The Employment Act 2008

This article examines the provisions of the Employment Act 2008, which received royal assent on 13 November 2008. It is expected that the key provisions of the Act will come into force on 6 April 2009.

On this page:
Dispute resolution
Non-compliance with a statutory code
Tribunal hearings
Acas conciliation
Compensation for financial loss
National minimum wage
Volunteers and the national minimum wage
Employment agencies
Information sharing
Exclusion or expulsion from a trade union

The Employment Act 2008 repeals the statutory dispute resolution procedures, which have been in force since October 2004. It also returns the law on unfair dismissal to that in existence prior to October 2004. While these are arguably its most eagerly awaited provisions, the Act also impacts on other areas, including the enforcement of the national minimum wage and the law on expulsion or exclusion from a trade union.

Dispute resolution

The most important provisions of the Employment Act 2008 were prompted by a review of the dispute resolution regime by Michael Gibbons of the Better Regulation Executive in the summer of 2007. The Gibbons review concluded that the statutory dispute resolution procedures were not achieving their aim of improving the informal resolution of employment disputes and reducing the number of employment tribunal claims. Gibbons considered that there was no point in seeking to amend the procedures, and recommended that they be repealed in their entirety. His views received overwhelming support from respondents to the subsequent government consultation, and the Employment Act 2008 implements his recommendation.

Section 1 repeals the parts of the Employment Act 2002 concerning the statutory dispute resolution procedures (Schs. 2 to 4 and ss.29 to 33). Sections 29 and 31 introduce the procedures, and provide for an adjustment in compensation of between 10% and 50% when they are not completed and one of the parties is responsible for the failure. Section 32 prevents an employee from pursuing certain tribunal claims without first initiating the grievance procedure and then waiting 28 days. Section 33 allows for an adjustment in time limits to account for the operation of the procedures. Section 30, which gave contractual effect to the statutory procedures, was never implemented. Schedules 2 to 4 set out the procedures, and the jurisdictions to which they apply.

Section 2 of the Employment Act 2008 repeals s.98A of the Employment Rights Act 1996, which provides that a dismissal in relation to which the appropriate statutory procedure has not been completed, where this non-completion is attributable to the employer, is automatically unfair. Section 98A(2) provides that, subject to the completion of the statutory procedure, further procedural failings by the employer will not render the dismissal unfair if the employer can show that the dismissal would have occurred in any event. The repeal of s.98A will therefore return the law on unfair dismissal to the position set out in Polkey v AE Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503: procedural failings will normally render a dismissal unfair even if they made no difference to the outcome, with the "no difference" element being reflected in the award of compensation made by the tribunal.

Non-compliance with a statutory code

In place of the statutory procedures, s.3 of the Employment Act 2008 inserts s.207A into Chapter III of Part IV of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A), allowing for compensation to be adjusted by up to 25% when one party has unreasonably failed to comply with a relevant code of practice.

Chapter III of Part IV of TULR(C)A provides for Acas or the secretary of state to issue codes of practice containing practical guidance for the improvement of industrial relations. The new s.207A applies to proceedings listed in Sch. A2 to TULR(C)A (also inserted by s.3 of the Employment Act 2008). Schedule A2 essentially covers cases of unfair dismissal, redundancy payments, discrimination and the whole range of unlawful detriment claims.

Section 207A states that, where it appears to the tribunal that a "relevant code of practice" applies, and either the employer or the employee has unreasonably failed to comply with the code, the tribunal may increase or decrease any award of compensation by up to 25%, where it considers this to be just and equitable.

Under s.207A(5), the adjustment should take place before any award is made under s.38 of the Employment Act 2002 on the grounds that the employer has failed to give the employee an accurate written statement of terms and conditions.

Section 3(4) of the Employment Act 2008 amends s.124A of the Employment Rights Act 1996 to provide that an adjustment made for breach of a code should be made before any reduction for contributory fault. In the case of unfair dismissal, any adjustment for breach of a code is made to the compensatory award only and not the basic award.

A "relevant code of practice" is defined by s.207A as a code of practice issued under Chapter III that "relates exclusively or primarily to procedure for the resolution of disputes". Throughout the parliamentary debates it was taken for granted that the forthcoming revised "Acas code of practice on disciplinary and grievance procedures" will be a relevant code of practice for these purposes. It could, however, be argued that a code that deals primarily with the steps to be taken by a reasonable employer prior to dismissing an employee for misconduct or poor performance is not primarily concerned with dispute resolution. Whether or not the courts would respond well to such a technical argument remains to be seen, but the definition of a relevant code of practice is certainly not as clear or straightforward as it could have been.

