ABG Employment Newsletter – July 2013

New unfair dismissal compensation cap to take effect on 29th July 2013

The cap for the unfair dismissal compensatory award will be changed on 29th July 2013. The new cap will be set at £74,200 or one year’s gross pay. The new cap will apply where the effective date of termination is on or after 29th July 2013.

Renaming of Compromise Agreements

A change in the law means that compromise agreements will be renamed settlement agreements from 29th July 2013. Any agreements that are expected to be signed on or after 29th July 2013 should therefore be called settlement agreements. However, whether the agreement is described as a ‘settlement agreement’ or ‘compromise agreement’, the agreement should still be valid provided it recites the necessary statutory provisions and states that they have been complied with.

Pre Termination Negotiations

The concept of pre termination negotiations will be introduced by legislation coming into force on 29th July 2013.

A pre termination discussion is a discussion (or offer) between (or from) an employer and (or to) employee with a view to terminating the employment relationship on agreed terms. The pre termination discussions will be inadmissible in ordinary unfair dismissal claims unless there has been any ‘improper behaviour’. This allows discussions to take place before a dispute arises and offers employers greater protection when offering settlement agreements outside of litigation.

‘Improper behaviour’ is not defined in the legislation and will therefore be defined by the Employment Tribunals through case law. However, the ACAS Code of Practice on Settlement Agreements sets out some examples of ‘improper behaviour’. These include: harassment, bullying, intimidation, physical assault, discrimination (on the grounds of age, sex, race, disability, sexual orientation, religion or belief, transgender, pregnancy and maternity or marital status) and undue pressure. Where there has been improper behaviour then the pre termination negotiations will only be admissible to the extent that the Employment Tribunal considers it just.

Pre termination negotiations will only be inadmissible in ordinary unfair dismissal proceedings. This means that the fact and content of such offers or discussions may be referred to in any other case, including: automatically unfair dismissal, discrimination and breach of contract.

Appointing someone unsuited to the role was not a reasonable adjustment

The Disability Discrimination Act 1995 placed an employer under a duty to make reasonable adjustments where a provision, criterion or practice (PCP) applied by the employer put a disabled person at a substantial disadvantage in comparison with persons who were not disabled. On 1st October 2010, the DDA 1995 was replaced by the Equality Act 2010 which contains a similar duty to make reasonable adjustments.

In a recent case the EAT has ruled that an employer did not fail in its duty to make reasonable adjustments by not waiving the requirement for a competitive interview process in respect of an internal vacancy for which a disabled employee was applying. It would not be reasonable to require an employer to automatically appoint someone to a role when it genuinely believed the person was not suitable for the job.

The employee, who suffered from an allergic condition which constituted a disability under the Disability Discrimination Act 1995, applied for an alternative role when her job was made redundant. She was required to undergo a competitive interview process. In the event, the employee was not successful in her application. The employer concluded that she was ‘not appointable’ as, during the interview, she did not demonstrate that she met the relevant criteria.

The employee brought a claim under the DDA as she felt an adjustment should have been made to waive the competitive interview requirement. The Employment Tribunal found that the competitive interview process did constitute a PCP which put the employee at a disadvantage but that it would not have been reasonable to waive the interview requirement. The employee appealed to the EAT.

The EAT upheld the tribunal’s decision. While the duty to make reasonable adjustments was engaged, the employer had not breached its duty in this case. The question of reasonableness would depend on all the circumstances in each case. Making the adjustment to remove the competitive interview requirement would be tantamount to appointing the employee automatically, when the employer did not consider her suitable. Such an adjustment could hardly be considered reasonable.

Woolworths case – change to collective redundancy law

The collective consultation obligations in the Trade Union and Labour Relations (Consolidation) Act 1992 apply where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. For some time, it has been acknowledged that the words ‘at one establishment’ are incompatible with the underlying European Directive on collective redundancy. However, the UK courts have previously been unwilling to adopt a purposive interpretation to rectify this discrepancy.

In the Woolworth’s case the EAT overturned an Employment Tribunal’s decision that Woolworths’ employees, who worked in stores where fewer than 20 employees were employed, were not entitled to be consulted collectively.

The EAT has ruled that the words ‘at one establishment’ are to be disregarded for the purposes of any collective redundancy involving 20 or more employees. Therefore, once it is proposed that at least 20 employees in a single business are to be made redundant in a 90-day period, their place of work will be irrelevant for the purposes of triggering the information and consultation obligations.

Subject to any further appeal this case brings about a significant change to the current law on collective redundancy consultation. It is notable that the EAT decided that the words ‘at one establishment’ should be removed altogether, rather than limiting the judgment to the facts of this particular case. Given the cost to the taxpayer as a result of the EAT’s decision, and the government’s ongoing quest to reduce the ‘burden on business’, it will be interesting to see whether the Secretary of State appeals to the Court of Appeal.


The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

Christopher Gigg 
[email protected] 
+44 (0)115 934 3310

Kathryn Meir
[email protected]
+44 (0)115 934 3308