Vince Cable’s Employment Law Reforms

Vince Cable, the Secretary of State for Business, Innovation and Skills has set out the following proposals to reform employment law.

The consultation proposes reducing the cap on the compensatory award from the current maximum of £72,300 to the lower figure of either the national median average earnings (£25,882) or an individual’s annual net salary. Employees can still of course claim discrimination or bring a whistle blowing claim, both of which have uncapped compensation, in order to put commercial pressure on employers and obtain higher awards than the unfair dismissal cap.

Currently employers and employees can settle disputes by way of Compromise Agreements in order to avoid the employee later bringing an Employment Tribunal claim. However, the limitation at the moment is that if there is no genuine dispute between the parties, any without prejudice discussions or offer of a Compromise Agreement can be disclosed in subsequent Tribunal proceedings. The government’s proposal is therefore to introduce Settlement Agreements which could be entered into by the parties where there is no dispute and without fear of any Without Prejudice discussions being disclosed if the employee elects not to sign the Agreement.

It is proposed that claims for unpaid wages will cost £390 to take to a hearing, which will make it unaffordable and uneconomic for lower paid employees to bring such claims.Unfair dismissal and discrimination claims, if the proposals go ahead, will cost £250 to issue in the Tribunal, and a further £950 if the case proceeds to a hearing. This may deter a large number of employees from bringing claims in the first place or put pressure on them to settle their case before having to pay for the hearing.