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Government review of employment regulation

On 11 May 2011, the Employment Relations Minister, Ed Davey, announced an extension to the Government's review of employment law.

On 11 May 2011, the Employment Relations Minister, Ed Davey, announced an extension to the Government's review of employment law. Three new areas for review have been identified: discrimination compensation, collective redundancy consultation and employee protection afforded by the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE").

Discrimination Compensation

The amount of compensation payable by employers in discrimination claims is currently uncapped. Many employers worry that the high compensation payouts which are reported in the press encourage vexatious claimants and/or claims that have no reasonable prospects of success. The current Vento guidelines do allow estimates of potential injury to feelings awards to be made, but the actual final amount of compensation awarded is not known with any certainty until judgment is given. With this uncertainty, many employers choose to settle even the weakest of claims early rather than risk a huge financial payout.

This position is to be reviewed

However, the Government may face obstacles if it decides to impose a cap on discrimination compensation. Until the mid-nineties, discrimination compensation was capped at £11,000 in the UK. This was until the ECJ decided in Marshall v Southampton & SW Hants. AHA (No. 2) (1993 IRLR 445) that the cap did not provide an adequate remedy under EC law. It is therefore questionable how feasible change is, and whether the Government will look to reintroduce a cap or create a more rigid structure for calculating compensation payouts.

Collective Redundancy Consultation Periods

Employers are currently required to start consultation at least 90 days before the first dismissal takes effect when making more than 100 employees redundant within a 90 day period. Many employers feel that this requirement is too burdensome, hinders their ability to restructure and reduces the flexibility of their workforce. Often employers making redundancies are not in the financial position to keep paying staff who they know they will need to let go and therefore this threatens the stability of the remaining workforce. Employers have also complained that it is not clear from the legislation when consultation should start or end.

The 90-day collective redundancy rule is contained in the Trade Union Labour Relations (Consolidation) Act 1992but not the Collective Redundancies Directive and therefore there may be some scope for the Government to amend it.

Nevertheless, the Directive requires that consultation must begin "in good time with a view to reaching agreement" and the Government will need to ensure that any proposed changes, if implemented, are fully compliant with the Directive.


In many respects the UK's legislation providing protection to employees on the transfer of an undertaking goes beyond that required under the Acquired Rights Directive. For example, it extends the ambit of TUPE to cover service provision changes. In addition, many employers feel that the provisions of TUPE are overly bureaucratic and complex.

The Government may have some scope to make amendments to TUPE given that the protection it affords, as noted above, is arguably wider than that provided under the Acquired Rights Directive.


The Government's extended review will commence this year and will examine whether the legislation described above is fit for purpose. The Government has however stressed that 'legislation will not necessarily be the route to implement any change if there is a case for reform'.

In addition, the Government is likely to face fierce resistance from employee organisations and trade unions to any changes to the collective redundancy consultation periods and/or TUPE.

Any changes brought about by this review will be reported in future editions of HR Focus.

Lee Rogers, Associate,