Tribunal hearings

Section 4 of the Employment Act 2008 amends the Employment Tribunals Act 1996. Under s.7(3) of the Employment Tribunals Act 1996, the secretary of state may issue regulations permitting tribunals to determine matters without a hearing in prescribed circumstances. Section 4 of the Employment Act 2008 inserts s.7(3AA), which provides that any such regulations may allow a case to be determined without a hearing only if both sides consent to this in writing or if the respondent has either not presented a response to the proceedings or does not contest the case. Section 7(3AB) provides that a respondent is taken as not submitting a response where it has submitted one but it has not been accepted by the tribunal.

Acas conciliation

Under s.18 of the Employment Tribunals Act 2002, Acas has a duty to conciliate when requested to do so in cases that are not yet the subject of a tribunal claim. Section 5 of the Employment Act 2008 amends s.18 to turn the duty to conciliate into a power to conciliate. This change is aimed at helping Acas target its resources more effectively and focus on the cases that are likely to result in a successful outcome.

Section 6 of the Employment Act 2008 removes the statutory basis for the fixed periods of conciliation provided for in rule 22 of Sch. 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861). At present, there are fixed conciliation periods of either seven or 13 weeks, and any hearing is postponed until the end of the fixed conciliation period. Section 6 repeals s.18(2A) of the Employment Tribunals Act 1996, which provides for the Acas duty to conciliate to become a power to conciliate when the fixed period has expired, and s.19(2), which provides that the parties should be informed that conciliation may not be available beyond the fixed period.

The fixed conciliation periods were introduced as a way of resolving disputes early and discouraging parties from delaying conciliation until just before the hearing. The Gibbons review found that the fixed periods were not achieving this aim and recommended that they be repealed. In practice, since 1 April 2008, Acas has offered conciliation beyond the fixed periods where it appears that doing so may be productive.

Compensation for financial loss

Section 7 of the Employment Act 2008 improves the remedies available to workers claiming unlawful deductions from wages and employees claiming a redundancy payment. At present, claims under these heads are limited to the amount of the deduction or the amount of the redundancy payment due. Section 7 inserts new provisions into ss.24 and 163 of the Employment Rights Act 1996 allowing tribunals to order payment of an amount that the tribunal considers "appropriate in all the circumstances to compensate the worker for any financial loss" that is attributable to the deduction or the non-payment of the redundancy pay.

These amendments will allow tribunals to compensate workers for the consequential losses of a failure on their employer's part to pay wages due or to make a proper redundancy payment. This may include bank charges or other fees incurred as a result of the non-payment. It does not allow for any compensation for injury to feelings or distress.

Although a redundancy payment is available to employees only, the amendment to s.163 refers to compensating the "worker". This is probably simply a drafting slip and should not have any practical effect on the provision.

National minimum wage

The Employment Act 2008 makes a number of changes to the enforcement regime for the national minimum wage.

Section 8 changes the calculation of the amount owed to a worker who is not paid the minimum wage. At present, s.17 of the National Minimum Wage Act 1998 provides that a worker is entitled to receive as "additional remuneration" the difference between the amount actually paid to him or her for the pay reference period in question and the amount that would have been paid had the worker been paid at the rate of the national minimum wage.

As amended, s.17 will retain this calculation, but inserts an alternative basis of calculation and provides that the worker will be entitled to additional remuneration resulting from the calculation that leads to the higher sum.

The alternative calculation is expressed as the formula (A/R1) x R2, where: A is the amount that the worker would receive under the current s.17 calculation; R1 is the rate of the minimum wage payable in respect of the worker during the pay reference period; and R2 is the rate of the national minimum wage applying at the date on which the arrears are determined. The provision therefore allows a worker who has been paid less than the minimum wage for a period of time to be compensated for this on the basis of the rate of the minimum wage applying at the date that his or her case is determined, rather than on the basis of the rate applying during the pay reference periods in which he or she was underpaid. Section 8 also makes similar amendments to the Agricultural Wages Act 1948.

Section 9 of the Employment Act 2008 introduces a new regime for the enforcement of the minimum wage. Currently, enforcement officers can issue an enforcement notice requiring an employer to pay arrears to workers. If the employer does not comply with the notice, the officer can take legal action to recover the arrears on the worker's behalf and issue a penalty notice requiring a penalty to be paid to the secretary of state. The penalty, in respect of each worker, is a sum equal to twice the amount of the national minimum wage rate for each day in which the employer has failed to comply with the enforcement notice.

The regime introduced by s.9 is more streamlined and is based on a single notice of underpayment. A replacement s.19 of the National Minimum Wage Act 1998 provides that, where an officer is of the opinion that an employer has not been paying one or more workers at the appropriate rate, the officer may serve a notice requiring the employer to pay the amount of arrears due (under the new calculation provided for under s.17) within 28 days.

