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Swedish derogation – Government confirms the loophole will be closed

The Swedish derogation will end next year. Stuart Neilson comments. 16 Apr 2019

NEWS – 16 April 2019

Restricting exit payments in the public sector – consultation

The government is consulting on its much-delayed plans for restricting exit payments for public sector workers with a £95,000 cap on any such exit payment. This goes back a long way – it was first announced in by George Osborne in 2015 when he was chancellor. The consultation deals superficially with how the cap will be implemented and those bodies which will be covered. There is no date for implementation, although the government says the reforms will be introduced 'without further delay' possibly indicating implementation later on this year. At the same time, we think, the government will also introduce separate regulations to claw-back exit payments if the person in question returns to the public sector within 12 months - again, that law has been on the back burner for a very long time but the two sets of regulations are likely to be rolled out at the same time we think. As for the cap, the implementation will be in two stages. The first stage will capture most public sector employees (including the civil service, local authorities and schools). The second stage will extend the cap to the rest of the public sector. With his thoughts on all of this, Rob Childe:

Rob Childe: "The cap is going to be £95,000 and also there is also going to be, for those high earning employees, a period within which they have to stay out of the public sector of a year otherwise they have to repay the severance payments that they receive. So what we think the impact of this is going to be is it is potentially going to drive those senior employees who are well paid from the public sector. This is a bit of an unintended consequence really of this legislation because they are first of all going to maybe kept out for a year as a result of this repayment provision, but also may be less likely to go into that sector because of these added complications. So that is one issue. Another problem that we foresee, and it is one that HR need to think about when looking at workplace planning, is there might be a clamour for individuals to seek severance packages and leave before the regulations come into force because at the moment they are unrestricted, so you have got to bear that in mind, and there may be an incentive for HR, perhaps, to delay making severance payments because of the cap, so again that is going to be a consideration. One of the things that we think is likely to happen, because it is going to be less attractive to settle claims we think that the instances of litigation might go up as there is going to be more incentive for employees to enter into litigation because if they receive more than the cap, say for example if they are settling a discrimination claim, the £95,000 might actually not look that high and they may get more in the tribunal. The other issue, of course, is that they will be locked out of the public sector for a year if they settle so there may be more incentive to litigate. So HR and public sector employers have got to be aware of this and there is likely to be a spike in that litigation. The other big impact is in employee relations. What we are expecting is senior employees are going to be less likely to accept these settlements and as a result they may well stay in their position for longer than they otherwise would have done. This is going to have an impact on workplace planning, it may mean there is more enforced redundancies, more compulsory redundancies, and again this is something that needs be borne in mind because it might be less easy going forward to implement a redundancy programme than prior to the regulations."

Early conciliation – can more than one claim can be presented using the same number?

Is it possible for a single claimant to use the same Acas early conciliation (EC) certificate in two or more claims? That is the question the EAT has been considering in a case called Akhigbe v St Edwards Home Ltd to which they have given the answer yes, so long as the complaints included within those claims relate to the matter in respect of which the early conciliation notification was made. So what does that tell us? I’ve been speaking to Andrew Kane about the scheme generally, and this case in particular, and I suggested to him that this case seems to indicate that this rule on claim numbers is not a strict one:

Andrew Kane: “Well we knew that already so it is really just reinforcing that the requirement isn't particularly stringent. The only real obligation on the prospective claimant is that they actually make that contact with Acas, everything else beyond that really is voluntary and what we are seeing now is questions about what the claimant tells Acas at early conciliation verses what they then bring as a claim in the employment tribunal and lawyers representing respondents are trying to use a difference in the two situations to stop claims from proceeding but what the courts are telling us is that they are going to take a broad approach to that situation. They don't expect prospective claimants to be lawyers and to be able to articulate legal claims and what they talk about in the law is the concept of a matter. So very broadly, a lot of prospective claimants may simply have a matter in relation to their working life and they may not be able to narrow it down or articulate it in particularly legal terms beyond that. So when they come to bring their claim maybe they are now taking legal advice, they are now bringing claims of discrimination, harassment, whistleblowing, victimisation, whatever it may be,  and just because they haven't expressed those claims to Acas at that early stage isn't going to be a barrier to them bringing those claims in the employment tribunal. What we would say as well is more and more I'm thinking respondent employers are going to be interested in exploring settlement at early conciliation stage especially since the fees were abolished and it really is important to emphasise that if you are going to settle a matter at early conciliation stage you have to be careful to define what it is that you are settling. When somebody has brought a claim you reference the claim number in your Acas COT3 and you can look back on the claim and see what claims have been brought and you know exactly what has been settled but you could find yourself in a situation with early conciliation where you settle off with an individual and they still bring a claim and they may then seek to argue that you settled one part of the dispute but not all of the dispute. You then might find yourself in tribunal, presumably as a preliminary point, having to argue about what you actually settled as part of the COT3 agreement at early conciliation and so it is crucial really that in that COT3 document you set out what it is that you are seeking to settle and I would suggest that you do that in relatively broad terms so as not to box yourself in to a particular corner. So rather than saying settling claims "in relation to the incident at the Christmas Party last year" you would be saying we are settling "any alleged claims of sexual harassment."

Swedish derogation – government confirms it will end next year

The government has confirmed that the controversial Swedish derogation will come to an end next year. This is the loophole which excludes agency workers from the principle of equal treatment in relation to pay under the Agency Workers Regulations. It was flagged up by Matthew Taylor in his review of modern working practices where he called on the government to change the law, close the loophole and bring an end to the practice he described as an avenue for exploitation. Last week, parliament approved a large chunk of the Good Work Plan and will now  proceed with secondary legislation to amend the Regulations, close the loophole and so bring an end to the Swedish derogation. The likely impact of that? Well that, of course, depends on whether you are one of those businesses that uses it. Which begs the question, how popular is it? Stuart Neilson:

 Stuart Neilson: “It's difficult to say how popular it is across our clients. I would say that across most of our clients, I would say, it's not that common. It does crop up from time to time. I think one would expect to see it more in industries, perhaps, in the food industry for example, agriculture, in hospitality, in those sort of areas you might see it, particularly, I think, where you are dealing with agency workers who are quite low paid, that's is the kind of area where this has been more prevalent because, you can imagine, that where you have got anywhere a reasonably lowly paid workforce and you are wanting to bring in agencies a lot of that is not about a skills shortage so much as just about cost and if they want to keep cost down then that is the sort of area where you see it. I think if your main aim in hiring agency workers is about skills, and getting the right people with the right skills, then this is not something that has been much of a concern because to get those skills you have had to pay a premium rate anyway."

For now from me that’s the news. Good bye.


- Link to consultation paper: Restricting exit payments in the public sector

- Link to case report: Akhigbe v St Edwards Home Ltd (EAT)