05 May 2020

A major new report on reform of Employment Tribunal hearing structures by the Law Commission includes various significant proposals on how employment and discrimination cases should be heard, time limits for bringing claims and compensation for breach of contract.

Background to the report

The role of the Law Commission (the Commission) is to promote reform of the law. The remit of its report Employment Law Hearing Structures was to consider the issues surrounding the shared jurisdiction of the civil courts and the Employment Tribunals (ETs) for employment and discrimination claims. The report follows a consultation period which ran from September 2018 to January 2019, during which the Commission received 72 responses from professionals (including Lewis Silkin - our submission is available here).

ETs are something of an anomaly in the court system, having been created in 1964 in the form of “Industrial Tribunals” to deal with appeals by employers against industrial training levies. The scope of ETs today has grown enormously over the years but, unlike civil courts, ETs have no inherent jurisdiction. This means that specific legislation must state which claims can be referred to ETs. Certain issues arise from this, particularly as regards discrimination and other employment claims that can be heard in both the civil courts and the ETs.

What is the Law Commission proposing?

The report contains 23 recommendations within its 200+ pages, the most noteworthy being as follows:

  • Increasing the time limit for individuals to bring an ET claim from three months (the current time limit in most cases) to six months, including breach of contract claims.
  • Introducing a single test to be applied when considering whether to allow a claim to proceed because it has been brought outside of the initial time limit – namely, whether it is “just and equitable” to allow the claim to continue. This is the current test for discrimination claims: it is easier to satisfy than the “not reasonably practicable” test used for most other types of ET claim.
  • Introducing the flexible deployment of ET judges so they can hear discrimination claims in the civil courts. The Commission considers that ET judges have considerable experience in discrimination law and so may be better placed to hear these types of claims.
  • Allowing ETs to hear claims for damages for breach of contract by employees (and counterclaims by employers) while the employment contract is still in place, and breach of contract claims relating to post-termination breaches. Currently, only contract claims which arise or are outstanding on termination of employment can be heard in the ET.
  • Allowing ETs to hear breach of contract claims from workers as well as employees.
  • Increasing the maximum award that an ET can make for a breach of contract claims from £25,000 to £100,000 (whether brought by the employee or employer).
  • A widening of the legal principles available to ETs when considering claims for unlawful deduction from wages - including applying “set-off” and allowing claims relating to unquantified sums.
  • The power to transfer equal pay claims from the High Court to the ET, with a presumption in favour of the case being transferred.
  • Extending the ET’s jurisdiction to hear claims brought by workers relating to working hours in excess of the maximum limits contained in the Working Time Regulations 1998.
  • Improving the procedures for enforcing ET awards to ensure employees receive their compensation in a timely fashion. The Commission recommends creating a fast-track enforcement process within the ET structure and extending the Department for Business, Energy & Industrial Strategy’s current ET penalty enforcement scheme so that it is automatically triggered on the issuing of an ET judgment.

What do these recommendations mean for employers?

There are both pros and cons for employers arising from the Commission’s recommendations.

The proposal to increase time limits means an extended period of uncertainty for employers before knowing whether an employee is bringing a claim. It also means that, in most cases, the actual timeframe before an employee must present their claim to an ET could be as long as 7.5 months, after taking into account the maximum Acas early conciliation period (which extends time for bringing a claim). Bearing in mind the significant delays that many ETs are currently experiencing in processing claims, this could mean it is some ten months after a dismissal or other alleged event before an employer is made aware there is a claim. This could cause difficulties in relation to the preservation of evidence and witness recollection of events, as well as witness availability.

The recommendation to introduce a single test regarding an employee missing the time limit would mean that claims which would previously have been struck out on ground of the employee being unable to show it was not “reasonably practicable” to bring their claim in time are more likely to be allowed to proceed. The “just and equitable” test allows ETs a broader discretion.

Other recommendations may be more welcome to employers. The ability to transfer equal pay claims from the civil courts to the ET ensures that specialist ET judges can deal with the potentially complex issues arising. Similarly, allowing specialist ET judges to hear discrimination cases in the civil courts would be a sensible use of their expertise.

It also makes sense to allow ETs to consider all types of breach of contract claim arising from employment, with an increased maximum award of £100,000. The downside is that the ET does not currently require any fee to be paid to bring a claim, and generally the losing party does not have to pay the other side’s costs (unlike in the civil courts). This means that employees might be more inclined to bring significant breach of contract claims in the ET when they would otherwise have been dissuaded by the fees and risk of costs in the civil courts. On the flipside, this would reduce the need for employers to potentially have to defend two separate claims - one brought in the ET for unfair dismissal and the other in the civil courts for breach of contract - when dealing with high-earners. The current situation is complex and often causes confusion in practice.

What happens next?

As the Commission’s role is merely to promote what it considers to be desirable legal reforms, it does not have the power to impose specific changes or enforce recommendations. The relevant government minister - Robert Buckland QC MP, Secretary of State for Justice and Lord Chancellor - should now consider the report and provide an interim response within the next six months followed by a full report within the next 12 months.

The minister’s report should explain which recommendations he accepts, rejects or intends to implement in a modified form. The government does often implement law reform recommendations put forward by the Commission, so it is likely that at least some of the changes outlined above will take place in due course.

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