The key change is that this notice of underpayment must require the employer to pay a financial penalty to the secretary of state (new s.19A). The amount of the penalty to be paid is 50% of the total arrears owed in respect of periods following the coming into force of the new regime (s.19A(5)). The penalty must be at least £100 and not higher than £5,000 (s.19A(6) and (7)). The employer cannot avoid a penalty by paying the arrears within 28 days. However, if the employer pays the whole of the arrears plus half of the financial penalty within 14 days of the notice being served, the rest of the financial penalty is waived (s.19A(10)).

The financial penalty is an alternative to prosecution under the National Minimum Wage Act 1998 for failure to pay the minimum wage. If prosecution takes place, the financial penalty is suspended, and withdrawn if the prosecution is successful. If the prosecution does not go ahead, or ends without a conviction, the penalty is reactivated by a "penalty reactivation notice".

An employer that wishes to challenge a notice of underpayment can appeal to the employment tribunal (s.19C). The claim must be brought within the 28-day period of the notice. If the tribunal upholds the complaint, it must either rescind or rectify the notice. If it rectifies the notice, the notice takes effect as a fresh notice of underpayment from the date of the tribunal's determination.

If an employer does not comply with the requirements under a notice of underpayment, the enforcement officer can bring an unlawful deduction from wages claim on the employees' behalf in the employment tribunal or launch a civil court action to recover the underpayments (s.19D). The financial penalty can be recovered as a civil debt in the normal courts (s.19E).

Section 9 of the Employment Act 2008 also inserts into the National Minimum Wage Act 1998 detailed provisions dealing with corrections to notices of underpayment and the issuing of corrected notices or the withdrawal of notices by enforcement officers (ss.19F to 19H).

Section 10 of the Employment Act 2008 makes a minor amendment to s.14 of the National Minimum Wage Act 1998, which deals with the powers of officers enforcing the minimum wage to inspect and make copies of records kept by employers. Officers are given a slightly wider power to take copies of whole records rather than just the "material part" of records under the current regime. A new s.14(3A) provides that the power to take copies of records includes a power to remove the records for the purposes of taking a copy, provided that such records are returned as soon as reasonably practicable. The amendments under s.10 will come into force on 13 January 2009 (s.22(1)(b) of the Employment Act 2008).

Section 11 of the Employment Act 2008 increases the seriousness of the offences under s.31 of the National Minimum Wage Act 1998 of refusing to pay the minimum wage, keeping inaccurate records or obstructing the work of enforcement officers. At present, such offences are triable only in the magistrates' court and the maximum punishment is a fine not exceeding level 5 on the standard scale (£5,000). Section 11 amends this to allow offences to be tried in the Crown Court with no limit on the level of the fine that can be imposed. If the trial takes place in the magistrates' court, the fine will be limited to the "statutory maximum", which is £5,000 in England and Wales, but £10,000 in Scotland. As a result of the offences now being triable in both the Crown Court and the magistrates' court (referred to in criminal law as offences "triable either way"), the provisions for determining when the time limits for cases triable only in the magistrates' court start to run are repealed (s.11(2) repealing s.33(2) to (5) of the National Minimum Wage Act 1998).

Section 12 extends the powers of enforcement officers investigating national minimum wage offences to equate to those in relation to other HM Revenue and Customs investigations covered by the Finance Act 2007. In effect, this means that officers will be able to apply for production orders and search warrants and will even be able to arrest a person suspected of committing an offence.

Volunteers and the national minimum wage

Section 13 of the Employment Act 2008 provides that adult volunteers working with any of the armed services cadet forces do not qualify for the national minimum wage. There had been some confusion about their position because, although they are volunteers, the military nature of their activities results in more obligations being placed on them than would be the case in many other areas of voluntary work, and they are given a small financial consideration for their work. Section 13 therefore clarifies that they do not qualify for the national minimum wage.

Section 14 makes a minor amendment regarding the expenses that can be paid to voluntary workers without such volunteers becoming workers who qualify for the national minimum wage. It amends s.44 of the National Minimum Wage Act 1998 to allow for reimbursement of expenses that are reasonably incurred in enabling the volunteer to perform his or her duties. This could cover travel, childcare costs or the purchase of special clothing or equipment. Accommodation cannot be recovered as an expense, although voluntary organisations and charities will still be able to provide reasonable accommodation directly to volunteers.

These provisions will come into force on 13 January 2009 (s.22(1)(d) of the Employment Act 2008).

