The basic award is based on age, gross weekly salary and length of service at the time of termination. The compensatory award is based on loss of earnings caused by the dismissal. The ERRA has introduced changes to the maximum value of the compensatory award while the formula for the basic award remains unchanged. Previously the compensation award was subject to an overall cap of £72,400 in respect of dismissals after 1 February 2013. T he ERRA stipulates that the maximum amount may be no less than the median average of annual earnings and no more than three times the median average of annual earnings, or no less than 52 times the claimant’s weekly pay. In order that that there is no over reliance on earnings statistics (which can be questionable when looking at national averages) the government has chosen to rely on a cap of 12 months’ pay (ie no less then the weekly salary multiplied by 52) which will apply where the annual salary is less than the overall cap of £74,200. These changes will apply to cases where the effective date of termination is on or after 29 July 2013. Employers and employees need not be concerned about tribunal rules and compensation if there is no need for litigation. Litigation can only be avoided if a deal can be struck. From 29 July 2013 the ERRA brought in the concept of “pre-termination negotiations”. The idea is that the employer will be able to offer a settlement agreement to an employee while, at the same time, being secure in the knowledge that the what is said in making the offer cannot be used in any claim by the employee, should no settlement be reached.
However, putting such an idea into practice is difficult. Claims can refer to the “off the record” type conversation if the employer is guilty of “improper behaviour”. The conversation will not be a protected if the claim relates to areas relating to an automatically unfair reason (eg whistleblowing or trade union membership). Where a claim is made about alleged discrimination, harassment or victimisation or other areas covered by the Equality Act 2010 evidence of “pre-termination negotiations” will be admissible in the tribunal. Further, the negotiations will be admissible in claims for wrongful dismissal and breach of contract. The exceptions mean that the employer will have to be extremely careful about holding “pre-termination negotiations”. Among other things they will not be able to say that the employee will be dismissed if they do not accept the offer. The restrictions on what can be legitimately said are such that any discussion will have to be carefully minuted to avoid subsequent allegation about stepping out of line. This means more paperwork and does not mean that the ad hoc “quiet word in your ear” will be a simple option for the employer. When promoting the ERRA Secretary of State Vince Cable said it would be a measure to help Britain’s struggling businesses and to make Britain more “enterprise-friendly”. He went on to say: “We want to make sure that the right conditions are in place to encourage investment and exports, boost enterprise, support green growth and build a responsible business culture.
The bill will help ensure that people who work hard and do the right thing are rewarded.” While Vince Cable is obliged to be positive his expressed confidence in what the ERRA will do in the workplace is misplaced. The ERRA does nothing to reward those who work hard. Only employers can do that. But it does potentially cut some of the possible costs for employers of making mistakes in dismissing employees. Crucially those employees who think that they do work hard are affected as much as any other employee. And while the “pretermination negotiation” protection may at first seem like a good idea we can see that the caveats to it are so numerous as to make it almost a burden rather than an aid to facilitating a smooth dismissal. What we have got is more change. A tinkering with the rules. The headlines say one thing but the reality is another. This means that both employers and employees do not know where they stand because they are playing catchup. Not knowing what the latest rules are means that people are more likely to make mistakes. And if more mistakes are made then there is an increased risk of litigation. Precisely what this legislation was seeking to avoid. Give it a few years and no doubt the next government will fall into the same trap and propose some further changes. In the meanwhile try not to get too used to the way things are. By Martin Williams
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