Another Coalition miss from the penalty spot?

Posted on January 26, 2016 by wonkypolicywonk

With the Department for Business, Innovation & Skills (BIS) having recently confirmed that it is set to commence section 150 of the Small Business, Enterprise and Employment Act 2015 – which provides for the imposition of financial penalties on respondent employers who fail to pay an employment tribunal award – from April this year, now seems a good time to take another look at how things are going with the not unrelated provisions in section 16 of the Enterprise & Regulatory Reform Act 2013. Since coming into force in April 2014, those provisions have empowered employment judges to impose a financial penalty of up to £5,000 on an employer found to have breached the claimant’s rights in a way that “has one or more aggravating features.”

Last summer, I noted on the Hard Labour blog that, as of 8 June 2015, just three such penalties had been imposed, of which only one had been paid. And I reiterated my belief that the most likely explanation for this tiny number is that

the hefty, upfront tribunal fees introduced by the Ministry of Injustice in July 2013 have eradicated exactly the kind of tribunal claim that [former business secretary] Vince Cable [and former BIS employment relations ministers] Ed Davey and Norman Lamb evidently had in mind when they came up with the section 16 penalty regime: a relatively low value claim (because the claimant is or was low paid) against a deliberately exploitative employer. For why would a vulnerable, low-paid worker subjected to ‘wage theft’ of a few hundred pounds gamble up to £390 on trying to extract the unpaid wages or holiday pay from their rogue (former) employer?

At this point, it’s worth noting that in September last year, there were just 748 claims for unpaid wages, down from a monthly average of 4,940 in the year before the introduction of fees in July 2013 – a fall of 85 per cent.

Well, another eight months have passed, and BIS has now confirmed, in response to a written parliamentary question by Caroline Lucas MP, that a mere 11 penalties have been imposed to date, of which only four have actually been paid. In relation to the seven unpaid penalties, “enforcement action is currently being considered”. Well, woo hoo.

So, what does this tell us? Well, it suggests we shouldn’t always listen to vested interests when they spout dire warnings about the likely impact of draft legislation. Back in 2012, the British Chamber of Commerce attacked the section 16 provisions as “a fundamentally anti-growth measure” that could “result in a more risk-averse attitude to employing people, particularly amongst SMEs”, while the TUC thundered that the provisions would “generate extensive satellite litigation” and “prolong remedies hearings”. Oof.

It also suggests – as if we didn’t know already – that we should take what BIS and other government departments say in their regulatory impact assessments with a heaped tablespoon of salt. In late 2011, BIS suggested in its final impact assessment that the section 16 provisions would generate a nice little income of £2.8m a year. So, the provisions should by now have netted HM Treasury some £5.1m. Yet the actual income of just £20,000 at most (4 x the maximum penalty of £5,000) probably doesn’t even cover the cost to BIS of preparing that meaningless impact assessment in 2011, let alone the time and effort seemingly wasted by MPs and peers on scrutiny of the provisions in Parliament in 2012 and 2013.

As recently as March 2015, BIS predicted that the section 150 penalties now set to come into force in April will generate a more modest annual income for HM Treasury of £0.1m. But with ET fees having slashed the number of tribunal awards that can go unpaid, thereby generating a s150 penalty, even that little trickle of dosh must now be in doubt.

Well played, Vince, well played.

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Employment tribunal fees: All you need is Gove

Posted on January 23, 2016 by wonkypolicywonk

With almost four months having passed since Ministry of Injustice officials dumped their ET fees review report in the intray of the nation’s slowest reader – junior injustice minister Shailesh Vara MP – and two months having passed since the justice select committee of MPs took oral evidence on the issue*, it is perhaps not too ridiculous to expect an announcement by everyone’s favourite justice secretary, Michael Gove, reasonably soon. But what kind of announcement will it be?

For those of us hoping Gove will substantially reduce or even scrap the fees introduced by Coalition ministers in July 2013, there was some bad news this week from the Institute for Government. The Institute’s wonks have been pouring over the detailed departmental spending figures that the Government publishes quarterly, and comparing these against each department’s spending plans for the year. And they’ve found that the Ministry of Injustice is “worryingly off target”.

[The Ministry of Injustice] has seen a 3.1% fall in its day-to-day spending compared to 2014/15, which sounds rather good (at least from a fiscal hawk’s point of view). However, the department needs to cut its spending by over 12% this year to meet the Government’s plans. So it looks as though [the Ministry] has a lot of catching up to do in the second half of the year. And that is unlikely to be the end of the story – this is a department with one of the toughest settlements in the recent spending review.

In other words, the Ministry is not exactly well placed to take the £20m a year hit that would come with full abolition of ET fees.

