27 September 2004
Change: humans do it to evolve, animals do it just to survive, companies do it to be successful and, unlike the criminal and civil courts, employment tribunals do it sitting down. Informal it may be, but after a significant overhaul of employment tribunal procedure only three years ago, the latest review has led to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004. It takes effect from 1 October 2004 for all unfair dismissal, discrimination and other employment tribunal claims.
The regulations are contained in a 75-page document entitled Statutory Instrument 204 No 1861, with 20 regulations and five schedules. On this basis it will not be first choice ‘beach reading’ for a late summer holiday, but there is a helpful explanatory note at the end of the order which summarises the main changes that have been made beyond the introduction of “simpler language” and “renumbering and reordering”.
By way of example, a “decision” from the employment tribunal is now replaced by either a “judgment” or an “order” and more emphasis will be given to “case management discussions”, such as to try to ensure that the parties do not turn up to a full hearing unprepared in terms of issues, documents and/or evidence, which is still unfortunately sometimes the case.
Default judgments without a hearing will be introduced where cases are not contested and ways will be sought to simplify all steps in the employment tribunal process. For example, there will be no need for the tribunal to give reasons for its judgments, unless requested to do so. Also, there is no specific guidance in respect of written reasons, where they are given, for example identifying the issues, findings of fact, a concise statement of the application law and how the findings with fact and law have been applied to determine the issues, with a table showing how much compensation has been calculated to the extent that the judgment includes such an award.
The idea is, no doubt, that this also leads to less appeals, but in reality there are three key changes that are most likely to affect practitioners and parties after 1 October.
Pride of place goes to the new cost provisions. Two changes have been made to the present costs rule. First, there will be a provision for possible costs awards in respect of preparation time, primarily aimed at parties without legal representation, although it also covers in-house lawyers. Second, it will be possible for representatives to incur a wasted costs order if they are deemed to have acted unreasonably. This will include solicitors acting on a contingency fee basis. Tribunals are already more prepared to make costs orders than they have been, partly because since summer 2001 costs awards can be made when a case is simply “misconceived”, although in most cases one would expect to see “abusive, vexatious, disruptive” or “unreasonable” behaviour. Most believe this trend will continue from October, although one anomaly, which has meant that the financial means of a party cannot be taken into account for costs orders at a full hearing in contrast to a pre-hearing review, has been removed. Parties with limited financial means are, therefore, more protected. However, those representing parties at an employment tribunal must now think twice before taking any action that might lead to the tribunal determining that they have acted unreasonably.
Unreasonable conduct is likely to include badgering an unrepresented applicant, which is sometimes the resort of a respondent on the back foot but wanting to settle. Also, bear in mind that costs orders are unlimited, albeit subject to what costs have been incurred and a limit of £10,000 if a specific lump sum order is made on the day. Solicitors, potentially in the frame for both sides’ costs in the tribunal, are unlikely to be covered effectively by insurance because any claim will probably come under the policy excess, so care is needed – for example, it is now more important to document pessimistic advice to a client intent on a weak case being heard.
Preacceptance procedures have now been introduced and a claim might be sent back to a claimant if it fails to meet certain conditions. This will include a failure to use the prescribed form that is being introduced for most claims. Until now, the suggested IT1 and IT3 forms have not been compulsory and an applicant could write a letter by way of claim. Under the new regulations, there will be a compulsory form from 6 April 2005 for both the application and the ‘response’ (the new terminology replacing ‘Notice of Appearance’). The idea is, of course, to help parties determine the strength of each side’s case, leading to more settlements prior to a hearing, as well as to a possible reduction in tribunal claims with claimants being better able to assess whether their case has a reasonable prospect of success.
One of the new requirements is that a claimant has to say whether they raised the subject matter of the claim with the respondent in writing at least 28 days prior to presenting the claim and, if not, why they have not done so. This requirement also links in with new statutory disciplinary and grievance procedures in the workplace, which require minimum steps to have been taken before an applicant makes an employment tribunal complaint, or a respondent defends it. The requirement also provides for possible increases or decreases of up to 50 per cent in compensation, in the event that these minimum procedures are not followed. From the new forms, the tribunal will be able to see immediately whether the disciplinary and grievance procedures have been followed in appropriate cases and Acas’s minimum procedures will now have real financial teeth.
Fixed periods for Acas conciliation have been introduced to encourage the early resolution of disputes. There will be no fixed period for the majority of discrimination claims, but there will be a 13-week fixed period (the standard conciliation period) for most other claims and a seven-week fixed period (the short conciliation period) for ‘fast track’ jurisdictions, such as unauthorised deduction of wages or breach of contract claims. After the period for conciliation has ended, or earlier if it is clear what the outcome is, the case will proceed to a hearing through a notification given by Acas. However, it is not until then that the case is listed for a hearing and there may be a further two-week extension if a settlement is imminent.
All claims are going to be affected by these measures and the Department of Trade and Industry is optimistic that these “focus on the issue” changes will lead to a significant reduction in employment tribunal cases, as well as savings in costs. Tactically, this is likely to have a real impact on the timing in cases such as compromise agreement settlements and negotiated exits generally. However, employers who put what they consider to be commercial reality above procedure might now live to regret it, particularly in discrimination cases, where the monetary compensation cap of around £55,000 does not apply.
The objective, rising principally out of the Employment Act 2002 and the recent Employment System Taskforce review, is to save money and tribunal time as well as assist the parties who want spurious cases or defences thrown out and a more efficient system. Only time will tell how successful this will be. The only certainty is that there are more changes to come.
Tim Russell is a consultant at Kemp Little and is a part-time employment tribunal chairman