Employment law update: latest Government proposals

Employment law update: latest Government proposals


Author: Kevin McCavish

The Government confirmed a package of employment law reforms on 14 September 2012.

Settlement agreements

The Government previously announced that compromise agreements would be re-named settlement agreements. It wants to encourage employers and employees to use them to end the employment relationship consensually without recourse to the Employment Tribunal. ACAS has been tasked to produce a new Statutory Code to assist employers in offering settlement in the right way. Template letters and model agreements have also been produced by the Government to assist employers.

Protected conversations: unfair dismissal

In respect of unfair dismissal claims only, employees would not be able to use evidence of their employer discussing terminating their employment e.g. by offering a settlement agreement to in unfair dismissal claim. However, this relaxation would not apply to other types of claim such as discrimination.

Cap of unfair dismissal compensation

The current statutory limit on compensatory awards for unfair dismissal is £72,300. There was a large one-off increase in this limit in 1999 from £12,000 to £50,000 and since that time there has been above inflation rises. However, the median award for unfair dismissal claims last year was actually just £5,000. A new cap on unfair dismissal compensation has been proposed. The basic award and the way it is calculated will not change. Two options are proposed, either a cap of the individual's annual salary (subject to an overall cap) or a reduced cap based on an as yet undecided figure of up to three time the median earnings (currently £25,882).

No fault dismissals for micro businesses

The Government has confirmed that controversial proposals for so-called 'no fault' dismissals for micro firms will not be taken forward. However, the ACAS Code of Practice on discipline and grievance will be amended to make it more accessible for small businesses.

Consultation on changes to TUPE

Following a call for evidence last year the Government has confirmed that it will consult on proposals to amend TUPE "in due course". While there may be changes to some aspects of the legislation, in other areas guidance may simply be improved. The Government has acknowledged that its room for manoeuvre on changes is limited as TUPE implements European law. It has however said it will consider:

  • whether the 2006 service provision changes should be retained or repealed;
  • whether, generally, liability should pass entirely to the transferee as now, or be held jointly and severally by transferee and transferor;
  • whether employee liability information should be provided earlier to the transferee;
  • whether an amendment to TUPE would be possible to ensure that a change of location of the workplace following a transfer does not necessarily lead to automatic unfair dismissal, i.e., it is capable of constituting an Economic, Technical or Organisational reason entailing changes in the workforce.


Lots of change is on the horizon; HR professionals, lawyers and their clients will be very busy getting to grips with new law in the coming 12 months!

Further reading