Public sector exit payments: We’ve only just begun…
In this article, we take a look at the first formal challenge to the proposed new rules, raised by the British Medical Association (BMA).
After Game of Thrones, the ongoing saga of public sector exit payments, now entering its fifth year, is our second favourite episodic drama; and one that looks set to be just as combative.
In our most recent update on this ongoing issue, in June 2020, we outlined the government’s response to public consultation on its proposal to introduce a cap of £95k on exit payments received by employees leaving the public sector.
The government intends to proceed with implementation of the cap, although we still don’t yet know when the Regulations that will implement these reforms will be introduced, or when the new regime will take effect. The consultation response states that revisions will be made to the current draft Regulations and guidance, and final versions published at a non-specified ‘later date’.
However, in contemplation of the changes, the first formal challenge to the proposed new rules has been raised by the British Medical Association (BMA), the professional association and trade union representing doctors and medical students in the UK.
The BMA alleges that the draft Regulations which will implement the scheme are unlawful and should be withdrawn from consideration by Parliament. The challenge centres around the following three issues:
Firstly, the BMA argues that the £95k cap unlawfully includes sums due to for matter’s arising during an individual’s period of employment (such as sums relating to equal pay or discrimination during employment) rather than including only those sums that specifically relate to an employee’s departure.
Secondly, the draft Regulations will require public bodies to act unlawfully, by preventing them from paying in full sums legally owed to former employees. For example, existing contractual arrangements with some senior NHS staff may provide for significantly more generous payments on exit than the draft Regulations will permit. The BMA argues that public bodies must legally be allowed to honour those contracts.
Thirdly, concern is also raised around the legal obligations imposed on individuals by the draft Regulations, which require every exiting public sector employee to calculate and specify the amount they are owed (no matter how small). The BMA raises a technical argument that this provision goes beyond what is enabled by the primary legislation under which the Regulations will be introduced (Small Business, Enterprise and Employment Act 2015); but also stresses that calculating outstanding sums on exit can be extremely difficult (for example where complex elements of pay are outstanding) and argues that this is an unfair burden to place on an individual member of staff.
When these proposals were first introduced back in October 2016 it was clear that they would be controversial.
We have highlighted throughout that these proposals will necessitate wholescale change to contracts, compensation schemes and pension schemes across the public sector, or else expose public sector bodies to litigation for failure to honour their current contractual commitments.
It is important to note that compensation for injury to feelings (for example relating to discrimination during employment) are excluded from the cap, and that the cap must be relaxed where payment is made in respect of a grievance or claim involving discrimination or whistleblowing. However, it is proposed that use of this waiver will require ministerial clearance, and the BMA argues that public sector bodies should not be made to wait for a discretionary decision from a minister before they are able to honour pre-existing legal commitments.
The BMA’s challenge may be politically embarrassing for the government, at a time when it is seeking to express its gratitude to the NHS navigating the COVID crisis. However, it appears that the government is determined to stand by its proposals, and its stated aim of ensuring public funds are spent wisely.
It is difficult at this stage to guesstimate the BMA’s chances of success, or even whether the Courts will allow the challenge to proceed. However, it is clear that the saga of public sector exit payments is not over yet. In fact, it seems we have only just begun!