EMPLOYMENT UPDATE – KEY DATE: 20 January 2024
Tribunals to gain greater power to increase compensation awarded to employees in certain claims:
Back in July 2024, I wrote an article on the new statutory code of practice on dismissal and re-engagement (“the Code”) which came into force on 18 July 2024.
As discussed in my previous article, the practice of employers using ‘fire and re-hire’ tactics has long been criticised, particularly by Trade Unions. This practice involves employers who wish to make changes to employees’ contractual terms seeking to dismiss those employees who do not agree to such changes during consultation and offering them new employment in the same roles on the (usually less favourable) new terms.
Under the Code, fire and rehire tactics are not unlawful, however it is made clear that such an approach must only ever be taken by employers as an absolute last resort following meaningful consultation. The purpose of the Code is stated to be to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with a view to reaching an agreed outcome with employees and/or their representatives. The Code provides practical guidance for both employers and employees, and their representatives.
A failure to follow the Code does not, on its own, give rise to a claim by an employee, however if the employer has failed to unreasonably comply with the Code any compensation awarded for some claims can be increased by up to 25% - this includes compensation for unfair dismissal. Up until now, the Order granting the right for employment tribunals to make such an award had not been finalised, as it did not gain approval from the House of Lords before the general election and therefore tribunals did not yet have the power to order such an increase to compensation awards. However, this Order has now been finalised and is due to come into force on 20 January 2025.
Previously, the proposed Order did not include the right for tribunals to increase protective awards for failure to comply with collective consultation obligations under section 188 of TULRCA 1992 (which applies both in redundancy scenarios and dismissal and re-engagement in relation to a proposed change of employment terms, depending on the number of affected employees). However, the Order has since been amended to include this power. The maximum protective award which a tribunal can award in such circumstances is 90 days’ gross pay per employee, therefore applying a 25% increase to such awards could have significant financial implications for employers.
It is clearly of even greater importance for employers to comply with the Code now that this power has been extended. If you are considering changes to your employees’ contracts of employment and require advice in respect of the potential risks and appropriate procedures to be followed, our dedicated Employment Team at Rollits shall be well placed to assist.
