March 2017 - Are discrimination awards set to rise?

dan-hobbsclare-harrington

Message from the Editors,
Dan Hobbs & Clare Harrington

Welcome back to 'Five from 5', the free employment law bulletin created by the employment team at 5 Essex Court in association with Bloomsbury Law Online.

This month's bulletin contains five short articles on (i) Tribunal Fees Review; (ii) Judicial Assessment; (iii) Rising Value of Discrimination Claims; (iv) Tribunal Judgments Online; and (v) The new limits for Unfair Dismissal Awards.

The editors continue to draw upon the vast pool of experience and knowledge held by the 5 Essex Court employment law team whose members include Queen's Counsel, part-time employment judges and those appointed by the Attorney General to represent the Crown.

 

1

Tribunal Fees - Proposed tinkering round the edges is nothing to get excited about

Victoria von Wachter

The screams of pain emanating from employment lawyers when Employment Tribunal fees were announced could be heard on the dark side of the moon.

Challenges on a variety of grounds were brought without success.

R (on the application of UNISON) v Lord Chancellor – UNISON’s last gasp challenge - will be heard on 27th March in the Court of Appeal.

The reality is that the Employment Tribunal system has experienced a drop in claims of just under 80% by reason of the fees being introduced. As Brain Doyle – Chair of the ET Service of England & Wales put it – the loss was mainly from high merit, low value claims and accordingly was even more regrettable.

As a result of constant pressure and griping the Ministry of Justice reviewed the system last year and published its results in January this year. Unsurprisingly they found a huge drop in claims but couldn’t quite bring themselves to link this causally to the introduction of fees. Some surprise was expressed at the extent of the reduction in claims and the review also accepted that the remission system is Delphic in the extreme and off putting to many potential claimants.

New proposals aimed to ease the situation have now been put out to consultation. These focus on raising the threshold below which remission can be claimed, abolishing the fee for claims involving insolvent employers and the National Insurance Fund (s188 ERA) or claims under the Pensions Schemes Act 1993.

Truthfully this exercise is little more than window dressing and tinkering around the edges of the legislation – The Government has not even produced a draft SI to amend the current Order.

2

Judicial Assessment – a winning notion?

Clare Harrington

Last Autumn saw the introduction of Judicial Assessment; an impartial and confidential assessment by an Employment Judge, at an early stage in the proceedings, of the strengths, weaknesses and risks of the parties’ respective claims, allegations and contentions.

On 3 October 2016 Presidential Guidance was issued under the provisions of Rule 7 of the First Schedule to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013. As with other Presidential Guidance, Tribunals in England and Wales must have regard to it but shall not be bound by it. The Guidance identifies Judicial Assessment as ‘other means of resolving’ disputes by agreement as referred to in Rule 3 of the Employment Tribunals Rules of Procedure. A protocol is provided with the Guidance to give a formal framework for the preliminary consideration of the claim and response with the parties. In addition to the Guidance and protocol, questions and answers have also been prepared for parties contemplating Judicial Assessment.

The protocol details that the assessment should take place after the issues have been clarified and formal case management orders have been made. Both parties must freely consent to the assessment and no pressure should ever be placed on any party to agree to it. The assessment is strictly confidential and is described in the protocol as being indicative in nature, involving a practical assessment of the case. In essence, the Employment Judge may give an assessment of the liability and / or remedy aspects of the case, making it clear that his / her view is provisional and that the Tribunal hearing the case may come to a different view. The Judicial Assessment is conducted with the aim of assisting eventual settlement of all or part of the claim but it is not necessarily envisaged that settlement negotiations will happen at that stage. In this way, the process is set apart from that of Judicial Mediation.

Little is known at this stage as to the level of interest expressed in Judicial Assessment by parties. No doubt, relevant statistics will be produced later in the year when the option has been available for at least 12 months. Meanwhile it is a useful mechanism to be employed in certain cases – particularly when a litigant in person is open to hearing the assessment of an Employment Judge but not points being made by an opponent. The President specifically comments in the Guidance that the Assessment will be particularly helpful where a party to a claim is not professionally represented.

It is also interesting to note the President’s comment that Judicial Assessment is not anticipated to make preliminary hearings longer. This would seem to be a challenge when the Employment Judge will need to guide the parties through his/her assessment and no doubt, respond to any queries raised.

3

A fall in the 'Discount Rate' - Are discrimination awards set to rise?

Dan Hobbs

The Lord Chancellor announced on 27th February 2017 that the 'discount rate' is to drop from 2.5% to -0.75%. This means average awards for discrimination claims will increase. Here's why:-

1. If discrimination at work leads to an employee suffering psychiatric injury he can claim damages for the injury in the Employment Tribunal (i.e. he can ask for an award of 'general damages' for pain, suffering and loss of amenity). [Sheriff v Klyne Tugs]

2. If the employee's psychiatric injury means that he is permanently unable to work, the loss flowing from the discrimination will be substantial and recoverable regardless of whether the injury was foreseeable [Essa v Laing].

3. In assessing future loss of earnings (loss of earnings from the date of the assessment until normal retirement date) the Tribunal may adopt the 'multiplier / multiplicand' approach commonly seen in personal injury claims in the civil courts.

4. Where future loss of earnings are being assessed, the 'multiplicand' is the annual net salary and the 'multiplier' is the number of years from date of assessment to normal retirement date.

5. The 'multiplier' is adjusted in the Ogden Tables [industry approved actuarial tables] to take account of the fact that the employee is getting all his lost earnings now rather than as salary spread over the course of his working life.

6. The justification for reducing the 'multiplier' is that the lump sum can then be invested by the employee and in consequence will produce a return for him.

7. Interest rates determine the rate of return that investments yield. When interest rates are low (as they are now) the rate of return is poor.

8. In consequence, when interest rates are low, the discount rate applied to the multiplier must fall if the employee is to receive fair and adequate compensation.

9. As an example,the loss of earnings multiplier to retirement age 70 for a 25 year old man will almost double by reason of the recent change to the discount rate. The applicable multiplier rises from 26.4 to around 51.33 (before applying the non-mortality discount factors). With a multiplicand of £20,000 the potential award changes from £547,000 to a staggering £1,026,000

To conclude, the fall in the discount rate only affects tribunal claims which include an element of personal injury (usually psychiatric injury caused by discrimination at work). Where serious injury is alleged, practitioners must approach the quantification of future losses with care and by reference to the change in the discount rate which applies from 20th March 2017.

4

The online register of employment tribunal judgments is now live

HM Courts and Tribunals announced in June 2016 that new judgments would be available online.

The online service covers judgments in both England and Wales and Scotland and includes some transcripts going back to 2015.

Link to judgments: https://www.gov.uk/employment-tribunal-decisions

5

New Limits for Week's Pay, Basic Award & Compensatory Award

The Employment Rights (Increase of Limits) Order 2017 will increase the compensation limits payable under employment legislation from 6 April 2017.

Link to Order: http://www.legislation.gov.uk/uksi/2017/175/contents/made

Changes include:

1. an increase in the maximum compensatory award for unfair dismissal from £78,962 to £80,541; and

2. an increase in the maximum week’s pay for calculating statutory redundancy payments and the basic award for unfair dismissal, from £479 to £489.

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