Staff writer AccountingWEB
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Rogue bosses beware: Tribunals won’t cost and the labour-market tsar has promised action

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3rd Aug 2017
Staff writer AccountingWEB
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Employment practices and business ethics are in the news right now. Adding to the picture, this week there has been a supreme court decision on the fees that attach to employment tribunals and the first statement and report by the government's newly appointed labour market tsar on bad business practices.

It all builds on the recent coverage across the media of the gig economy and its various abuses – here’s our look at the issue – with a broader narrative on employment and employment rights. This was explored in part by the recent government-commissioned Taylor Review of modern working practices, even if the review itself has drawn plenty of negative comment.

So what have this week’s developments taught us?

Meet the labour market enforcer

Sir David Metcalf, a founding member of the Low Pay Commission that is tasked with enforcing workers’ rights, is now the country’s first fully engaged director of labour market enforcement.

What effect can he have in the role? In his first statement and report since being appointed in January, he has pledged nothing less than the jailing of rogue bosses and investigations into failing industries – all as part of the government’s response to the workplace scandals uncovered at companies such as Sports Direct.

Metcalf will report into the home secretary and the business secretary. From the start, he will consult on increasing the resources available to investigators and the fines to be levied on guilty firms. For his first act, he has questioned whether official statistics are an “understatement” of the real level of non-compliance.

Metcalf said: “Over the coming months I will be working with government enforcement agencies and industry bodies to better identify and punish the most serious and repeat offenders taking advantage of vulnerable workers and honest businesses.”

What’s at stake, according to Metcalf, is that the current context doesn’t appear to do enough to deter businesses from bad or illegal practices. For companies paying less than the minimum wage, for example – where fines average £400 a breach and HMRC conducts around 2,000 investigations a year in a country where 1.3m firms have employees – Metcalf has said more must be done.

“If you put together the low probability of a firm having an investigation and the fairly low fines then... I raised my eyebrows. So I will want to look at this.”

He also suggested that the full powers of the law had not been used to protect workers, even if the laws themselves look robust on paper.

Other areas under scrutiny include examining how supply chains as a whole can be made to adhere more rigorously to employment laws, perhaps by mirroring rules in the US where brands can be made jointly liable for infringements further down the supply chain.

Responding to Metcalf’s statements and report, business minister Margot James said: “We are determined to stamp out any workplace exploitation, from minimum wage abuses to modern slavery.

“While the majority of employers create a fair and safe environment for their workers, there are a small minority of rogue employers who break the law and we will use all enforcement measures at our disposal to crack down on labour market abuses.”

Matthew Percival, the CBI’s head of employment, has also welcomed the approach set out by Metcalf in respect of labour exploitation in particular.

“Labour exploitation, from unpaid wages to modern slavery, is wrong and must not be tolerated,” said Percival. “While the vast majority of UK employers treat their responsibility to staff with the utmost seriousness, there remains a small minority who do not.

"Enforcement activities must be effective to protect workers and ensure that all employers operate on a level playing field.”

Quite what impact Metcalf’s interventions can have – and how quickly – is something AccountingWEB will watch closely.

The cost of costly tribunals

Just a few days before Metcalf’s commentary and scene-setting, something else occurred that moves the goalposts for companies with employees.

In July 2013 the government introduced hefty fees for employment tribunals, and this decision has been overturned by the supreme court as illegal because it has prevented access to justice.

The country’s highest court unanimously ruled that the fees contravene both EU and UK law and are "discriminatory" against women.

The government will have to refund up to £32m to the thousands of people charged for taking claims in the past four years. This comes after a government review found the number cases taken to tribunal has fallen by 70% following the introduction of fees.

Unison, the UK's largest trade union, won the victory after it argued that the fees of up to £1,200 discriminated against workers.

In their ruling, the court said: "A significant number of people have found the fees unaffordable."

The Ministry of Justice said the government will take immediate steps to stop charging employment tribunal fees and will refund those who have paid.

Unison’s general secretary Dave Prentis said: "The government has been acting unlawfully, and has been proved wrong – not just on simple economics, but on constitutional law and basic fairness.