However, Gove must be under considerable pressure to do at least something on ET fees. Apart from the pending justice select committee report, and the Ministry’s bulging file of my blog posts, it is surely no coincidence that the Department for Business, Innovation & Skills (BIS) and the Equality & Human Rights Commission (EHRC) have yet to publish the long overdue final reports of their joint investigation of pregnancy and maternity discrimination in the workplace. Those final reports, originally scheduled for publication last autumn, include policy recommendations by the EHRC, and I will be astonished if they don’t highlight the detrimental impact of ET fees on women’s access to justice.

sexpreg

So, we have to hope that Gove is at least looking at a substantial reduction in the level of the fees. And that he has been reading up on past policy statements by employer bodies such as the British Chambers of Commerce, which in July 2012 suggested it would “make sense to fine non-compliant employers an automatic small administration fee, aligned with the [claimant issue] fee”. This is not dissimilar to my own, January 2012 proposal for a ‘polluter pays’ financial penalty for those employers found by a tribunal to have breached the law – that is, those employers that create the need for an employment tribunal system. In March last year, I noted that:

Each year, about 12 per cent of all claims are successful at a hearing or result in a default judgement in favour of the claimant. And, if claim/case numbers [were to rise] to just below their 2012-13 level [thanks to a substantial lowering of claimant fee levels], there would be about 6,500 losing employers. Imposing a penalty of £1,000 on each of those losing employers – a hefty sum, for sure, but still less than the £1,200 some claimants have to pay in fees now – would generate an annual income of £6.5 million.

Were Gove to combine such a ‘polluter pays’ financial penalty with a modest (or nominal) fee for employers to defend a tribunal claim – and why shouldn’t employers pay to use the tribunal system? – he would give himself the financial space he needs to reduce claimant fees to a modest (or, ideally, nominal), level.

But first, Shailesh Vara has to finish reading that review report. Do hurry up, Mr Vara!

[* Since writing this post, I see the justice select committee is taking further oral evidence on (court and) ET fees, from the senior judiciary. So, the committee’s report may still be some way off.]

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Modest Vince and his modest reforms

Posted on January 19, 2016 by wonkypolicywonk

Call me weird, but if I was Vince Cable, I wouldn’t go around bragging about how I “blocked” attempts by George Osborne to “set a high minimum wage” – as Sir Vince does in his near unreadable tome about how brilliant and sensible he was in the Coalition, After the storm. (Apparently, all the bad Coalition stuff was the work of someone else – Dave, Nick, George, or Danny). No, I think I’d keep that to myself, just in case I run into one of the all too many strivers who have to live on – or even below – that minimum wage.

That particular boast was on page 12 of After the storm. So I had to read another 195 coma-inducing pages before I got to Sir Vince’s mind-boggling assertion that his time as Mr Sensible of the Coalition included “a modest shift in [the] terms governing unfair dismissal, in order to reduce the numbers of cases going to tribunals”.

As Sir Vince helpfully spells out, this modest reform means that “it now requires two years of employment, rather than one, before an [unfair dismissal] case can be brought”. I’m a bit rubbish with statistics, but I think that’s a 100% increase in the length of the qualifying period. So I suppose we must be grateful that Sir Vince and the useless Dave, Nick, George and Danny didn’t go for less modest reform of unfair dismissal law.

However – as you may have guessed, if you’re my Mum or Gem Reucroft – it was Sir Sensible’s claim about needing to reduce the number of unfair dismissal cases going to tribunals that really got my goat. Because – and I have a chart to show this, which proves my moral superiority over Sir Vince, who includes no such chart in After the storm – the number of tribunal claims for unfair dismissal fell from 57,400 in 2009-10, the last year of the Labour government led by the equally useless Gordon Brown, to 47,900 in 2010-11, and to 46,300 in 2011-12. That’s one unfair dismissal claim every 26 years, on average, for each of Britain’s 1.2 million employers.

Call me weird (again), but that doesn’t look like a crisis requiring a 100% – sorry, a modest – increase in the qualifying period for legal protection from unfair dismissal. Admittedly, the number of such claims did shoot up by a whopping 6.3% to 49,200 in 2012-13, but by then Mr Sensible and the Silly Billies had already decided that modest, 100% reform of unfair dismissal law was necessary to prevent the economy going into meltdown. Or something.

Indeed, that 6.3% increase followed their modest reform in April 2012. Oops. It was all going so well until then. Here’s that chart of which Sir Vince can be so proud.

UD

In the 12 months following Sir Vince’s modest reform in April 2012 (the orange column), we can see that modest, 6.3% increase in unfair dismissal claims. And then, in July 2013, Chris Grayling introduced his own modest reform (the blue column) and over the next 12 months unfair dismissal claims fell by an extremely modest 66%, never to recover.

As Sir Vince puts it in his soporific After the storm, “measures introduced elsewhere in government radically to increase tribunal fees” – that is, measures that were nothing to do with Sir Sensible, who was simply in charge of employment law policy at the time – “have almost certainly tipped the balance too far against workers”.

You think?

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