Employment agencies

Section 15 of the Employment Act 2008 makes offences under the Employment Agencies Act 1973 "triable either way", ie in both the Crown Court and the magistrates' court, rather than just the magistrates' court. The maximum penalty becomes a fine (with no upper limit) in the Crown Court or a fine not exceeding the statutory maximum in the magistrates' court (£5,000 in England and Wales, £10,000 in Scotland).

Section 16 deals with the powers of employment agency inspectors under the Employment Agencies Act 1973. It widens their power to inspect and copy financial records and documents and to require individuals - including, in certain circumstances, banks - to produce records and documents that may be relevant to the inspection. Inspectors may make copies of any documents inspected, and for this purpose may remove a document from the premises and return it once a copy has been made.

Section 17 makes a minor change to the offences under the Employment Agencies Act 1973 as they apply to partnerships in Scotland. It provides that partners who have connived in an offence will be individually liable for the offence, along with the partnership itself. This deals with specific aspects of the Scottish law on partnerships and has no relevance to the law in England and Wales.

These provisions will come into force on 6 April 2009 (s.22(1)(e) of the Employment Act 2008).

Information sharing

Section 18 of the Employment Act 2008 makes a small amendment to the National Minimum Wage Act 1998 and the Employment Agencies Act 1973 to allow the officers and inspectors concerned with the enforcement of the Acts to share the information that they obtain in the course of their investigations.

Exclusion or expulsion from a trade union

The final substantive provision of the Employment Act 2008 (s.19) makes a change to the law surrounding the exclusion or expulsion of trade union members. Section 174 of TULR(C)A - which dates back to a time when employees in a closed shop environment could lose their job if they were not a member of the right trade union - limits the exclusion or expulsion of trade union members to a number of specified grounds. One ground on which an individual can be excluded or expelled is conduct. However, s.174(4A) provides that membership (or non-membership) of a political party is "protected conduct" and cannot form the basis of a lawful exclusion or expulsion from a union.

In Associated Society of Locomotive Engineers and Firemen (ASLEF) v United Kingdom [2007] IRLR 361, the European Court of Human Rights ruled that this provision was in breach of the union's right to freedom of association under art. 11 of the European Convention on Human Rights. The union had resolved at its conference that membership of the British National Party (BNP) and similar organisations was incompatible with membership of Aslef, and as a result had expelled a member who was a BNP activist. The expulsion was ruled by an employment tribunal to be unlawful and the union complained to the European Court of Human Rights that s.174 interfered with its right to freedom of association.

The Court ruled that s.174 did not strike a proper balance between the union's rights to choose its members and the rights of the individual to join a trade union. Section 19 of the Employment Act 2008 aims to correct this.

The first draft of the Bill simply provided for references to membership of a political party to be removed from s.174. However, this proposal was heavily criticised in the House of Lords - particularly by human rights expert Lord Lester of Herne Hill - as not providing any balancing measures to ensure that individuals excluded or expelled are not subjected to hardship, and have a proper opportunity to make representations to the union in relation to their case. A more detailed regime therefore inserts six new subsections into s.174.

Section 174(4C) provides that conduct that consists of an individual being or having been a member of a political party is not "protected conduct" under s.174(4A) if membership of that party is contrary to either a rule or an objective of the trade union. Such membership may therefore found the basis for a lawful expulsion or exclusion from membership.

In relation to an expulsion, an objective cannot be relied on by the union if, at the time of the conduct, it was not reasonably practicable for the objective to be ascertained by a member of the union. In relation to an exclusion, an objective cannot be relied on if, at the time of the conduct, it was not reasonably practicable for it to be ascertained by a person working in the same trade, industry or profession as the individual (s.174(4D) and (4E)).

An exclusion or expulsion in these circumstances will be unlawful if the decision is not taken in accordance with the union's rules, the decision is taken unfairly, or the individual would lose his or her livelihood or suffer other exceptional hardship as a result of not being, or ceasing to be, a member of the union (s.174(4F) and (4G)).

Section 174(4H) defines unfairness for the purposes of s.174(4G). To act fairly, the union must give the individual notice of the proposal to exclude or expel him or her, and the reasons for the proposal, and the individual must be given a fair opportunity to make representations in respect of the proposal. The union must also consider any representations made fairly.

These amendments make s.174 a complicated provision, and the concept of fairness in deciding on an exclusion or expulsion is vague. However, there are few claims under this section. Unions are not in the business of excluding members lightly. Even if they were, individuals have a number of strong legal protections against being subjected to any disadvantage as a result of not being a member of a trade union. Essentially, the provision is likely to be used in relation only to BNP membership and unions that have chosen to take a particular stand about the incompatibility of this with membership of the union. For the majority of unions and union members, s.174 will remain a hangover from an earlier time, so the difficulties surrounding the wording of the new provisions are unlikely to cause many problems in practice.