"Unison took the case on behalf of anyone who's ever been wronged at work, or who might be in future. Unscrupulous employers no longer have the upper hand. These unfair fees have let law-breaking bosses off the hook these past four years, and left badly treated staff with no choice but to put up or shut up.”

Dave Stallon, the FSB's commercial and operations director, said the ruling was potentially a drain on honest businesses, which could face spurious claims, even if access to justice takes precedence.

"Employment tribunal fees were put in place to curb the number of unfounded claims and we believe a fair and proportionate system of fees should be put in place to prevent vexatious claims.

"The ruling means employers could now be open to more claims, potentially costing thousands of pounds in legal costs. Having advice, support and insurance protection for a wide range of legal and tax scenarios is essential to the success of any business.”

Access to justice

Yet, understandable as the FSB’s caution is, the judgment notes that the introduction of fees not only led to a dramatic drop in the number of claims, but the success rate of claims also fell, most probably because low-paid people with strong claims for modest awards could no longer afford to take their case to tribunal. That undermines the UK’s rule of law.

With Brexit in the frame, the supreme court also went out of its way to make its case primarily based on two principles of English common law: the constitutional right of access to justice and the rule that statutory rights, established by parliament, must not be undermined by secondary legislation with minimal parliamentary scrutiny.

This not only makes it Brexit-proof but, in doing so, the supreme court explicitly questioned the government’s understanding of the rule of law. It rubbished its claims that fees are justified because employment tribunals only benefit those who use them, not society at large.

Retrospective risk?

For business, the ruling may raise the prospect that some of those tribunal proceedings that weren’t taken in the past four years could now be opened. It’s not yet totally clear how this would work, as Lewis Silkin’s employment partner Colin Leckey has noted.

Leckey said after the judgement: “Most employment claims have to be brought within three months of the act being complained of. What we could see now is claimants who are not eligible to be refunded by the government because they did not bring forward a claim, but argue they would have but for the existence of the fee regime.”

Quite how this particular can of worms gets handled is something businesses will need to watch closely.

Replies (5)

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By InflatableBassPlayer
03rd Aug 2017 11:24

"The country’s highest court unanimously ruled that the fees contravene both EU and UK law and are "discriminatory" against women."

Not men too?

" (Dave Prentis said) Unison took the case on behalf of anyone who's ever been wronged at work, or who might be in future. Unscrupulous employers no longer have the upper hand. These unfair fees have let law-breaking bosses off the hook these past four years, and left badly treated staff with no choice but to put up or shut up.”

He said, rubbing his hands together at the thought of all those lovely tribunal expenses now available to claim.

An extremely biased article - could have been pulled straight from the Guardian.

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Replying to InflatableBassPlayer:
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By chatman
03rd Aug 2017 11:40

I thought it was a good article, with no evidence of any bias at all. Much better than the crap you get in The Guardian (not that that is a meaningful criticism anyway).

I thought this was very interesting "the judgment notes that the introduction of fees not only led to a dramatic drop in the number of claims, but the success rate of claims also fell"

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Replying to InflatableBassPlayer:
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By stephengw
03rd Aug 2017 13:33

InflatableBassPlayer wrote:

Not men too?


Read the report. Against women and other protected groups because a higher fee is charged for discrimination claims. That's what the Supreme Court said - where is the bias in reporting it?
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By AndrewV12
03rd Aug 2017 13:38

The government will have to refund up to £32m to the thousands of people charged for taking claims in the past four years. This comes after a government review found the number cases taken to tribunal has fallen by 70% following the introduction of fees.

What happened to the thousands of people who could not afford to take up a claim (the 70%).

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By Dutchnick
03rd Aug 2017 13:55

Firstly the big boys got fines that were peanuts and were not a serious disincentive for bad practices. Secondly though the Judges were previously able to award fines and costs for vexatious claims when imposed they were nothing compared with cost and agro to the companies, especially smaller companies. When there is no cost it is worth a punt. Though not the UK in Holland we dismissed as guy who should never have been taken on. This lawyers and the system cost us over 22k Euro including a course for him to re-establish his self esteem having been sacked.!

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