The Enterprise and Regulatory Reform Bill was presented to the House of Commons on 23 May 2012. In September 2012 a consultation paper on settlement agreements and unfair dismissal compensation was published. Amendments relating to equal pay audits, third party harassment and discrimination questionnaires were announced in October 2012.

Further Government amendments were announced in February 2013 covering whistleblowing, an employer’s ability to pay when assessing the new tribunal penalties, and unfair dismissal where the reason relates to political opinions. Following the Bill’s progress through the House of Lords an amended version of the Bill now contains new clauses on caste discrimination, the abolition of the Agricultural Wages Board and the circumstances in which Acas can disclose information.

The Bill will return to the House of Commons on 16 April 2013 and is expected to receive Royal Assent later in Spring 2013.

The Bill is wide-ranging in the effects it will have on employment law. Its provisions include those listed below.

Settlement agreements

Compromise agreements will be renamed ‘settlement agreements’ and in the Second Reading of the Bill on 11 June 2012 the Government announced that amendments would be tabled to make it easier for employers to use settlement agreements. This would be achieved by ensuring that employers can offer settlement agreements before a formal dispute arises without the offer being used as evidence in an unfair dismissal case. An employee can reject the offer and go to a tribunal with their employment rights unaffected.

An amendment to the Bill tabled in Committee on 19 June 2012 contained a proposed wording on settlement offers. Subject to exceptions, an offer made or discussion held with an employee with a view to terminating employment cannot be taken into account in unfair dismissal proceedings. However if something ‘improper’ comes up in the discussion, an employment tribunal would be allowed to take it into account. The rule would not apply to complaints of automatically unfair dismissal.

The proposed wording would insert a new section 111A into the Employment Rights Act 1996.

On 14 September 2012 the Government published a consultation paper Ending the employment relationship proposing a statutory code of practice on settlement agreements which will include an optional model settlement agreement and model letters. The consultation ended on 23 November 2012 with the Government response published in January 2013. This announced a new Acas statutory code of practice as well as non-statutory guidance.

Unfair dismissal compensatory award

Giving the Secretary of State the power to amend the maximum limit on the compensatory award for unfair dismissal.

The Ending the employment relationship consultation launched on 14 September 2012 also sought views on the proposed level of the cap and how it should be calculated. The Government response published on 17 January announced that the unfair dismissal compensatory award will be capped at the lower of one year’s pay and the existing limit.

Judges sitting alone

Enabling proceedings before the Employment Appeal Tribunal to be heard by the judge alone (subject to a discretionary power to order a hearing in front of a full panel).

Legal officers

Legal officers may make determinations on certain claims – intended to support the introduction of a ‘rapid resolution’ scheme for certain simple or low value claims.

Financial penalties

Enabling employment tribunals to levy a financial penalty on employers found to have breached employment rights. The new penalty will be up to £5,000 in cases where the breach has aggravating features such as malice or negligence.  The power is discretionary.

Indexation of week’s pay

Modifying the formulae for up-rating tribunal awards and statutory redundancy payments to round to the nearest pound.

Deposit orders

Employment tribunals will be given the power to make a deposit order if a party wishes to ‘pursue a specific allegation or argument within proceedings’. Currently, tribunals can make such orders only if a party wishes to continue to ‘participate in proceedings’.


Restricting the definition of ’qualifying disclosure’ in whistleblowing legislation to disclosures ‘in the public interest’. Employers will also become responsible for ‘detrimental acts’ of co-workers against whistleblowers. These actions will be regarded as being done by the employer. Workers may also be personally liable.

Equal pay audits

A minister will be granted the power to make regulations requiring employment tribunals to order any employer who has been found to have breached equal pay law or discriminated because of sex in non-contractual pay to carry out an equal pay audit.

An equal pay audit cannot be ordered where:

  • an audit completed by the respondent in the previous three years meets requirements prescribed for this purpose
  • it is clear without an audit whether any action is required to avoid equal pay breaches occurring or continuing
  • the breach the tribunal has found gives no reason to think that there may be other breaches
  • the disadvantages of an equal pay audit would outweigh its benefits.

The first equal pay audit regulations will exempt start-up and micro-businesses but this may change.

Third party harassment

Provisions in the Equality Act 2010 which make employers liable for the harassment of employees by third parties will be removed.

Discrimination questionnaires

The discrimination questionnaires provisions by which a person can obtain information about potential discrimination from an alleged discriminator will be removed from the Equality Act 2010.

Equality and Human Rights Commission

The Equality Act 2006 was to be amended to change the Equality and Human Rights Commission’s general duty and powers. However the House of Lords has now voted in favour of retaining this general duty.

Source: The Chartered Institute of Personnel and Development (CIPD).

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