The Power of an Employment Tribunal

The Law Commission has published a report on Employment Law Hearing Structures making several recommendations for reform. Proposals include changes to time limits, compensation for breach of contract, and greater flexibility to hear discrimination matters.

The Ministry of Justice and the Department of Business, Energy, Innovation and Skills (BEIS) are currently undertaking a review of the court and tribunal systems, aiming to modify and improve access to justice but without the need for major reform. To assist, the Law Commission has published its report into Employment Law Hearing Structures following its 13th Programme of Law Reform. Employment litigation was just one of several topics being reviewed during the Programme and the Commission explores the overlap between the jurisdiction of employment tribunals on the one hand and the civil courts on the other.

Initially created in 1964, employment tribunals (then called industrial tribunals) were originally designed to deal with appeals by employers against industrial training levies. Since then, we have seen a significant expansion in their jurisdiction and they now deal with a wide range of matters, some of which are also dealt with in the civil courts. Because of this overlap, the purpose of the Report was to focus on how to improve the existing system, and remove any anomalies arising from the demarcation of the two forums without a major restructuring of the employment tribunal system.

Separately, the Civil Courts Structure Review 2015 noted that there is an ‘awkward area’ of shared and exclusive jurisdiction in the fields of discrimination and employment law which can cause unnecessary complexity and delay for claimants. Because of this, claims are not always heard by a Judge with the relevant experience and expertise.

Proposals for Reform

The Law Commission therefore sought views on employment law hearing structures during a consultation period which ran from 26 September 2018 and closed on 31 January 2019. During this time, 72 responses were received. The Law Commission identified a number of proposals (23 to be precise) which would address the concerns and improve how employment tribunals operate day to day. Some of the key reforms include:

• Increasing the time limit for bringing an employment tribunal claim to 6 months (currently it is 3 months for most types of claim);
• Giving employment tribunals the power to award damages in breach of contract claims up to £100,000 (currently the limit is £25,000);
• Increasing the power of an employment tribunal to decide on breach of contract claims for workers and employees in situations where they are still working (at present, these claims can only be brought by employees and only once the employment has ended);
• Where applications are made for extensions of time, to replace the ‘reasonably practicable’ test with the ‘just and equitable’ test (the latter is used currently for discrimination claims);
• Introducing flexibility for ET judges to hear discrimination claims in the civil courts (given their considerable expertise in the area); and
• The power to transfer equal pay claims from the High Court to the employment tribunal (with a presumption in favour of the case being transferred).

Impact on Businesses

The Law Commission’s report (which runs to over 200 pages) takes a fresh look at the powers of employment tribunals and the extent of their jurisdiction when hearing complex matters. It sets out some comprehensive changes which will affect employers and employees if adopted.

On the one hand, employee protections are enhanced, as extended time limits for lodging a claim gives an individual longer to decide whether or not to litigate. This causes greater uncertainty for businesses, who may be left waiting a considerable number of months before knowing whether they have to defend a claim and prepare for the associated cost. In addition, the ‘just and equitable’ test gives employment tribunals wider discretion to consider whether to extend the time limit for claims that would have been struck out under the existing ‘reasonably practicable’ test. Applications for extensions of time are more likely to succeed under a proposed single test.

On the other hand, employers faced with high value claims, including claims for breach of contract, would be able to defend such claims in a single forum, rather than having to litigate separately in the employment tribunal (for unfair dismissal) and in the civil court (for breach of contract). In addition, allowing the flexible deployment of employment judges to hear discrimination cases in the civil courts may provide some comfort to employers that complex matters are being heard by specially trained and experienced judges.

What happens next?

The Secretary of State for Justice and Lord Chancellor will consider the various proposals for reform and provide an interim response to be published in the next 6 months. A full report will then follow, outlining the proposals to be adopted or implemented in a modified form. Whilst the Law Commission does not have the power to impose or enforce specific changes, the Government will take seriously its proposals for reform, and it is likely that at least some of the recommendations outlined above will be adopted. We will update this briefing as soon as these have been published.

This note is intended to provide general guidance and is not a substitute for legal advice.