Employment law reform: discrimination compensation and TUPE unlikely to change
Consultant editor Darren Newman argues that, despite promising to include reducing discrimination awards and addressing the “gold plated” aspects of TUPE in its employment law review, the Government is unlikely to make changes in these areas.
On Wednesday 11 May, the press was full of stories about the next stage of the Government’s review of employment law. Three areas were to be highlighted in a speech by Ed Davey, the employment relations minister: discrimination compensation, collective redundancies and TUPE. The press reports said that the Government was to look at the case for reducing discrimination awards, cutting the 90-day consultation period in large-scale redundancies and addressing the “gold plated” aspects of TUPE.
These were potentially controversial and important announcements. However, when the official press release on which the reports were based became available, it was clear that the Government was not making any specific proposals. It was merely promising to include these three areas in its overall review of employment law at some stage this year. The same day, at the annual conference of the Institute of Directors, the Chancellor, George Osborne, pledged that the Government would publish “a detailed timetable for the wholesale review of employment law in this country”, although when we do not know. Interestingly, he also referred to the three areas identified by Ed Davey, but added a fourth: simplifying the administration of the national minimum wage.
The difficulty for those of us with a professional interest in the development of employment law is separating the noise from the genuine proposals for reform. For example, we can be fairly certain that the Government is not going to introduce a cap on compensation in discrimination cases. The original limit on awards was removed in 1993 when the European Court of Justice (ECJ) ruled in Marshall v Southampton and South-West Hampshire Area Health Authority (No.2) [1993] IRLR 445 ECJ that compensation has to be capable of covering the full loss suffered by the claimant. If any sort of cap were to be reintroduced, with the result that someone was denied full compensation for the loss caused by the discrimination, this would almost certainly be successfully challenged in the ECJ. This is no secret and the Government’s legal advisors must have already pointed out this problem. Quite why the Government feels it wise to raise false hopes in the press and business community is a bit of a puzzle.
Similar issues arise with TUPE. It would be difficult, for example, for the Government to widen the scope for changing terms and conditions post-transfer and be confident that the new law would survive the scrutiny of the ECJ. However, in one key respect, TUPE goes further than the requirements of the Acquired Rights Directive (2001/23/EC) - namely in defining a “service provision change” as a relevant transfer. Technically, this could be regarded as gold plating, but it would be very surprising if the Government chose to remove it. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) specifically included service provision changes to bring some sense of certainty to the contract services industry. Without this provision, the issue of whether or not the winning and losing of service contracts amounts to a transfer would be left to the complicated and contradictory case law of the ECJ. Were these provisions to be removed from TUPE, chaos would ensue and the business community would have the Government to thank.
There is more scope, however, for changing the law in relation to collective redundancies. Although this area is covered by a European Directive (the Collective Redundancies Directive (98/59/EC)), the UK law has never followed the terms of the Directive as strictly and literally as it does in other areas. For example, the requirement for consultation to begin 30 or 90 days before the first dismissal takes effect is not found in the Directive; nor does the Directive contain any requirement for a protective award, which is an archaic remedy left over from the time when one could expect a tribunal hearing to take place within a week or two of a claim being lodged. The Government would be perfectly free within the constraints of EU law to shorten the period of consultation and to provide that any compensation should be based on the loss suffered by the employees rather than being a punitive award against the employer. Whether or not the Government will actually do this is anybody's guess, because at the moment it is not actually proposing anything.
There is no doubt that many in the business community have so far been disappointed with the Government’s approach to employment law. Many expected a more employer-friendly approach from a Conservative-led administration. Instead they have heard numerous hints about future reform but little in the way of specific proposals. This may be because Conservatives and Liberal Democrats do not naturally see eye to eye on this issue, and there needs to be a lot of careful behind-the-scenes negotiation before fully formed policies can be put forward. In the meantime, what we get is mood music and background noise: speeches that do not actually say anything but provide enough of a hint of future reform to keep the business lobby reasonably happy. Until we see a proper set of proposals we simply do not know how radical this Government is prepared to be on employment law.
My concern is that the Government may be swayed by the woefully inaccurate coverage of employment law in the mainstream media. Much can be done to improve employment law, but reforms need to be carefully thought out, with a proper evidence base. By all means, let us have a wholesale review of employment law, but let us do it properly with clear terms of reference, with consultation structured around specific proposals and with a rational debate. Winning headlines by making vague noises about laws that cannot in practice be changed is not the way forward.
mailto:perspective@irsonline.co.uk
